Dr. HSA

News & Views on the Rise of Medical Consumerism

Who will pay P4P?

February 2006 - Vol. 6

Is pay-for-performance (P4P) just another buzz phrase in healthcare or is the industry serious about improving quality? Imagine an industry where medical providers are paid on a contingency basis like attorneys? For example, doctors and the hospital get paid only if the triple bypass was successful. While that's the ultimate in P4P it's unrealistic for healthcare-even if it's cosmetic surgery.

Many industry experts believe the underpinning for P4P is technology, however, the healthcare industry is not a big spender on technology. Consider that the financial services industry invests between 6-8% on technology compared to 3% in healthcare.

"Dr. HSA": David Harris, National Healthcare Revenue Cycle Partner, PricewaterhouseCoopers LLP, NY, NY © 2005 All rights reserved.

Electronic medical records are the linchpin for taking quality to the next level, yet most providers still rely on paper documentation. Notice the breakdown on the number of physician practices that have some form of electronic medical record (EMR) or physician order entry (POE) system:

Single practitioners	10%
Two physician practices	13%
Three to ten physician practices	55%
Eleven to twenty physician practices	26%
Twenty-one or more/large group practices	39%

If you think hospitals are any better think again. Only 3.7% of America 's hospitals have EMR and POE.

It's been proven that technology improves clinical outcomes time and time again. Accordingly, it should come as no surprise that 25% of the America's Best Hospitals ranked by US News and World Report also ranked among Hospitals and Health Network magazine's "Most Wired".

   America's Best Hospitals


•  Johns Hopkins Hospital, Baltimore

•  Mayo Clinic, Rochester, Minnesota

•  Massachusetts General Hospital (part of PartnersHealth), Boston *

•  Cleveland Clinic

•  UCLA Medical Center, Los Angeles

•  Barnes-Jewish Hospital/Washington University, St. Louis

•  New York-Presbyterian University Hospital of Columbia and Cornell

•  Duke University Medical Center, Durham, NC *

•  University of Washington Medical Center, Seattle

•  University of California, San Francisco Medical Center

•  University of Michigan Medical Center, Ann Arbor

•  Brigham and Women's Hospital (part of PartnersHealth), Boston *

•  University of Pittsburgh Medical Center

•  University of Chicago Hospitals

•  Hospital of the University of Pennsylvania, Philadelphia *

•  Stanford Hospitals and Clinics, Stanford, California

 

* H&HN's 100 most wired hospitals

Human capital is the most important factor in making the top 16 list. Talented physicians, dedicated staff and top-shelf management teams are the right stuff for making US News and World Report's best-in-class. Even though these institutions are not-for-profit organizations, they all have a strong balance sheet, which leads one to believe we're already paying for performance. A byproduct of a strong balance sheet is the ability to invest in technology-which 1 in 4 of the top hospitals does on a consistent basis.

As the "Y" generation begins to graduate from medical school, this new breed of "techno-docs" will seek hospitals that are fully computerized. This expectation cannot go by unnoticed. America has become a technology-based society so it's inevitable healthcare will join other industries in adopting technology to become more efficient and to, most importantly, improve quality.

The American Medical Association (AMA) has established criteria around P4P that is patient-centered, fair and ethical-focusing on quality-according to John Armstrong, MD and AMA Trustee.  AMA's Principles and Guidelines for P4P are designed to:

• ensure quality of care
• foster the patient/physician relationship
• offer voluntary physician participation
• use accurate data and fair reporting
• provide fair and equitable program incentives

Technology has a role in every element of AMA's guiding principles. As the healthcare industry embraces consumerism a patient-centric model makes sense. However, healthcare is an industry that is not known for transparency. In fact, it's one of the worst industries when it comes to sharing information.

The AMA believes P4P should be voluntary and for now it seems the government concurs; at least for now, Medicare's P4P program is voluntary. This could be a reason why it's having limited success in the marketplace.

Perhaps we would do well to learn from HIPAA, that mammoth regulation that regulates healthcare privacy, security and transaction processing. The transactions portion could be considered semi-voluntary in that providers not submitting electronic claims aren't bound by HIPAA transaction requirements (how can an electronic rule regulate a paper transaction?). But between the lines, we may be finding a pattern. There is reason to believe that applying the transaction requirements, used to standardize information sharing between employers, payers, providers and consumers, has stalled.

This may be one reason why some politicians want to make P4P a requirement for anyone seeking reimbursement from Medicare. If so, it seems an appropriate use of policy to gain clear transformative actions that move us towards the digital environment that many believe will make healthcare better, safer and more accessible.

As consumerism takes hold of healthcare the fundamentals for a free market system are likely to flourish; specifically:

• Transparency around pricing and quality
• Focus on price instead of reimbursement rate
• Deregulation and less government involvement
• Greater investment in technology
• Sharing of information between medical providers
• Possible elimination of (or less reliance on) certain stakeholders

P4P doesn't apply to medical providers alone but other stakeholders too, like payers, TPAs and insurance brokers. As HSA and HRA qualified High Deductible Health Plans (HDHPs) become mainstream, what will insurance brokers do when a company like Geico starts advertising HDHPs at below market prices? What happens to some payers if banks begin to buy TPAs or even insurance companies-integrating HDHPs and HSAs into one simplified product and selling it alongside 401Ks to their fortune 500 clients? What will happen to certain hospitals and physician practices as ambulatory care moves out of more traditional settings to 'Express Care' centers such as ReadiClinic, MinuteClinic and Revolution Health's Interfit?

I don't know about you, but it sounds like less expensive healthcare and more opportunities for consumers to purchase health insurance and healthcare services in a competitive marketplace. Technology like the Internet is already enabling people to become better healthcare consumers.

Watch consumer directed healthcare take P4P to a whole new level and experience the change first-hand as medical providers get "wired". As America 's 79 million baby boomers turn 60 this year and begin to feel their oats, you can be sure that P4P will be on the top of their minds. It doesn't take a consultant to tell you change is coming because it's already here.

So to answer my question, who will pay for P4P? Who do you think? You the consumer!

>> What's your point of view? Email Dr. HSA. We look forward to hearing from you!

About the author...

David Harris is a Partner with the Healthcare Advisory Practice in PricewaterhouseCoopers' New York office. He has over twenty years industry experience in the health care and information systems field. David is the National Partner for PwC's revenue cycle practice that specializes in, payer, hospital and physician revenue cycle operations improvement, operation turnarounds/workouts, process redesign and business office integration, as well as denial management. He is responsible for the thought leadership, products and methodologies used by PwC's more than 100 revenue cycle professionals with in-depth knowledge of patient access, clinical documentation, health information management, inpatient and ambulatory coding, billing, claim adjudication, collections, A/R management and information systems. David also leads the Medical Banking Project's HSA Workgroup as part of a new consumer-focused effort being developed at the Project.