Pay for Performance in Health Care:

Methods and ApproachesEDITED BY

Jerry Cromwell, Michael G. Trisolini, Gregory C. Pope, Janet B. Mitchell, and Leslie M. Greenwald

Pay for Performance in Health Care: Methods and Approaches

Edited byJerry Cromwell, Michael G. Trisolini, Gregory C. Pope,

Janet B. Mitchell, and Leslie M. Greenwald

RTI Press

March 2011

2011 Research Triangle Institute.

RTI International is a trade name of Research

Triangle Institute.

All rights reserved. Please note that this

document is copyrighted and credit must be

provided to the authors and source of the

document when you quote from it. You must

not sell the document or make a profit from

reproducing it.

Library of Congress Control Number: 2011921923

ISBN 978-1-934831-04-5

doi:10.3768/rtipress.2011.bk.0002.1103

www.rti.org/rtipress

Suggested Citation

Cromwell, J., Trisolini, M. G., Pope, G. C., Mitchell,

J. B., and Greenwald, L. M., Eds. (2011). Pay

for Performance in Health Care: Methods

and Approaches. RTI Press publication

No. BK-0002-1103. Research Triangle Park, NC:

RTI Press. Retrieved [date] from

http://www.rti.org/rtipress.

This publication is part of the RTI Press Book series.

RTI International 3040 Cornwallis Road, PO Box 12194, Research Triangle Park, NC 27709-2194 USA

rtipress@rti.org www.rti.org

ContentsAcknowledgments v

Contributors vi

Abbreviations and Acronyms vii

Introduction 1

Janet B. Mitchell

Chapter 1. Introduction to Pay for Performance 7

Michael G. Trisolini

Chapter 2. Overview of Pay for Performance Models and Issues 33

Gregory C. Pope

Chapter 3. Theoretical Perspectives on Pay for Performance 77

Michael G. Trisolini

Chapter 4. Quality Measures for Pay for Performance 99

Michael G. Trisolini

Chapter 5. Incorporating Efficiency Measures into Pay for Performance 139

John Kautter

Chapter 6. Who Gets the Payment Under Pay for Performance? 161

Leslie M. Greenwald

Chapter 7. Attributing Patients to Physicians for Pay for Performance 181

Gregory C. Pope

Chapter 8. Financial Gains and Risks in Pay for Performance Bonus Algorithms 203

Jerry Cromwell

Chapter 9. Overview of Selected Medicare Pay for Performance Demonstrations 221

Leslie M. Greenwald

iv

Chapter 10. Evaluating Pay for Performance Interventions 267

Jerry Cromwell and Kevin W. Smith

Chapter 11. Converting Successful Medicare Demonstrations into National Programs 315

Leslie M. Greenwald

Chapter 12. Conclusions: Planning for Second-Generation Pay for Performance 341

Michael G. Trisolini, Jerry Cromwell, and Gregory C. Pope

Index 371

v

AcknowledgmentsThe authors would like to thank the many editors, reviewers, and document preparation specialists who contributed to the development of this book. They include Kathleen Lohr, PhD, who was the RTI Press editor-in-chief when this book was written; she provided extensive comments on each chapter and advice on layout, cover design, and many other details of writing and production. Karen Lauterbach, RTI Press managing editor, provided detailed advice and comments on editing, layout, and production, and kept the many components of the overall process moving steadily forward. Anne Gering and Carol Offen provided detailed edits for each chapter and managed the process of moving each chapter through writing, editing, and production. Joanne Studders and Sonja Douglas provided detailed final reviews and edits for each chapter, and prepared the final layouts. We would also like to thank the many anonymous reviewers who provided valuable comments and suggestions for each of the chapters when they were in earlier versions.

vi

Jerry Cromwell, PhD, is an RTI Senior Fellow in Health Economics. In the past 40 years, he has participated in more than 75 federally funded evaluations and technical analyses of health care payment reforms, including Medicares hospital prospective payment system, the physician fee schedule, anesthesia payment, disease management programs, and federal-state Medicaid cost sharing. He also is an adjunct professor in the University of Massachusettss College of Nursing, where he teaches health economics, finance, secondary data analysis, and cost-effectiveness analysis.

