11 Questions to Ask About a Commercial Payor’s Pay-for-Performance Incentive Program

Pay for performance is cited as the “next big thing” the latest in trend in incentive compensation between payors and providers (physicians and hospitals).

One source says there are already over 100 different Pay-for-Performance programs being offered by payors across the country.  [Rewarding Quality Performance: The Multidisciplinary Approach, 5/12/06, Alliance for Health Reform, replay available at: Kaiser Foundation] The Boston Globe recently reported that Blue Cross Blue Shield of Massachusetts is doubling to $189 million the annual amount it spends on pay-for-performance incentives for health care providers. Incentives to improve quality sound like a positive thing, but with all this going on, we suggest some questions to ask when evaluating these initiatives.

This is by all means not an exhaustive list and I invite you to click the comment button below to add items for consideration.

1) Does the provider give you advance notice of the quality measures being used? Are they accepted quality initiatives in the industry, i.e., CMS, Leapfrog, etc. ? Do you have any input into the selection of quality measures?

2) Many payors are establishing programs that rate and grade performance based on the performance of a community of providers. Some programs refer to these as “silos” or “pods”. Do you agree with the group of providers with whom you are included? Can their failure to report affect your quality score?  Even if you are not in a “pod” or “silo”, most payor contracts are the primary responsibility of the finance people. From the start, do you have the support of a sufficient number of physicians that they will cooperate?

3) Do you know in advance what the benchmarks will be? Are the benchmarks determined based on nationally recognized standards of practice? Are they reasonable for your community? Is the incentive paid if your performance is average? … at the 75^th percentile? …higher?

4) Do you know how your organization currently ranks at meeting these benchmarks? What about your “pod” or “silo”?

5) Will you have the ability to determine as you go how your performance is measuring up? Will you have the opportunity to identify providers who are failing to report or incorrectly reporting information that will affect your performance score?

6) Are the performance determinations subjective? Can you appeal the results, whether from incomplete reporting or a disagreement about how results are determined? Are any permitted appeals limited to overall quality scores or can you seek review of individual cases?

7) Is the formula for translating your performance score into an incentive payment transparent? Can you follow step by step how the payor reached its incentive award amount? Is the pay for performance program another way to reward cost containment?

8) What commitment will the payor make to train the providers in your “pod”?

9) Will complying with the reporting requirements be administratively burdensome? Will the monitoring necessary to “catch” and correct unreported quality information be administratively burdensome? Will you be able to meet electronic reporting requirements with your current systems?

10) How has the payout been over time? What are the reports on the “ease of use” and fairness of this program from other providers?

11) Who has access to the quality data once it is amassed by the payor? For what purposes can it be used?  Will data be released before you have had a chance to review it or before you have had an opportunity to dispute any reports which are not correct?  Will this quality data be used for future credentialing decisions?

Pay-for-performance incentives can improve the quality of health care. However, it is important to enter into an arrangement with a clear understanding of how it will work and what your organization’s rights and obligations will be under such a program.  Perhaps these questions will provide a framework for considering pay for performance proposals.