Maryland P4P programs paying off

Two pay-for-performance (P4P) programs implemented in Maryland are showing how state-level efforts to set payment rates are influencing provider behavior and improving patient outcomes, according to research published in the December issue of Health Affairs. 

“The desire to transform the U.S. healthcare delivery system from one that promotes increased volume and mediocre quality to one that rewards high-value health systems has prompted the use of both process- and outcome-based performance measures to tailor changes in payments, according to lead author Sule Calikoglu, PhD, associate director of performance measurement for the Maryland Health Services Cost Review Commission, and her colleagues. “The pay-for-performance experience in the hospital sector generally has been characterized by very slow progress, with a tendency to err on the side of caution and incrementalism.”

A federal waiver exempts Maryland from national Medicare and state Medicaid fee schedules, and since the state since 1977 has operated a hospital payment system applying to all payers that sets specific payments for inpatient and outpatient services, allowing a state agency to create consistent payment incentives for hospitals to contain costs and improve access. During the 2000s, Maryland continued efforts to improve healthcare quality while reducing costs by  implementing two pay-performance programs.

Intended to encourage improvements in process-of-care measures, such as giving administering aspirin to heart attack patients upon hospital admittance, the quality-based reimbursement program implemented in 2008 calculates hospital performance similarly to the Centers for Medicare & Medicaid Services’ value-based purchasing program, and offers financial incentives to hospitals that make improvements and perform better than state benchmarks.

Maryland also implemented a hospital-acquired conditions program a year later in 2009. This program limits payments to hospitals for treating 49 potentially preventable complications, such as pneumonia and urinary tract infections, that were unlikely to arise as the natural progression of the underlying condition that warranted hospitalization.  

So far, the programs appear to be making progress. Maryland hospitals improved according to process-of-care measures at an average rate of 7.3 percentage points from 2007 to 2010 compared to a national average rate of 6.86 percentage points. Across all measures, the difference is statistically insignificant, but Maryland did make significant progress in some areas. For instance, 71.5 percent of Maryland patients with pneumonia influenza vaccines in 2007 compared with 92 percent in 2010. Additionally, complication rates decline 15.3 percent during the first two years of the hospital-acquired conditions program for $110.9 million in savings, or 0.6 percent of total inpatient costs.

P4P and state-based rate setting programs not only help contain rising healthcare costs, they can also influence improvements in healthcare quality, according to Calikoglu et al.  “Rate-setting systems, or consistent and coordinated efforts by public and private payers, can provide a more powerful mechanism to promote systematic quality improvement because the incentives applied are consistent and can be applied in a progressively stronger fashion overtime.”

“The employment of consistent and powerful financial incentives can motivate considerable and focused efforts to improve hospital outcome,” they concluded.