Leslie M. Greenwald, PhD, is a principal scientist at RTI International. Her research interests include Medicare program policy, health care costs and payment, managed care, and health care reform. Dr. Greenwald received a BA from Dartmouth College and an MPA and PhD from the University of Virginia.

John Kautter, PhD, is a senior economist at RTI International. His research interests include the development, implementation, and evaluation of health care payment models, including payment models for fee-for-service and managed care, as well as hybrid payment models. Dr. Kautter received his doctorate in economics from the University of Illinois at Urbana-Champaign, where he specialized in health economics, industrial organization, and applied statistics.

Janet B. Mitchell, PhD, heads RTIs Social Policy, Health, and Economics Research unit. She received her doctorate from the Heller School at Brandeis University in 1976. She has studied physician payment under Medicare and Medicaid for many years and conducted the seminal work on bundling inpatient physician services (physician diagnosis-related groups).

Gregory C. Pope, MS, directs RTIs Health Care Financing and Payment program. Mr. Pope is a health economist whose primary research interest is health plan and provider payment in the US Medicare program, including pay for performance, accountable care organizations, and risk adjustment.

Kevin W. Smith, MA, is a senior health research analyst in RTIs Health Care Quality and Outcomes Group. His research interests include evaluation research, quality-of-life measurement, psychometric assessment, structural equation modeling, and survey methodology. Mr. Smith received a BA from Colgate University and an MA from Tufts University.

Michael G. Trisolini, PhD, MBA, is the director of RTI Internationals Heath Care Quality and Outcomes Program. Dr. Trisolini has more than 27 years of experience in health services research and management. His research focuses on quality-of-care measurement, quality improvement programs, pay for performance, value-based purchasing, and health information technology. He has a BA from Oberlin College, an MBA from Harvard University, and a PhD from Brandeis University.

Contributors

vii

Abbreviations and Acronyms ACE acute care episode

ACO accountable care organization

ACSC ambulatory care sensitive condition

ADL activity of daily living

AHRQ Agency for Healthcare Research and Quality (formerly known as the Agency for Health Care Policy and Research)

ALOS average length of stay

AMA American Medical Association

AMI acute myocardial infarction

APR-DRG all-payer refined diagnosis-related group

CAD coronary artery disease

CAMC Charleston Area Medical Center

CBO Congressional Budget Office

CHF congestive heart failure

CMHCB Care Management for High-Cost Beneficiaries

CMO care management organization

CMS Centers for Medicare & Medicaid Services

CoE Center of Excellence

COPD chronic obstructive pulmonary disease

CPOE computerized physician order entry

CPPI California Physician Performance Initiative

CPT Current Procedural Terminology

CPTD Cancer Prevention and Treatment Demonstration

CQI continuous quality improvement

CT computed tomography

DEA data envelopment analysis

DHHS Department of Health and Human Services

viii

D-in-D differences-in-differences

DM disease management

DRA Deficit Reduction Act of 2005

DRG diagnosis-related group

EDSS Extended Disability Status Scale

EHR electronic health record

EMR electronic medical record

ESRD end-stage renal disease

FFS fee-for-service

FIM Functional Independence Measure

GDP gross domestic product

HAC hospital-acquired condition

HbA1c glycosylated hemoglobin

HCC Hierarchical Condition Category

HEDIS Healthcare Effectiveness Data and Information Set (as of 2007);

Health Plan Employer Data and Information Set (in use 19932007)

HIE health information exchange

HIPAA Health Insurance Portability and Accountability Act

HMO health maintenance organization

HQA Hospital Quality Alliance

HQID (Premier) Hospital Quality Incentive Demonstration

HVBPP Hospital Value-Based Purchasing Program

IADL instrumental activity of daily living

ICD-9 International Classification of Diseases, Ninth Revision

ICER incremental cost-effectiveness ratio

ICU intensive care unit

IDS integrated delivery system

IHA Integrated Healthcare Association

Abbreviations and Acronyms

ix

IHIE Indiana Health Information Exchange

IOM Institute of Medicine

IT information technology

ITT intent-to-treat

LL lower limit

MCCD Medicare Coordinated Care Demonstration

MCPT maximum percentage eligible for bonus

MCS Mental Component Summary

MedPAC Medicare Payment Advisory Commission

MFIS Modified Fatigue Impact Scale

MHQP Massachusetts Health Quality Partners

MHS Medicare Health Support

MHSO Medicare Health