Ratings to Affect Doctors’ Wallets

Patient satisfaction and measures of effective healthcare would determine 10% of pay for many California doctors under a plan to be released today.

The plan would expand a program that has quietly begun to change the way the state’s doctors are paid. The California Pay for Performance Program, launched five years ago by a nonprofit consortium of physician groups, employers and health insurers, is the largest such effort in the country.

Advocates of the movement say the goal is to reward doctors for effective treatment, not simply for ordering tests and processing patients quickly.

Physician groups “need to compete among ourselves to improve performance,” said Steve McDermott, chief executive of San Ramon-based Hill Physicians Medical Group. “And money talks.”

Although some doctors initially were leery, the California program now has 225 participating physician groups employing about half of the state’s 70,000 doctors. Collectively they care for 6.2 million patients and collect $5 billion a year from health plans.

The program rates physician groups’ performance annually in three areas: patient satisfaction, adoption of computer technology, and success at providing effective treatment and preventive measures such as immunizing children and screening women for breast and cervical cancer. The scores are posted on a public website run by the state Office of the Patient Advocate.

Seven large health plans began paying bonuses to physician groups based on the scores in 2003, handing out more than $90 million in the first two years. Some of those groups have extended the idea further, setting pay for individual doctors based in part on quality measures.

The insurance company bonuses represent 1.5% of physician-group income. The plan to be announced today would bring performance-based pay up to 10% in five years -- a step that might require cutting annual across-the-board fee increases paid by health plans, according to the architects of the plan.

To succeed, the program will have to work out details with health plans and physician groups. And that could be difficult. The potential challenges include competition among insurers, possible antitrust concerns and doctor acceptance.

Pay for performance “does drive behavior,” said Don Crane, president of the California Assn. of Physician Groups. But some doctors “don’t want to do it because it makes life more competitive,” he said. “It upsets the status quo. It’s going to create winners and losers.”

The program also plans to make fundamental changes in how physician performance is measured. Currently, the program primarily measures process -- how often doctors provide patients appropriate treatment or tests in 10 key areas. The goal is to add measures of medical outcomes, such as how well a physician group manages the blood-sugar level of diabetics or the blood pressure of its patients with hypertension.

Efforts by health plans, government agencies and employers to peg physician pay to effective care are on the rise, up from 35 programs three years ago to 115 today, said Geof Baker, chief executive of Med-Vantage Inc., a San Francisco company that sells quality-measurement software to health plans. Altogether, such programs affect the care of 53 million patients across the country.

The move to raise the level of performance-based pay in California reflects a growing consensus that small bonuses are not enough, Baker said.

“In order to change behavior, the numbers we’re seeing in other health plans are anywhere between 5% and 10%” of overall pay, he said. “That’s enough to get the physicians’ attention, to get them to make an investment” in changes that could improve patient outcomes, such as tracking those with chronic conditions.

The idea of tying physicians’ pay to performance came from business leaders who were practicing it in the workplace. Worried by soaring healthcare costs, employers grew frustrated that there were no clear quality measures they could examine to determine whether they were spending wisely.

In the late 1990s, individual health plans launched their own doctor “report cards.” But they did not go over well with physicians who felt overwhelmed by multiple demands for information. In some cases, a physician would be highly rated by one and get a low rating from another.

Beginning in 2001, the Oakland-based nonprofit Integrated Healthcare Assn. brought together leaders from physician groups, health plans and employers to create the state’s pay-for-performance program with funding from the California Healthcare Foundation and the Robert Wood Johnson Foundation.

“We all want our physicians to give us the best care,” said Dr. Richard Lehrfeld, medical director for Blue Cross of California, one of the largest health plans involved in the program. “For the physicians who do the right thing -- preventive care -- it would make sense that you should be rewarded.”

The planned changes in California have been well received by physician group leaders, said McDermott, who chairs the California program’s planning committee.

“Three or four years ago, this was very controversial,” McDermott said. “Now I said, ‘We’re talking about more pay in this thing, and let’s be clear: If there is more money for performance, it’s got to come out of something....’ And they were for it.”

Ron Bangasser, a Redlands physician and former president of the California Medical Assn., said raising the level of performance-based pay would give physicians more incentive to find ways to improve.

“It’s an opportunity to get attention and to change behavior,” said Bangasser, who heads the program’s technical committee. “And that’s what this is all about.”

On the national level, another step forward in the pay-for-performance movement is expected today when the American Board of Internal Medicine, the nation’s largest medical board, is to announce that it is joining forces with Bridges to Excellence, a national pay-for-performance program started three years ago by General Electric Co., Procter & Gamble Co., Verizon Communications Inc. and other large employers.

Beginning this year, internists who agree to measure their performance as a part of their 10-year board recertification may also have their data sent to the Bridges program to qualify for bonuses offered by employers and insurance plans.

Dr. Christine Cassel, the board’s president, said the performance assessments began a few years ago and were voluntary until January. Physicians who have participated have learned how to improve the care they give through such simple steps as affixing notes to the charts of forgetful patients to have a nurse remind them to take their medications.

“There was at first resistance,” Cassel said. “Then it’s ‘Hey, this is really valuable.’ ”