Health Plans to Pay Bonuses for Quality
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home / healthcare / in the media

Los Angeles Times
Jan 16, 2002


Health Plans to Pay Bonuses for Quality

Pact by six state insurers is further sign of disenchantment with HMO system.
Six of California's largest health insurers said Tuesday they will begin paying bonuses to doctors for providing superior treatment, giving further evidence that the current system of fixed HMO payments for patient care rapidly is coming unglued.

The health plans--Aetna Inc., Blue Cross of California, Blue Shield of California, Cigna Corp., Health Net Inc. and PacifiCare Health Systems Inc.--said they would agree on a set of standards for measuring quality care, publish report cards on doctors' performance and reward medical groups with bonuses of 5% to 10% for meeting or exceeding the standards.

Additional details were scarce Tuesday; the groups said they are just assembling a task force to work out the details and they hoped to have the programs underway within a year. A spokesman said some of the funds for the bonuses probably will come from increases in health insurance premiums, which could be controversial at a time when premiums already are going up 10% to 15% this year.

Some were quick to call the move a smoke screen designed by the unpopular managed-care industry to score some public relations points and show that it can resuscitate a failing system.

"The problem is that 100% of physician pay is capitated--a lump sum regardless of how sick the patient is--so 100% of the financial incentive for doctors today is to provide less treatment," said health-care consumer advocate Jamie Court. "Now, there's going to be a 5% to 10% bonus for providing higher-quality health care? Fundamentally, it's a mirage. If they really wanted to change the quality of care patients received, they would pay doctors more for treating the sicker patients. They are refusing to do that."

Peter Lee, president and chief executive of the Pacific Business Group on Health, which represents employers, defended the plan, saying, "Costs are escalating, and spending has to support better performance."

Steve McDermott, CEO of Hill Physicians Medical Group in Northern California, whose 2,500 doctors work with several health maintenance organizations under the capitation system, said the program was necessary because "we have concluded that neither a fee-for-service model or capitation rewards [better] performance or quality. There are no long-term performance incentives. Until recently we've had very few financial results. There's something wrong with that."

Under capitated payments, which recently have been fought by several doctors groups and hospitals, providers are paid a lump sum per patient, regardless of whether the patient needs a variety of medical procedures.

Detractors say the payments are too low, have bankrupted medical groups and left hospitals struggling to survive.

Supporters say capitation works fine and only poorly run and inefficient medical groups suffer under them.

Lee said consumers would benefit by being able to see the report cards and choose the medical groups with the best grades.

The report cards and the standards they will be based on have not been developed, but they will be heavily weighted at first toward patient satisfaction with the medical experience.

"The illnesses and screening covered will include diabetes, asthma, breast cancer screening, childhood immunizations, coronary artery disease," Lee said. "By satisfaction, we don't just mean 'Are you happy?' [but] 'Did the doctor explain drugs and procedures in a way you can understand? Did you have ready access to specialty care?'"

One of the most important considerations is the source of the bonus money. Some physicians groups said the bonuses will be meaningless unless money is created to finance them rather than taken away from other areas of health care.

A spokesman at the news conference where the initiative was announced said about $100million annually would go into the fund and some of it would come from premium increases.

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