...cardiologists hospitals involved the Participating Hospital Agreement (PHA) program implemented by Blue Cross Blue Shield of Michigan (BCBSM). Under PHA, hospitals are eligible for an annual incentive payment of up to percent of BCBSM's diagnosis-related-group-based inpatient claims, depending on their performance in patient safety, community outreach, and selected quality indicators.

Interviews focused on knowledge, perceptions, and impact of pay-for-performance (P4P) strategies. We compared BCBSM-provided data on heart-failure quality indicators between 2002 and 2004 with our qualitative findings. Our analyses suggest that pursuit of incentive-based quality targets may be largely dependent on the context of a particular hospital. In settings where performance did not change, incentives did not appear to drive organizational or individual practice changes. Underperforming hospitals with some of the infrastructure necessary for quality improvement had the greatest success when presented with incentives. We concluded that one formula for a successful P4P program is to direct incentive payment to an organized entity capable of supporting process improvement by applying resources and organizational expertise. In this model, the incentive program supports the organization, and the organization in turn may apply resources to facilitate improvement in clinician performance. Consideration of the requirements of organizations to facilitate improvement in relation to existing quality improvement infrastructure may lead to the future success of hospital-based P4P programs.

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With the publications of the Institute of Medicine's Crossing the Quality Chasm (2001) and To Err Is Human (1999) reports, healthcare purchasers have pursued strategies to eliminate gaps in healthcare quality. Among those strategies, pay for performance (P4P) has emerged as an alternative to the utilization-based approaches of managed care, realigning financial accountability with service performance. In their basic form, P4P strategies provide financial incentives to providers or healthcare organizations, such as hospitals, for meeting predetermined clinical and service quality targets. Considerable experimentation with P4P strategies featuring a variety of payment schemes is currently underway in both private and public sectors, with a reported 115 P4P programs in existence in the United States (Baker and Carter 2005).

While some have hailed P4P as a panacea for the difficulties faced by our nation's heahhcare system, it is far from certain that P4P programs are efficacious. Nearly all relevant studies stem only from the last few years. A review by Rosenthal and Frank (2006) reveals little empirical evidence that P4P strategies are effective in improving quality. However, some studies link modest quality improvements to participation in P4P programs sponsored by commercial health plans (Rosenthal et al. 2005; Young et al. 2006). In the hospital sector, recent studies have shown that P4P programs can improve quality of care (Grossbart 2006; Kahn et al. 2006; Nahra et al. 2006). Evidence also indicates that hospital-based P4P programs have the potential to be cost effective (Nahra et al. 2006).

Evaluating the alignment of payment strategies with quality performance in the hospital setting is both relevant and timely. A third of current P4P programs target hospitals, with the majority featuring bonuses sponsored by health plans (Grossbart 2006; Leapfrog Group 2006). As these initiatives become entrenched in the acute care delivery landscape, it is important to understand the conditions under which P4P strategies can achieve quality goals and cost savings.

In this article, we present findings from a study of ten hospitals involved in the P4P Participating Hospital Agreement (PHA) program implemented by Blue Cross Blue Shield of Michigan (BCBSM) in 2000. We conducted semistructured interviews with groups of senior managers and separate interviews with cardiologists at each of the ten sites. The goals of these interviews were to ascertain knowledge and perceptions regarding implementation and effectiveness of the PHA strategy and to assess whether PHA played a role in motivating cardiologist behavior or administrative system change to improve performance for a specific heart-failure quality target. This article provides a perspective on the implementation of a P4P approach that rewards hospitals for the delivery of evidence-based care, not the individual providers responsible for performance change.

OVERVIEW OF THE PHA PROGRAM

The BCBSM PHA program is one of seven demonstrations participating in the Rewarding Results program, a national initiative testing a variety of P4P strategies and funded by The Robert Wood Johnson Foundation, the California HealthCare Foundation, and the Agency for Healthcare Research and Quality. As part of the Rewarding Results program, PHA is being evaluated at two levels--by a local evaluator who works closely with BCBSM and by the national evaluation team consisting of physicians and health services researchers. The design of PHA has been presented elsewhere in detail (Nahra et al. 2006; Reiter et al. 2006). Briefly, each of the 86 not-for-profit hospitals participating in PHA is eligible to receive an incentive payment of up to 4 percent of its inpatient diagnostic-related-group reimbursements from BCBSM, based on the hospital's overall annual performance in three categories--patient safety, community benefit, and clinical quality....

NOTE: All illustrations and photos have been removed from this article.



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