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AAOS Now

Published 8/1/2007
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Jennie McKee

P4P: Participation now may pay off later

Meeting quality indicators may eventually affect your financial success

How do you feel about pay-for-performance (P4P)? Regardless of your answer, it’s very important that you realize the growing influence of P4P and understand what P4P may require of you in the future.

A panel of experts discussed these and other issues at the 2007 BONES Society Annual Conference. Speakers included Tom Wolfe, administrator of Texas Orthopaedics, Sports & Rehabilitation Associates, a 13-physician practice in Austin, Tex. that participates in pay-for-performance; Richard M. Cameron, MHSA, CMPE, a consultant for a healthcare consulting firm; and William D. Darling, JD, who has practiced healthcare law for more than two decades.

P4P: a growing trend
Under a P4P system, a portion of the reimbursement that physicians and hospitals receive from Medicare is based on how physicians manage their patients.

According to Wolfe, P4P initiatives are here to stay and are continuing to proliferate. Therefore, orthopaedic surgeons must carefully investigate and monitor P4P to determine if participation would benefit them.

“As the Centers for Medicare & Medicaid Services (CMS) and other insurance companies continue to design and develop performance-based reimbursement models, practices must realize the reality of P4P and the fact that it will change the way we do things,” said Wolfe.

Cameron agreed that P4P initiatives are growing at a slow but steady rate.

“In the last year we’ve seen a substantial increase in the number of P4P programs,” he said. “Today, there are at least 200 P4P programs in this country. A year ago, there were about 160.”

There’s a business case for quality, stated Darling. Better medical protocols and processes (for example, quality indicators) lead to better clinical outcomes, which, in turn, reduce complication rates and costs associated with care. The combination of better clinical outcomes and less costly care results in improved patient satisfaction.

Possible problems
Despite the potential benefits—including increased revenues and improved quality in health care—many physicians are concerned about the undefined aspects of P4P, such as the lack of true quality indicators. To date, no single set of standards exists for P4P that everyone accepts. Data collection and the physician’s role in obtaining data are also concerns. Cameron pointed out other possible issues.

“P4P is still time-consuming with very little payoff,” he explained. “All the work involved is in the front end—data collection and analysis. You don’t get paid for that, and you probably never will. You look at it as an investment in growing your business. To a certain extent that’s admirable, but those are costs that are not yet recognized.”

In addition, P4P isn’t appropriate in all markets, and doesn’t include individualized treatment plans. Nor have quality measures been developed for all classes of patients.

“Will all patients ultimately be affected?” mused Cameron. “I think that’s where CMS is going. I think that CMS will continue to drive the final version of P4P.”

Practices may also be concerned about whether the initial costs of participating in P4P will exceed the return, said Darling. Other questions include whether physicians may terminate relationships with patients who are not compliant to avoid a lower scorecard or whether a physician’s scorecard may affect hiring decisions.

Finally, a large percentage—about 75 percent—of practices in this country still don’t use electronic technology such as electronic medical records (EMR) or electronic health records (EHR) to help gather information and manage patients’ care. These practices aren’t able to transmit quality information easily. Determining how to gather the necessary data, dealing with the costs involved, and translating the data into information that can be used to improve quality are unresolved issues in many practices.

“Although CMS is sympathetic that not all practices have EMR, it is under a government mandate to have differentiated payments for services by the 2010 fiscal year,” said Cameron. “CMS will involve providers as best it can, but it’s going to keep moving ahead with its agenda.”

Legal and regulatory issues
Before participating in P4P, physicians should make sure they’re familiar with all related legal and regulatory issues, including the Stark Law, which prohibits a physician from referring Medicare and Medicaid patients for designated health services (which include inpatient and outpatient hospital services) to entities with which the physician (or an immediate family member) has a financial relationship. If a hospital distributes funds as part of a P4P or gainsharing program, said Darling, it may create a financial relationship with the participating physicians that could result in a Stark violation.

Other important legal considerations are federal and state anti-kickback regulations that prohibit the solicitation of, offering of, or payment of any type of remuneration (directly or indirectly, in cash or in kind) in exchange for referrals or arranging for furnishing healthcare service opportunities. The Federal anti-kickback statute applies to healthcare programs such as Medicare, Medicaid, and Tricare.

Can P4P be profitable?
Although current participation in P4P may not translate to substantial financial benefits for small practices or even for primary care networks, the motivation for participating has more to do with preparing for the future.

“As CMS introduces P4P and actually pays doctors differently for providing the same services, it will fundamentally change how dollars flow to doctors who are able to demonstrate their quality under P4P guidelines versus those who cannot,” said Cameron. “The reality is that the payment that you get today will be drastically different from what you might get in the future if you cannot demonstrate your quality.”

Cameron then provided an example using Dr. J, who is participating in P4P, and Dr. B, who is not.

“Before P4P,” said Cameron, “these two doctors would get paid basically the same for seeing Medicare and commercial patients. It’s my belief that with a full, 5-year impact of P4P, Dr. J, who’s participating, will get 18 percent more than Dr. B. But the two doctors together will get about 9.5 percent less than current payments, because the pie is going to shrink, as dollars shift to the doctors who can prove their quality. Over the next few years, that’s going to be a reality in some markets.”

Collaboration is key to P4P success
According to Darling, P4P is “a team sport,” and, therefore, creating a collaborative organization—such as a physician/hospital P4P network—can be helpful.

“I think that creating such a network should not be driven solely by the hospital. There needs to be a P4P team, with physician members,” said Darling. “To develop a collaborative, integrated model that will allow you to participate in P4P, physicians must be more than peripherally involved in the process.”

The team should also include financial experts who can forecast how P4P will affect the revenue stream, information technology members to develop systems to measure and report treatments and outcomes, and legal counsel to assist in developing the organizational structure, review regulatory impediments, and review contracts with payors.

Jennie McKee is a staff writer for AAOS Now. She can be reached at mckee@aaos.org.