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California Pay-for-Performance Programs Draws National Attention

Medical movers and shakers convened in Los Angeles this week — more than 600 of them — to assess the first five years and chart the next five of the country’s largest health care pay for performance program.

Integrated Health Association, which now serves as a model for other pay-for-performance efforts across the country, comprises a statewide consortium of health plans, physician groups, health care systems, business groups and consumer groups.

IHA’s statewide California Pay for Performance program faces challenges ahead, but officials predict more success if the medical community continues to collaborate and cooperate.

“If the turnout for this conference and the buzz it’s generating are any indication, I think we’re headed in the right direction,” IHA Executive Director Tom Williams said.

P4P Beginnings

Pay-for-performance initiatives began springing up in the late 1990s as one way to address steeply rising costs and a general disenchantment with managed care.

Two studies by the Institute of Medicine in 1999 and 2001 added urgency to the issue. The first report cited medical errors as the leading cause of death in the U.S., ahead of breast cancer, AIDS and automobile accidents. The 2001 report identified pay for performance programs as a potentially effective tool that could reduce medical errors, improve clinical outcomes by sharing data and ultimately reduce health care costs.

Now, five years later as Wall Street and corporate America begin to question huge pay-for-performance packages for top executives — even when their companies don’t perform particularly well — the health care industry is trying to give shape to its own version of the time-honored capitalist tool.

In most industries, compensation goes up when sales or stock prices go up. In health care, the idea is to reward caregivers for healthy patients because healthy patients are inexpensive patients.

By rewarding doctors who perform certain exams and order certain tests to detect conditions early, insurance companies save money by avoiding costly surgeries and hospital stays down the road. And, the theory continues, if insurers save money, consumers will, too.

CMS, Others Look to California

The rest of the country is watching California carefully. That helps explain the big turnout for IHA’s conference this week.

“California is at least a few years ahead of most states in developing and adopting pay for performance plans,” Ed Mendoza — acting director of California’s Office of the Patient Advocate, a government office charged with educating and advocating for consumers — said.

“California is in a unique position to be a leader for a couple of reasons,” Mendoza said. “We have more people enrolled in HMOs than other states. About 50% of California’s population belongs to an HMO. And the second reason is California’s HMOs — except for Kaiser — are designed in a delegated model with medical groups associated with different insurers. That’s the best model to make pay for performance successful. At least we think it’s the best model,” Mendoza said.

Nationwide, more than 100 pay for performance programs are in place and offering extra incentives for good report cards.

With seven health plans — Aetna, Blue Cross, Blue Shield, Cigna, Health Net, PacifiCare and Western Health Advantage — including more than eight million members, IHA’s program is the largest in the country. The program has attracted interest from state and regional groups all over the country contemplating building similar programs. Even the feds are interested, as CMS is considering adopting parts of IHA’s program.

So far, California’s statewide program is the biggest in payouts as well as participants. Last year IHA paid more than $88 million to 235 medical groups in its P4P program.

Pay-for-performance plans grew up with and remain closely related to advances in health care information technology. It was the arrival of health care “report cards,” such as the National Committee on Quality Assurance’s Health Plan Employer Data and Information Set (HEDIS) standards that allowed comparisons between HMOs. HEDIS is a set of standardized performance measures designed to ensure that purchasers and consumers have information to compare managed health care plans.

“So far, participating in these programs — both quality reporting and pay for performance — is voluntary but as the quality comparisons and pay for performance programs gain steam, that may change,” Mendoza said. “Those quality measures have been collected and disclosed for years, but now adding financial incentives to the outcomes, things are starting to speed up.”

Are There Side-Effects?

Some physicians and consumer groups have expressed concerns that P4P programs could in effect penalize doctors who care for “non-ideal” patient populations — poorer, less educated patients, some of whom have less time or inclination to attend to health needs. The scorecard could show that these patients didn’t get their immunizations on time or didn’t show up for cancer screenings or diabetes tests. Doctors serving these patients would have lower performance outcomes, and the incentives for doctors to practice in less-affluent areas would diminish.

Some also are concerned that performance money — some call it “bonus money” — will reduce the amount of money available for other health care needs.

Ron Bangasser — a family physician in Redlands, past president of the California Medical Association and chairman of Integrated Healthcare Association’s technical committee — said P4P is here to stay and the medical community should not only get used to it, it should embrace the idea because it improves quality of care.

“It’s not the amount of money so much as good measures and a little bit of money,” Bangasser told the American Academy of Family Physicians. “If I don’t believe the measures are worth it, I ain’t gonna play. And the pay-outs have to be from new money. It can’t be money taken away from all of us or some of us as a stick, it has to be all carrot.

“Right now, the more you do, the more you get paid,” Bangasser told the Academy. “The more you do poorly, the more you get paid. We’re trying to make a small change in that perverse system,” he said.


Changes have appeared quickly.

After the first full year of its statewide program, IHA statistics showed that 35,000 more California women received breast cancer screenings, almost 150,000 more women received cervical cancer screenings, about 10,000 more children received immunizations and 18,000 more people received diabetes tests.

And more changes are coming, in patient care as well as to the program’s structure, according to IHA’s forecast. The association’s goals for the next five years of P4P are to “increase incentive payments proportional to improvements in performance outcomes; aggressively develop and expand the performance measurement set; strengthen pay for performance administration to support an increasingly sophisticated program; and further develop public reporting, research and public relations.”

IHA’s written report on the first five years and strategic plan for the next five years concludes:

“While California’s pay-for-performance program faces significant challenges, it is ripe with opportunity. Indeed, it is the biggest pay for performance program in the country, and is the model for other regional programs, as well as for adoption by the Center for Medicare and Medicaid Services. While the program continues to grow and evolve, one factor stays constant: its success depends on continued collaboration.”

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