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7 Steps for Creating a Viable Pay for Performance Model


By Richard L. Gilbert, MD, MBA, Chairman and CEO, Southeast Anesthesiology Consultants, Southeast Pain Care & Quantum Clinical Navigation System | September 01, 2010


The rising cost of healthcare has been an ongoing concern of the nation's business community. When the 2001 Institute of Medicine landmark report titled "Crossing the Quality Chasm" revealed that 98,000 hospitalized patients die unnecessarily each year from preventable medical errors, the nation's business and medical communities took notice. They realized expenditures for healthcare did not necessarily translate into higher quality healthcare. Not only were healthcare costs escalating, but also there was an opportunity for improvement in patient safety and quality — the pay for performance (P4P) movement was borne out of the premise — since medical complications were costly, improving quality had the potential to lower costs.

Borrowing from industry process improvement models and change management strategies, we at Southeast Anesthesiology Consultants (SAC) have developed a system that has helped us improve quality performance and recruit some the best and the brightest in our field. The approach is a business model that allows our organization to reap the benefits of P4P while using non-monetary incentives to drive individual performance improvement. By demonstrating cost savings through lowering costly complications, and increasing patient satisfaction scores/overall efficiency, our organization has been compensated for our efforts by receiving discounted malpractice premiums, competitive managed care rates as well as retaining and growing our hospital contract business. What we have learned has been proven over many years in the worldwide manufacturing sectors and is very applicable to all sectors of the American economy. Here is a seven step process that any healthcare company could use to create a viable P4P model.

Step 1: Define goals. Viewing industry as the quintessential P4P arena, the overarching goal is to deliver value by aligning incentives for the consumer, organization and individual employee. Translated to healthcare, this has meant aligning incentives for patients, payors and providers resulting in both effective and efficient healthcare delivery.

Step 2: Understand challenges. Historically, the healthcare industry has not fully taken advantage of industry process improvement tools such as six sigma or the Deming Cycle. Even simple processes designed to decrease variability and error such as standard operating procedures (SOPs) and checklists common to high performance industries, such as aviation, have not traditionally been employed in the healthcare sector. Physicians typically rely on their individual cognitive and technical skills to perform advanced procedures for severely ill patients, usually with great results. Advanced training, which fosters independence and enables physicians to quickly make life and death decisions, does not always lend itself to SOPs. SAC saw the opportunity to design a continuous quality improvement system which identified opportunities for a systems approach to decreasing variability and error while also measuring and identifying opportunities to improve individual practitioner performance. Our continuous quality improvement (CQI) system provided empirical evidence and accessible data as a way to create a healthcare P4P model that would decrease the spiraling costs of healthcare.

Step 3: Committed leadership. As with any change management program, leadership must come from the top. SAC's board set the expectations of 100 percent participation for all practitioners as well as committed the necessary resources. QA committees at each practice location were established with representation on a corporate CQI committee charged with peer review of the data.

Step 4: Develop quantifiable metrics. Frederick W. Smith, the founder of Federal Express, as well as other companies, said, "If you can't measure it, you can't manage it." Once the goals and challenges had been defined, SAC tackled the challenge of, "What should we measure that will create impact." For SAC, assessing clinical outcomes, operating room efficiency, practitioner performance and patient satisfaction were the quantifiable metrics that we needed to begin improving our processes. Using national healthcare initiatives and anesthesia industry standards, we developed a list of 50 quality indicators, or inputs, and outcomes.

Step 5: Develop organizational process. If a practice or hospital is developing an individual organizational process the organization can use the metrics in step for as a starting point. Once metrics have been established, the organization can begin developing a process that allows them to capture data associated with the metrics as well as develop reports that allow review of outcomes. With SAC’s 50 defined indicators in hand, we began to shift the way we practice medicine by using technology. We developed a software platform that tracks these indicators for every patient we serve. We analyze that data daily and it has helped us lower costs, increase positive outcomes for our patients, realize growth opportunities and retain hospital contracts.

Step 6: Develop feedback loops to drive individual performance/analyze data in aggregate to identify systems issues. By utilizing real-time clinician entered data and feeding the results back to the individual practitioner, both positive and negative feedback loops are established. Opportunities for individual mentoring, utilization of positive incentives and the Hawthorne Effect all foster superior individual practitioner performance. The expectations for performance benchmarks and participation are set by the company's executive leadership.

Step 7: Use benchmarking to foster internal competition /positive incentives to foster improvement/demonstrate better patient outcomes. Similar to other professionals, physicians are inherently a competitive group. No one wants to be on the wrong side of a standard deviation. Individual but anonymous benchmarking to one's peers, or to a standard, often fosters the internal competitiveness to drive improvement. The rewards, however, do not always have to be tied to compensation. High performers are recognized through a quality awards program and banquet. Recognition awards for most improved, best performance or high patient satisfaction pays dividends. Low performers participate in completing required continuing education process improvement tracks or mentoring designed to improve performance. At the end of the day, healthcare providers enter the medical profession to take great care of their patients. CQI systems that enhance their ability to do this and are user friendly generate adoption.

Whether it is healthcare or any other sector, a CQI systems approach will ultimately decrease variability whenever possible. Checklists and standard operating procedures that were once handled singularly will help reduce errors. This is not conformity, but rather standardizing excellence and making those best practices available and accessible to all on a consistent, replicable and scalable basis.

The success of any P4P model depends on collaboration among all parties involved. Reliable data and positive incentives are required to ensure further success. The data must be timely, quantifiable and accurate, utilizing appropriate baselines and benchmarks in order to compare "apples to apples."

Tremendous opportunity resides in the ability to integrate a systems approach to operations across many industries while assuring individual accountability. That is why P4P can be much more than a reimbursement method for individuals. Instead it can become the way an organization operates with recognition and rewards being used to incentivize superior individual performance. There will never be a straightforward, standard recipe for improving performance in any business application, but P4P is a powerful way to get started on a solution pathway.

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