Web Exclusive: Dr. Michael Belman, staff VP and Medical Director, Blue Cross of California

The $66 million dollar question: How to make pay for performance work

Dr. Michael Belman, staff VP and Medical Director with WellPoint division Blue Cross of California, discusses how his company developed its pay-for-performance program, which recently awarded its contracted medical groups $66 million in incentive pay.

How long has your current pay for performance program been in the works?

First, bear in mind that 99 percent of our HMO network is through our delegated medical groups.  We give the group a full capitation for the professional risk, though the hospital risk stays with us.

Anyway, we had a program in the 90s aimed at our HMO product which offered a small incentive related to how doctors managed chronic disease, health, and how they managed grievances and appeals.  But the money wasn’t very much.

Before switching to pay for performance, we tracked resource consumption– primarily hospital days and dollars–and paid out based on a utilization risk pool. In 2001, though, we revamped our program from a few million a year to much more.  Now, it’s at $66 million. 

Why did you get involved with pay for performance?

I think there was a feeling that the shared risk pool had achieved as much as it could.  And we knew based on HEDIS that there were large deficiencies in providing evidence-based programs to most of the population.  We felt that there was a lot to do on managing chronic disease, on improving care and saving costs. Through pay for performance programs, improvement was possible. 

There was also need for system change.  It couldn’t be done by just trying harder--there had to be some change in process.

How did you choose performance criteria?

We are not in the business of making up measures..we avoid that like the plague.  All you do is get into arguments.  Other health plans had report cards, and medical groups felt that this was a dueling scorecard situation.  I would tell a medical group that they were doing great, others would say no. 

So instead, we worked with the (Calif.-based) Integrated Healthcare Association to build a single set of measures and a single report card that everyone could use, based on HEDIS measures.  The IHA program weighs clinical quality at 50 percent, patient experience at 30 percent and information technology at 20 percent. (Ed. Note:  Plans participating in the IHA program include Aetna, Blue Shield, Blue Cross, CIGNA, Health Net, PacifiCare, and Western Health Advantage.)

How do pay for performance programs like yours address very sick or non-compliant patients?

We realize that some patients will be very sick, which makes thigns harder. And some are just non-compliant--for example, some may not have a mammogram, ever.  It’s a very difficult problem.  There’s a concern that physicians will choose patients selectively who are more compliant.

In the United Kingdom, though, physicians can remove patients who are non-compliant from the denominator.  We may do something like that.

Have you agreed to keep reimbursement at the same level and offer pay for performance incentives as a bonus?

When you start a program like this, physicians want to know that it’s new money, and that you’re not taking away with one hand and given wit the other.  In our case, it is. And it’s likely to pay them more, because on the shared risk side, many groups weren’t receiving money. 

But on the quality incentive program, we committed to pay the entire pool, and score it on a percentage basis.  Everyone from the 20th percentile up will get money.  We pay on a per member per month basis on the reward side, depending on the medical group’s score.

What have providers seen as the biggest challenges?

Most money now is not being paid for doing things right, but for units of service–just doing things.  So quality may or may not be there.

The groups felt that there should be a business case for quality.  Doing good things was fine, and many people did them for ethics and professional reasons, but money made it a little bit sweeter. 

What have been the biggest challenges on your end?

The challenge at the beginning was coming up with appropriate measures, and implementing the program so as to have it be equitable across a wide range of groups and a wide range of performance.  The biggest challenge I see now is to see that groups which are more challenged don’t get left behind permanently.

The idea is that there would be a way of adjusting incentives not only for absolute performance, but also a pool for improvement as well.  But that’s the challenge: if you can’t enlarge the pool, you’ve got to take some money out of the pot for the others.
Are there any specific characteristics that stand out that highly-performing groups have in common?

Successful groups have systems: they’re not just telling people to do well.  It’s clear from our data that groups who have strong IT systems do well.  They have a registry for all patients who fit in a group, such as diabetics, heart disease, asthmatics, etc. They seek out members who are missing things and bring them in and have them done.

Where to you think this program is headed?

This program be in a process of evolution for the next four or five years. With maturation of these systems, it should be possible to take into account people who are non-compliant, very sick and so forth. I’m open to any way we can improve that through systems alone or systems plus incentives.

We’ve been encouraged by the fact that we’ve been able to communicate very openly medical groups and administrators, and think the program will continue to improve.  There’s plenty of hope that by rewarding appropriate systems and good performance, we’ll get to where we all want to go.