Pay For Performance: Make Healthcare Metrics Count

Jan. 30, 2012 InformationWeek healthcare Digital Issue

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Pay For Performance

Dr. Donald M. Berwick, who just stepped down as director of the Centers for Medicare and Medicaid Services, was unflinching in his criticism of the U.S. medical establishment during one of his last interviews with The New York Times while still on the job. Citing the use of unproven treatments and a failure to coordinate care, Berwick said 20% to 30% of health spending is a waste of money.

CMS's initial attempt to curtail this sort of waste is to replace the pay-for-service approach to reimbursing Medicare providers with an approach that has a significant performance element, whereby providers are rewarded for showing improvements in care.

Pay for performance requires that providers be able to prove they've improved patient outcomes in a range of areas. To do that, healthcare organizations must be able to provide detailed performance data that demonstrates they're offering effective care at the most reasonable price, and that they're improving care over time.

Collecting and analyzing the required data isn't going to be easy. Here's a look at what's involved and ways to make it easier.

Accountable Care

CMS's accountable care organization program, started last year, is the first federal program to incorporate pay-for-performance incentives. An ACO is a group of doctors, hospitals, and other healthcare providers that work together to deliver high-quality care to at least 5,000 Medicare beneficiaries for at least three years. They're required to report on 33 quality standards and show improvement in 32 of them within the three years to obtain financial rewards.

The underlying assumption is that higher-quality care will lead to lower costs. How so? Their healthier patients will need fewer expensive tests, require fewer surgeries and other medical procedures, and have lower hospital admission rates. ACOs that cut the cost of treating their Medicare patients below the average per capita spending for Medicare beneficiaries keep a portion of the savings. If, on the other hand, their cost of treating a patient exceeds the CMS benchmark, the ACO loses some of its Medicare dollars.

"How does this apply to me?" you're probably asking. "This sounds like a lot of work, and my organization doesn't treat that many Medicare patients." While only ACO participants must now adhere to the federal pay-for-performance standards, all healthcare providers should take a close look at them because, if the federal program is successful, private insurers will probably follow with their own pay-for-performance requirements. It's a safe bet that pay for performance will be part of every healthcare provider's future.

Lutheran Hospital of Indiana in Fort Wayne, for instance, isn't aiming to become an ACO, but chief medical information officer Dr. Steve Orlow sees the importance of meeting all the quality standards outlined in the CMS rulebook. "We believe we will have to compete in a pay-for-performance environment," Orlow says.

Like many other high-performing organizations, Lutheran, a 396-bed facility, was already measuring care quality and making the transition to EHRs well before CMS came out with its Meaningful Use incentives and the ACO program. Orlow notes that the hospital was almost 100% on a CPOE system before even applying for MU.

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