If the pay-for-performance phenomenon was a marathon race, the winner in the first length of track would arguably be Hackensack (N.J.) University Medical Center. The 781-bed teaching hospital has been the most highly rewarded organization participating in the CMS/Premier Hospital Quality Incentive Demonstration Project (HQID) for the past two years, receiving $744,000 last year in additional reimbursement from the Centers for Medicare and Medicaid Services (CMS) for its quality improvement achievements.

Hackensack was a top performer in all five areas covered by the demonstration project for the second year in a row, with the $744,000 in award money crossing all five categories. Meanwhile, the second-place overall finisher was Charleston Area Medical Center in Charleston, W.Va., which received a total award of $701,000, the highest single award, $432,901, for providing high-quality care to 883 Medicare patients who had coronary artery bypass graft procedures. Overall, the total payout so far to hospitals in this program, the highest-profile nationwide pay-for-performance (P4P) program, is $8,690,447 for the first two years.

Peter Gross, M.D.

Interestingly, though, Hackensack senior executives say that for them, recognition from the demo project is just icing on the cake anyway. "When we got our first award, the people from CMS asked us, what difference did it make?" recalls Peter Gross, M.D., Hackensack's senior vice president and CMO. "And the answer was, it didn't. We would have done this anyway, but it was nice to get the money, and hopefully, some of the money will be plowed back into the effort."

In fact, Gross and his colleagues note that they had been focused on improving clinical outcomes quality for several years before the HQID demo project went live, and are committed to optimizing quality in their organization.

And that is one of the emerging paradoxes of pay for performance: the organizations that are doing well in P4P programs are already among the ones most highly focused on improving clinical care quality in the country. They are using evidence-based measurements backed by the clinical literature and supported by medical specialty societies and by organizations like the Washington, D.C.-based Leapfrog Group.

IT alignment a key ingredient for success

What's more, not only are the organizations leading the pack in P4P earnings strategically committed to quality improvement enterprise-wide, they have also made major investments in, and changes to, their information technology systems, in order to be effective both in measuring and reporting quality, and making improvements based on measurement. To that end, IT leadership and development are turning out to be exceptionally important to P4P success.

Barry Bershow, M.D.

For example, at seven-hospital Fairview Health Services in Minneapolis, Barry Bershow, M.D., medical director, quality and informatics, says a critical element in participating in pay-for-performance programs involves implementing computerized provider order entry (CPOE) systems that automatically facilitate clinical measurements.

"To have the ability to not only gather data, but make sure you can return the data to individual physicians frequently without bogging down your operation, is key," says Bershow, who is functioning as Fairview's acting CMIO. In other words, data-gathering must be made a part of the natural flow of automated order entry and documentation processes, he urges. When that facilitation is made possible, things can really move forward dramatically, Bershow says. Fairview (like Hackensack, a CMS/Premier demo project participant), has been running its own physician P4P program internally that has already awarded hundreds of thousands of dollars in bonus quality payments to employed Fairview physicians. Among the areas that have been focused on have been Chlamydia, obesity screening, and tobacco-use screening projects.

One obvious take-away from all this activity is the fact that implementation of advanced clinical information systems, especially electronic medical records (EMRs) becomes essential to the collection and reporting of clinical quality data, and the analysis of that data for feedback-loop improvement within hospitals, as well as in many cases the need to rework order sets within physician order entry programs.

According to Stephanie Alexander, senior vice president for Premier Healthcare Informatics, the data division of Premier Inc., the project brought the need for implementing EMRs for better measuring to the forefront. "The majority of EMRs implemented before this project did not contemplate the need to track these kinds of measures," she says. "The necessity of implementing evidence-based order sets is becoming apparent." That said, the Charlotte, N.C.-based Alexander notes that P4P programs seem to have hit their stride. "We've seen consistent, systematic improvement, across every quarter, among participants," in the CMS/Premier demonstration project, she says. Indeed, the overall quality across 30 nationally standardized clinical measures has risen by 11.8 percent in the first two years of the project, while the gap between the highest performers and others has continued to shrink, Alexander reports.

The difficult spade work began some time ago among many of those hospitals now showing outstanding results in the CMS/Premier project. For example, at Hackensack, senior management there committed several years ago to continuous improvement of patient quality, creating a Department of Performance Improvement to oversee the intensive quality work, confirms Charles Riccobono, M.D., the hospital's chief patient safety and quality officer. Among the many things that have been worked on at the New Jersey facility have been shortening the lag time to get heart attack patients into angioplasty, and improving the management of heart failure.

Core evidence-based measures

In addition to the alignment of clinical information systems, another critical element in P4P success, say those involved, is the need to make use of clinical quality measures that are evidence-based, meaning those that have been validated in the medical literature as meaningful and worthwhile.

"All the measures that CMS is using for this demonstration are evidence-based measures to begin with," emphasizes Premier's Alexander. "What's happened is, we've just gotten a broader base of data with which to potentially improve quality," as more and more hospitals participate in the demonstration project and thus grow its database.

Executives at hospitals participating in P4P programs are expressing enthusiasm for the lessons learned—and the cash rewards—involved. Richard Keenan, senior vice president finance and CFO of The Valley Hospital, Ridgewood, N.J., says he and his colleagues have been "delighted" by the recognition they've received from the Newark-based Horizon Blue Cross Blue Shield of New Jersey's (BCBSNJ) statewide hospital quality recognition program.

"And part of our enthusiasm for this is that Valley was one of only two hospitals that got $225,000—the other was Robert Wood Johnson Hospital (New Brunswick)—so we consider ourselves to be in good company." According to Keenan, data is important in quality improvement. "Look at the difficulty of accurately comparing one hospital's cardiac mortality rates to another's," he says. "It's labor-intensive to produce the data, and you can't just stop there; you have to drill down and say, we're not hitting the target, and you have to ask, why not?" Being evidence-based is critical, he says, especially with regard to getting physician buy-in.

The Horizon BCBSNJ program, in its first year (calendar year 2006), distributed $6 million in reward pay to the 68 hospitals in its statewide network, "And that represented about 63 percent of the dollars allocated for this program, so there is still room for improvement," says William Finck, director of network initiatives for Horizon BCBSNJ.

Still, for the first year of such a program, the results were very encouraging, says Richard Popiel, M.D., the health plan's vice president and CMO. "I think we were always anticipating a baseline that would highlight the fact that there was room for improvement," Popiel adds. "I think every state starts at a different place." Indeed, the program was begun in part out of concern over the extremely wide variation in clinical outcomes the health insurer was seeing across hospitals in the Garden State.

Certainly, Popiel and Finck say, the fact that the program is rewarding hospitals based on quality improvement using clinical measures that are very widely accepted has quickened hospital acceptance including giving patients aspirin on arrival after diagnosis of a heart attack, completing an oxygenation assessment within four hours of an admission for community-acquired pneumonia, and providing the most appropriate antibiotic for community-acquired pneumonia, within four hours.

Meanwhile, say those involved in P4P, there will inevitably be opportunities, such as collaboration between patient care organizations and vendors, that weren't obvious even a few years ago.

For example, Physician Associates IPA, an 800-physician independent practice association based in Pasadena, Calif., is one of a number of customers of Horsham, Pa.-based NextGen Healthcare that are using new NextGen tools to help those physician organizations report quality data to the CMS Physicians Quality Reporting Initiative (PQRI). And despite his own personal wariness earlier towards P4P programs, Steven Davis, D.O., Physician Associates' medical director, says he now sees that reward programs, including the IPA's own internal one have helped him practice better. According to Davis, "They uncover your vulnerabilities as a practicing physician."