P4P is the newest healthcare reform theory. Many believe the theory developed wide-spread acceptance following the landmark report, To Err is Human, published by the Institute of Medicine (IOM) in 2000, followed by the IOM report, Crossing the Quality Chasm: A New Health System For the Twenty-First Century, issued in 2001. There is almost unanimous agreement that P4P, if implemented correctly, has great potential to improve patient care. The basic premise is to (1) define quality by some measurable standard, (2) provide reimbursement incentives which compensate improved quality and (3) assess performance and pay accordingly.

There is almost equal consensus that, if implemented haphazardly or inequitably, P4P has just as much potential to frustrate physicians and waste resources. Both specialty and primary care physicians are concerned that, unless the absolute budget for Medicare reimbursement or any healthcare reimbursement is increased proportionately, any P4P system could merely redistribute existing reimbursement pools, thereby reducing the reimbursement of physician groups who do not have the benefit of easily measurable performance targets.

Numerous reports have been issued. In April 2004, the American College of Physicians issued a Position Paper entitled, The Use of Performance Measurements to Improve Physician Quality of Care. The paper identifies seven fundamental position points, as follows:

Position 1: The goal of physician performance measurement should be to foster continuous quality improvement of clinical care to meet or exceed evidence-based national standards of such care.

Position 2: Physician performance measures should be evidence-based, broadly accepted, and clinically relevant. These measures should assess and focus on those elements of clinical care over which physicians have direct and instrumental control (as opposed to systems constraints). They should be built on statistical methods that provide valid and reliable comparative assessment across populations.

Position 3: Any data collection required to support performance measurement should be feasible, reliable, and practical. Data collection should not violate patient privacy or add to the paperwork burden experienced by physicians. Should performance measurement data collection impose additional costs on physicians, these costs should be supported by the health system and not the physician.

Position 4: The College supports demonstration projects on public reporting of performance measures to provide patients with information to make educated choices about their physicians and other health care professionals. Acceptable demonstration projects should include the following elements:

a. Physician participation in the demonstration projects is voluntary.

b. Physicians have a key role in determining the design of the demonstration projects, selection of the measures, and data collection and reporting systems that will be used.

c. Physician-specific performance data are disclosed only after physicians participating in the project are provided an opportunity to review and comment on such data; data are fully adjusted for case-mix composition (including factors of sample size, age/sex distribution, and severity of illness; number of comorbid conditions; and other features of a physician’s practice and patient population that may influence the results); and patient identifiers are removed to ensure that patient privacy is protected.

Position 5: Information technology tools should be used whenever possible to facilitate data acquisition for performance measures and to minimize any manual data extraction to support such measurement.

Position 6: The College supports demonstration projects to evaluate the use of incentives, including financial incentives, to reward physicians who meet or exceed performance standards. Any financial incentives related to performance measurement should be directed at positive rather than negative reward.

Position 7: The College will lead the critical review, development, and dissemination of physician clinical performance measures and the development of public policies to support the appropriate use of performance measures.

Congress is working on legislation to expand P4P within Medicare; this concept has been christened “Value Based Purchasing.” I suppose it would be asking too much for Congress simply to accept the widely accepted label for this theory. The Chairman of the House Ways and Means Committee, William M. Thomas (R-California), and the Health Subcommittee Chairwoman, Nancy L. Johnson (R-Connecticut), have asked CMS to provide information on the Agency’s P4P initiative, such as the hospital demonstration project and the Physician Group Practice demonstration project, involving ten of the largest physician practices described in our February 18, 2004 email newsletter. The American Medical Association (AMA) has, not surprisingly, stated that its goal is to have a “place at the table” in the development for P4P. The AMA Board of Trustees at its June 2005 Annual Meeting recommended a report on Pay for Performance Principles and Guidelines identifying five core elements for P4P program:

1. Insure quality;
2. Foster physician/patient relationships;
3. Voluntary physician participation;
4. The use of accurate data and fair reporting mechanisms; and
5. Funding of fair and equitable program incentives which funding should include resources to cover the administrative costs of collecting and reporting quality data.

Many physician groups have indicated staunch opposition to any P4P program that does not include a permanent fix of the Medicare system, particularly the formula which ties physician reimbursement to a sustainable growth rate for Medicare spending, which simply maintains a defined pool of Medicare dollars that gets redistributed among physicians by reducing reimbursement rates, via the Medicare conversion factor, if volume exceeds the original projections used to implement the Medicare physician fee schedule. Congress has intervened in each of the last several years to avoid Medicare reimbursement and reductions, but physician groups are seeking a permanent fix to this situation. Obviously, the definition of a permanent fix depends upon whether you are the payor or the payee in this situation, so this type of dogmatic opposition could impede the development of P4P.