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A Dose of Transparency to Alleviate System's Ills

October 9, 2006
Related Topics: Health and Wellness, Featured Article, Compensation
A report titled “To Err Is Human” rocked the health care establishment in 1999 by bringing into sharp relief the need to change how doctors and hospitals get paid.

    That shake-up is finally revealing itself in the marketplace.

    The landmark report, released by the Washington, D.C.-based Institute of Medicine, said 44,000 to 98,000 people die each year in hospitals because of medical errors. The institute calculated the annual cost of these preventable deaths to be $37.6 billion.

    The report was a wake-up call, says Larry Boress, president of the Midwest Business Group on Health in Chicago.

    “There is an understanding now that no matter what you do with benefit design the cost will go up,” Boress says, “until you address the underlying cost in our health care system: overuse, underuse, misuse and inefficiency.”

    What astounded employers, insurers and government officials—the ones picking up the bill—was that hospitals’ doctors whose care resulted in death were getting paid for their services and had little incentive to change.

"We're sort of in the honeymoon
phase of pay for performance.
We don't feel fettered by past performance, and programs are proliferating at a steady clip."
--Suzanne Delbanco,
executive director, Leapfrog Group

    The report catapulted to the forefront the concept of pay for performance: Instead of paying doctors for the services they provide, as they are now, a significant percentage of a doctor’s or a hospital’s compensation would be tied to their performance. Doing so would give medical providers an incentive to improve the quality and efficiency of their care.

    Employers could use the information to build better provider networks and force patients who go to an underperforming doctor to pay more. Pay for performance has been embraced as a kind of consumerism that even opponents of high-deductible plans endorse because it can exist within the current system of co-pays and premiums.

    But to judge which doctors or hospitals perform well requires rating them.

    Rating a doctor is radically different from comparison shopping for a new television, or even for prescription drugs or medical equipment. For several years, nearly two dozen groups composed of employers, insurers, and state and federal government officials have been developing a ratings system for doctors, hospitals and other medical providers. Those working on the project hope that by using anonymous claims data supplied by employers and the federal government’s Centers for Medicare & Medicaid Services—the largest single payer of health care in the country—they can create a comprehensive database accessible to the public that will rate medical performance.

    In the effort to make doctor and hospital costs and performance transparent, however, the medical community worries that doctors who take on end-of-life cases or people who are chronically ill will be penalized.

    “Transparency is not a panacea,” says Robert Doherty, senior vice president for governmental affairs at the American College of Physicians, who spoke during a Kaiser Family Foundation webcast on the issue in July.

    Though the largest efforts involving Medicare are not yet online, insurers in several markets being closely studied have begun to use their data to rate doctors. In August, Blue Cross of California announced it had awarded $65 million to 178 physician groups that scored at the top of its ratings. The doctors were judged based on commonly adopted measures: patient satisfaction surveys, clinical measures, waiting times for appointments, number of complaints and grievances, and a review of the medical group.

"There is an understanding now that no matter what you do with benefit design the cost will go up, until you address the underlying cost in our health care system: overuse, underuse, misuse and inefficiency."
--Larry Boress, president,
Midwest Business Group on Health

    Also, President Bush signed an executive order in August directing federal health care programs to make quality measurements of hospitals and doctors available by January 2007, building on legislation folded into the Deficit Reduction Act of 2005. The order, though symbolic, is widely supported by employer groups.

    Part of the challenge is determining how much money it will take to encourage physicians and hospitals to practice cost-efficient medicine, since the current system encourages the use of expensive tests and procedures, says Suzanne Delbanco, executive director of the Leapfrog Group, an employer-led organization developing a pay-for-performance model. Another challenge, Delbanco says, is deciding who will pay for those incentives.

    Employers, for their part, worry about fomenting a backlash, as they did with managed care in the 1990s, if they limit access to doctors who are underperformers, Delbanco says.

    Like other experiments to reduce health care costs, this one is in its infancy. And it remains to be seen whether consumers will eventually choose doctors based on ratings or if they will equate more expensive doctors with better quality.

    “There is a great need to educate the public,” says Dana Felthouse, president of the Pharmacy Benefit Management Institute.

    The success of this new approach will not be tested until Medicare, the largest payer of health care in the country, releases its data on doctor per­formance, says Boress from the Midwest Business Group on Health.

    He also worries that it may be for naught if consumers do not use the information.

    “We know that 60 percent of [participants in] pension plans never move their money. How the heck are we going to expect people to use health information?” Boress says. “Fundamentally, we have a major problem with people not using the information despite all the efforts we are making to make that information available.”

    Nevertheless, expectations are high that pay for performance will revolutionize health care in the United States.

    “We’re sort of in the honeymoon phase of pay for performance,” Delbanco says. “We don’t feel fettered by past performance, and programs are proliferating at a steady clip.”

    But Delbanco counsels patience if expectations for pay for performance are not met right away.

    “My fear is that people will throw up their hands and say that pay for performance doesn’t work.”

Workforce Management, September 25, 2006, p. 30 -- Subscribe Now!

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