Pay for Performance: How Prisoners Presaged CMS Changes

by: Greg Seymann, Chair of SHM’s Performance Measurement and Reporting Committee

In England in the mid 1800’s, the concept that government had a duty to provide for the public health was taking shape under the leadership of Edwin Chadwick. At one point in his career, Chadwick struggled to improve staggeringly high mortality rates on British ships transporting prisoners to the Australian colonies. Various interventions, including dietary modifications, onboard medical staff, and even exercise programs, failed to reduce death rates below 50%. Chadwick’s mentor, the utilitarian philosopher Jeremy Bentham, suggested a change in the contract with the ships’ captains. Instead of paying for the number of passengers boarding the ship in London, they would pay for the number who got off alive in Australia. In the two years that followed, Chadwick found that mortality rates dropped to 5%, and the precedent to apply “pay for performance” incentives to improving health outcomes was set.

Although it took a long time for these lessons about applying pay for performance to improve health outcomes to gather steam, that train has now left the station at CMS and is accelerating rapidly. US healthcare payment and delivery systems have steadily moved away from a model that incentivizes volume to one that incorporates transparency, feedback and accountability for outcomes among its providers.

In the last decade, various initiatives incentivizing voluntary reporting of performance on clinical outcomes by hospitals and physicians took shape. More recently, these programs have morphed from providing bonuses to those who participate to penalizing those who abstain. CMS has come to realize that the relatively small amounts of money at stake in the Physician Quality Reporting System (PQRS) were not sufficient to attract the attention of most providers. With the passage of the Medicare Access and CHIP Reauthorization Act (MACRA) that included the SGR fix, we will see the financial stakes continue to escalate to encourage broader participation as CMS pursues its mission to transform from a purchaser of volume to value, with a stated goal of tying 90% of its fee-for-service payments to quality and value by 2018.

Under MACRA, physicians and groups will face increasing financial risk, with a potential upside for providing efficient and high quality care (learn more about MACRA). Procrastinators may be falsely reassured by the CMS timeline, which suggests that MACRA implementation will begin in 2019. While technically true, collection of performance data used to categorize groups as good or bad performers on quality and cost in 2019 starts in January, just 9 months from now. Groups without a strategy, especially those not currently participating in PQRS or Physician Value-based purchasing programs, will likely face some significant financial consequences.

Although I can’t prove it, I wouldn’t be surprised if one way British captains achieved such a reduction in mortality rates on Australian voyages in the wake of “pay for performance” was by leaving the sick or frail prisoners on shore. It does not require too large a leap of imagination to envision how such a perversion of concept could arise with application of P4P to healthcare, and it is precisely the reason we need front-line clinicians engaged in the process as the implementation strategies continue to develop. Without oversight, sensible business concepts applied to patient care can go very wrong (for example: incentivizing antibiotic timing in pneumonia, discharge by noon, healthcare-acquired infections).

My colleague Ron Greeno, who chairs SHM’s Public Policy Committee, and I will be presenting a session on Monday, March 7 at 3:15 pm during the SHM Annual Meeting in San Diego entitled, “The SGR is Repealed…What Now? What Hospitalists Need to Know about MACRA, MIPS and APMs.” In this session we will provide an overview of the changes hospitalists can expect from this legislation and its impact on your bottom line. We will highlight some of the SHM advocacy efforts to ensure the interests of hospitalists are represented appropriately as strategies to implement this new law develop. We’d love to see you there.

Dr. Greg Seymann is a hospitalist and Vice Chief for Academic Affairs at the University of California, San Diego Division of Hospital Medicine. He is a longstanding member and current chair of SHM’s Performance Measurement and Reporting Committee.

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