Value-Based Pay for Performance: Rewarding Affordability Alongside Quality

Abstract

In Since 2001, the Integrated Healthcare Association has served as the convener and lead organization for California’s statewide Pay for Performance (P4P) program. Eight health plans and approximately 200 physician organizations (POs) participate in the program, which covers approximately 9 million Californians enrolled in commercial HMO and POS products. Seven of the plans – Aetna, Anthem Blue Cross, Blue Shield of California, Cigna Healthcare of California, Health Net, UnitedHealthcare, and Western Health Advantage – have paid out over $450 million in incentives through 2012 based on the results, which have shown a steady, incremental improvement in quality metrics over time. Kaiser Permanente physician organizations serving both Northern and Southern California participate in public reporting only. While the program is widely viewed as a success by its stakeholders and national observers, it became increasingly apparent that a major component of performance was missing: cost. Even as quality performance has improved over time, costs have continued to rise inexorably. Several years ago, P4P participants decided that the program should begin to measure cost and resource use, as well as quality, and we embarked on a challenging path to transition to “Value Based” Pay for Performance. In 2013, one participating health plan fully implemented the new program design; several others are poised to adopt in 2014. At the core of the new program design is a global view of the cost of care. The price of health care is notoriously opaque, and varies based on who is paying for the care. Unit cost also falls short as a meaningful measure – cutting the cost of a service in half while utilization doubles does not generate savings. We are not alone in focusing on total cost of care – the Institute for Healthcare Improvement and the Institute of Medicine have both released recent reports aimed at measuring key aspects of the Triple Aim, including total cost of care. Health Partners, an integrated delivery system in Minnesota, received National Quality Forum endorsement for their total cost of care measure in January 2012.