Pay-for-Performance MDs

Through childhood and adolescence, young physicians-to-be learned the workings of the incentive system by cleaning their rooms and taking out the trash in exchange for a periodic monetary allowance. In college and medical school, the lure of professional fulfillment (ie, community respect and a high-end paycheck) became the incentive that carried residents through long hours and back-to-back shifts.

"When it comes to designing physician pay-for-performance programs the primary issue is one of trust.”—Terris King; Deputy Director, CMS Office of Clinical Standards & Quality

Through childhood and adolescence, young physicians-to-be learned the workings of the incentive system by cleaning their rooms and taking out the trash in exchange for a periodic monetary allowance. In college and medical school, the lure of professional fulfillment (ie, community respect and a high-end paycheck) became the incentive that carried residents through long hours and back-to-back shifts.

More recently, pay-for-performance (P4P) programs are extending the financial carrot as the Centers for Medicare and Medicaid Services (CMS) asks physicians to follow specific quality-of-care guidelines in an effort to improve healthcare outcomes while reducing healthcare expenditures. In wide circles, P4P programs are being heralded as the next healthcare savior. And as Bill Darling, a partner with Strasburger & Price, who has extensive experience in healthcare law and quality care initiatives, asks rhetorically, “What’s the alternative? Does anybody have a better plan?”

The $ Bottom Line

But what does the arrival of P4P mean to America’s physicians from a bottom line, financial perspective? Depending on the size of a physician’s practice, it might be a very expensive carrot.

“Let’s assume that I’m a physician in private practice that has a 30% Medicare patient base,” offers Joe Rubinsztain, MD, a gastroenterologist and CEO of gMed, a Florida-based EMR company. “Not all of my Medicare patients are going to come in with GERD,” which is one of the specific conditions P4P programs are looking at. “So, out of that Medicare-specific patient base, you now reduce it to only those patients who have that condition, then further reduce that to only 1.5% of the total allowable charges. At the end of the day, you’re only going to be making probably $30 more for each patient who has that condition. Do you realize how much work is involved in reporting these quality measures?”

A lot—both in manpower hours and technology outlay. Dr. Rubinsztain suggests that unless a physician is working with electronic medical records—and no more than 25% of physicians are—it’s highly unlikely that medical offices will be able to offset the cost of participating in P4P with the gains they receive.

Darling says that what he often encounters at the physician practice level is confusion where P4P programs are concerned, especially for smaller practices or sole practitioners. P4P programs may provide a 1.5% bonus reimbursement, but the cost to gear up, technology-wise, might be 2.5%. Physicians are left scratching their heads, wondering if the investment is financially feasible.

Better Get Going?

But, warns Darling, there’s an even greater question to ponder. “It’s the old pay-me-now, pay-me-later concept,” he explains. “If you don’t spend the money on the front end, then what happens to you on the back end? CMS has announced that the Physician Quality Reporting Initiative will be ongoing in 2008. So, if you don’t learn to walk while there’s time to walk, what happens later when everybody is jogging? You might be standing there watching them jog off into the distance.”

Richard Gilbert, MD, MBA, is CEO of Southeast Anesthesiology Consultants, which provides the anesthesia physicians for Carolinas Healthcare System, the third largest non-profit hospital system in the country. Southeast’s Perioperative P4P program has realized considerable annual savings in the categories of post-operative heart attacks and strokes, and translated that into lowering their annual malpractice premiums by approximately 10%. Dr. Gilbert agrees that for some smaller practices, the investment in an IT infrastructure and accompanying training might be cost prohibitive. But, he offers an alternative strategy going forward.

A Team Effort

“The real savings (in P4P) accrue to the payors more so than the physicians,” Dr. Gilbert explains. “It would seem that to jump-start these programs and get everybody’s incentive aligned, it would behoove the payors to put some of those savings back into physicians’ hands to get more of an immediate cause and effect.”

Darling agrees. He explains that the Office of Inspector General at the US Department of Health and Human Services has instituted some exceptions to the anti-kick-back statute that allows hospitals to participate in financing physicians’ cost to ramp up, technology-wise. He suggests that if physicians are not yet talking to their hospitals about receiving help in this area, they should be.

Regardless of the assistance, and despite the cost, Darling says there is an important reason why physicians might want to consider jumping onto the P4P bandwagon in the near future. He points to the issue of transparency in healthcare today, which is an element of pay for performance, and how the public is made aware of where physician practices rank based on level of quality.

“No physician wants to be ranked lower than his or her peers,” Darling says. “It may not put money in their pocket, but the incentive is there from a peer pressure standpoint. And I don’t think anybody has to tell physicians how that works.”

Ed Rabinowitz is a veteran healthcare reporter and writer. He welcomes comments at edwardr@ptd.net.

Read More:

Judging Physician Care

P4P: Physician Reimbursement Methodologies

Doctor Ratings Fraught With Uncertainty

(Not) Paying for Performance

Helping Physicians Assess Performance