An Incentive to Provide Incentives: Leapfrog Group Tool Measures Pay-For-Performance ROI
Chris Silva
Employee Benefit News•May 2007
One of the gripes with pay-for-performance (P4P) programs is that there hasn't been a way to measure how well they are working. A new tool made available by The Leapfrog Group could change that.
Leapfrog unveiled earlier this year the ROI Estimator, a tool for employers and health plans to estimate the costs and financial benefits of using the Leapfrog Hospital Rewards Program, a standardized incentive program that can be licensed and used by health care purchasers and plan sponsors.
According to Med-Vantage, a San Francisco health informatics company, more than 53 million Americans are involved in a P4P program, and more than 115 such programs are in operation, up from 35 programs in 2003. But while interest in P4P has gained momentum, some employers and physicians are still skeptical about its validity. Having a tool available that shows health care purchasers how much they could save through a P4P program could lead to greater trust and wider acceptance rates.
"We wanted to make it easier for health plans or employer groups to engage in a robust or meaningful program with the hospital industry," says Catherine Eikel, director of programs for The Leapfrog Group.
The ROI Estimator - which can be found at www.ROIEstimator.com - is a free, Web-based survey that takes about 10 minutes to complete. It shows an employer the potential return on investment - in both lives and money saved - from implementing a P4P program that rewards hospitals for providing high-quality health care in five key areas - heart bypass, heart attack care, angioplasty, community-acquired pneumonia, and deliveries and newborn care - based on measures from the Joint Commission on Accreditation of Healthcare Organizations and the Leapfrog Hospital Quality and Safety Survey. The tool was developed by Leapfrog, HSM Group and Discern Consulting.
"Employers have a lot of choices when it comes to spending health care dollars," remarks Guy D'Andrea, president of Discern Consulting in Baltimore. "The ROI Estimator helps health care purchasers see the impact of the hospital rewards program on their bottom line."
The value of P4P
The Integrated Healthcare Association reported in February that seven California health plans paid a combined total of $55 million in 2006 to physicians groups participating in its P4P program. A successful P4P supports physicians' need for uniform performance measures and provides valuable information to purchasers and consumers, proponents of the programs say. Moreover, as quality increases, sponsors' health care costs decrease.
"It does two things for us: The hospitals that apply to the process are measured routinely by us and have better [clinical] outcomes and costs than hospitals that don't, and it also minimizes our readmissions," notes Bill Finck, director of network initiatives for Horizon BlueCross BlueShield, which is based in Newark, N.J.
Horizon is New Jersey's largest insurer with more than 3.2 million members, and Finck estimates 90% of the state's hospitals are in its network. The insurer began using LHRP just under a year ago, and therefore doesn't have hard data yet on how successful it's been. Finck believes, however, the numbers estimated by the ROI Estimator have been very close to actual performance figures. "We just rolled out the program, and we expect to have initial data soon, but so far, it's been pretty close," says Finck. "It's helped us predict what our payments will be, and what our returns would be over time."
Of the 68 hospitals in Horizon's network, eight agreed to participate in the LHRP in 2006. Finck estimates 15 to 18 hospitals will participate this year.
In a time of rising health costs, the ROI Estimator tool could help alleviate the distrust employers have felt towards P4P.
"Health care is getting more and more expensive - especially for larger employers that have older employees," states Brett Plummer, research director with the HSM Group, based in Scottsdale, Ariz. "We're saying you might have to pay some money up front [for licensure of LHRP or another P4P], but it's going to pay off in the long run with fewer medical errors and hospitalizations, and more lives saved."
ROI Estimator at a glance
Developed by The Leapfrog Group, HSM Group and Discern Consulting, the ROI Estimator is a free, 10-minute online survey that asks employers for some general information, such as the number of employees, retirees, location and annual growth rate in determining the potential ROI of a pay-for-performance program.
The tool will provide average costs of admissions with a breakdown by condition. For example, the average cost to treat a heart attack is $29,169, although that figure could go up or down depending on the information provided by the employer.
The HSM Group and Discern Consulting are building a similar tool for Bridges To Excellence, a multistate, multiemployer coalition developed by employers, physicians and health care researchers. D'Andrea says he expects that to be completed within a couple of months.
In addition, Plummer says the two groups are working on measuring the economic benefits that arise from reductions in absenteeism and improved productivity at work as a result of an increase in the quality of health care through P4P. - C.S.
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