Pay-for-performance (P4P) programs are a phenomenon spreading across the healthcare industry.

Supporters believe P4P programs will change the landscape of healthcare and benefit all stakeholders, including patients, physicians and health plans. Opponents argue that P4P programs create more work for physicians with few rewards in return.

For the past three years, seven Medi-Cal HMOs in California have been experimenting with P4P incentives. The study participants recognized that healthcare stakeholders have personal and organizational interests that sometimes appear to conflict with one another and that P4P programs could be a tool for aligning the goals of physicians, medical groups and health plans so they all feel part of the same mission-improving patient care.

L.A. Care Health Plan, Inland Empire Health Plan, Alameda Alliance for Health, Health Plan of San Joaquin, Kern Family Health Plan, Santa Clara Family Health Plan and San Francisco Health Plan participated in a national P4P initiative, known as Rewarding Results. The California HMOs came together to try to learn whether P4P incentives can be effective at improving healthcare for low-income Medi-Cal enrollees in managed care systems. The Robert Wood Johnson Foundation and the California Healthcare Foundation funded the initiative.

The HMOs spent the first year developing their P4P models. Each health plan designed its own set of incentives to encourage well-care visits. Although each health plan developed a slightly different P4P model, the programs all rewarded physicians for completing recommended well-care visits. Some health plans, including L.A. Care, also implemented incentives for members to complete the well-care visits.

The health plans implemented their respective P4P programs almost two years ago and monitored results over that time period. The health plans also met on a regular basis to compare their P4P models.

Findings Show Promise
After almost two years, the results are promising. Approximately 3,300 physicians participated in the Medi-Cal P4P programs, providing care to nearly 350,000 infants and teens. Five of the seven health plans increased their Health Plan Employer Data and Information Set (HEDIS) scores on the well-baby measure over the life of the project. The range of improvement was 4 percent to 35 percent. In addition, six out of seven plans increased their scores on the well-adolescent HEDIS measure by 7 percent to 14 percent.

Overall, the programs paid out nearly $5 million in incentives to physicians and medical groups. Many physicians expressed surprise when they received their incentive checks and were intrigued by the possibility of continued participation.

There are a variety of early lessons learned:

1. Financial incentives can work. The incentives must be large enough to make a difference. Some suggest they should account for at least 5 percent to 10 percent of income.

2. Engaging physicians is critical. Physicians must be brought into the process early as collaborators to ensure that goals are clinically meaningful and the structure of the reward program is transparent and credible.

3. Physicians need data and tools in order to improve. Frequent, clear and actionable feedback to physicians is essential. Physicians need to understand what aspect of their performance is being evaluated, how performance is being measured, how performance and incentives are related, and how performance can be improved.

4. Data integrity is important. Physicians are more likely to embrace P4P if they view the performance measures being used as valid and the data collection and reporting process as accurate and reliable.

5. Physicians need to be better educated about P4P. Physicians are deluged with clinical and reimbursement information. It can be challenging to attract their attention, but health plans must find effective communication vehicles to raise awareness. Otherwise, physicians may not focus their attention on the goals or rewards of the P4P program.

6. P4P is not a magic bullet. It is one of a number of activities underway in the public and private sectors to improve quality and change incentives in the way healthcare is delivered and financed. If it is implemented well and aligned with other incentives, P4P appears to be a very useful tool.

The preliminary study results show that carefully designed P4P programs can increase utilization of preventive care services by low-income patients. Such programs present healthcare stakeholders with the opportunity to have greater impact in caring for patients with chronic diseases such as asthma and diabetes. Chronic diseases account for a disproportionate share of both the illness burden and healthcare expenditures and represent the next logical focus for P4P incentives.

Elaine Batchlor, MD, is chief medical officer of L.A. Care Health Plan. She is also chair of the Quality Assurance and Quality Improvement Committee. Dr. Batchlor can be reached at 213/694-1250.