Another Milestone in Physician Pay-for-Performance

EFFORTS TO EXPAND AND IMPROVE physician pay-for-performance programs are ongoing. The latest big news is the announcement by a consortium of California’s largest health insurers, employers, and physician groups that its existing pay-for-performance program will expand to pay quality-based bonuses equal to 10% of physicians’ income within five years.

This goal was contained in a report released on February 6 by the Integrated Healthcare Association (IHA) of Sacramento, California. The report was a five-year strategic plan that included the outcomes from the first five years of its pay-for-performance (P4P) plan. Currently IHA’s plan includes 225 participating physician groups which employ about half of the state’s 70,000 physicians. These physicians provide care to 6.2 million commercially-insured patients.

IHA’s P4P program rewards physician groups for improvements in three areas: patient satisfaction (30% weighting), utilization of information technology (20%), and improvements in specific clinical measures (50%), ranging from providing immunizations to screening for cancer. Currently it pays a bonus that equals about 1.5% of a physician group’s annual income. IHA’s strategic plan calls for the bonus amount to grow to 10% of a physician group’s income within five years.

The first year for performance measurements was 2003. IHA paid bonuses totaling $37.7 million to 80 physician groups for 2003. Bonus payments for 2004 were $54 million, paid to 179 participating physician groups. Bonus awards for 2005 have not yet been announced.

During the first 24 months of the program, there was substantial documented improvement in all three areas. In the clinical area, 87% of participating physician groups showed improvement. Patient satisfaction scores were increased in 66% of the groups. IT capability showed substantial improvement. In year one, only 34% of the groups were using IT solutions. This had increased to 54% by the end of year two.

For lab administrators and pathologists, the success of this broad- based P4P program in the nation’s most populous—and progressive—state is a noteworthy development. It points to further expansion of this trend, not just within California, but across the United States.