Quality improvement is critical for ensuring that healthcare services are safe, efficient, patient-centered, and equitable. As such, payers have increased their reliance on financial incentives to encourage high performance, foster improvement, and promote accountable spending. Despite the saturation of studies assessing hospital approaches to federal incentive programs, there remains a lack of information surrounding hospitals’ strategies for episode-based reimbursement in commercial payment models.
Blue Cross Blue Shield of Michigan’s (BCBSM) Hospital Pay-for-Performance (P4P) Program rewards hospitals that excel at care quality, cost-efficiency, and population health management. In 2018, BCBSM partnered with the Michigan Value Collaborative (MVC) in allocating 10% of its P4P program budget to an episode of care spending metric based on MVC data.
To fill the knowledge gaps mentioned above, a qualitative analysis published earlier this year in the American Journal of Managed Care (AJMC) [LINK] took advantage of a unique opportunity to explore hospital activity and decision-making within MVC’s episode-based incentive program. The lead author of the resulting publication was MVC Senior Faculty Advisor Dr. Scott E. Regenbogen, MD, MPH, who previously served as a Co-Director of MVC. In engaging with MVC’s hospital members, the project team aimed to understand hospital approaches to commercial incentive programs, identify best practices for success, and collect information to promote the optimal design of future metrics.
In an effort to understand the variability between participating hospitals, qualitative interviews were completed with 21 leaders from 8 intentionally selected hospitals with ranging performance metrics. Between December 2020 and November 2021, administrative leaders and quality officers were interviewed using a video teleconference-based platform. Each interview followed a standardized protocol and addressed four domains: choice of clinical condition for evaluation, strategies for episode spending reduction, best practices for success in learning incentives, and barriers to achievement.
Clinical Condition Selection Approaches
When asked about approaches to selecting clinical conditions, besides programmatic constraints, the project team found that multiple factors impacted hospitals’ decisions. Throughout the selection process, many hospital leaders aimed to identify opportunities for improvement or areas of historic underperformance.
In analyzing this trend, Dr. Regenbogen commented, “We were somewhat surprised that there was less ‘playing to the test’ than expected. For the most part, hospitals were committed to success in this program and made good faith efforts to try and achieve savings through operational improvements, not just making the numbers look good.” In addition to seeking opportunities for the greatest improvement, participants selected conditions that often aligned with ongoing value-based improvement efforts, especially those related to federal value-based financial incentive programs. A final factor contributing to the selection approach for many sites was the commitment and motivation of physician leaders to contribute to quality improvement. Most site coordinators agreed that without individual and collective dedication to hospital-based initiatives, success was unlikely.
Strategies for Episode Payment Improvement
As members of MVC, the participants in this analysis had access to comprehensive utilization data and risk-adjusted comparisons with other hospitals across the state of Michigan. When asked about methods to improve performance, site coordinators highlighted the immense benefits of MVC’s custom analytic and annual push reports, citing the utilization of administrative and clinical data to motivate and inspire improvement at their respective hospitals. In addition to using MVC data to identify areas of growth, respondents also recognized the importance of standardizing protocols and policies to promote the implementation of consistent best practices.
Best Practices for Success in the Incentive Program
In discussing the strategic approaches of program participants, hospitals highlighted three main areas of importance regardless of their performance rank: consistent leadership focus on metrics, readmissions reduction, and controlling costs related to post-acute care.
Obstacles to Success
However, despite these similar strategic approaches, low-performing participants also noted obstacles and barriers to their success in the program. One institution noted a failure to remain focused on cost containment for a condition across the measurement period, while another expressed a disconnect between institutional achievement goals and non-employed physician incentives. In response to participants’ obstacles to engaging with physicians, co-author and MVC Senior Advisor Mike Thompson, PhD, MPH, who served as MVC’s most recent Co-Director until June 2024, noted, “Perhaps it isn’t surprising, but the challenge of engaging front-line clinicians in pay-for-performance programs is always difficult. Bridging the gap between broader administrative goals and daily clinical operations can sometimes feel like a canyon, but it is necessary for success.”
Implications for the Future
Altogether, the data collected during the qualitative arm of this analysis gleaned key quality improvement insights that MVC can utilize to inform the continued refinement and improvement of the MVC Component of the BCBSM P4P Program. The project team posits that, to be successful, these incentives must possess enough depth and relevance to capture the attention of hospital leadership or align closely with larger initiatives to facilitate collaboration; they must address and resolve any discrepancies between the goals of the hospital and the incentives driving credentialed physicians; and, most importantly, commercial episode-based incentives should offer the chance for success by delivering not only initial performance enhancements but also consistently maintaining excellence over time.
Moving forward, continued program evaluation will be crucial for understanding how to best design metrics in the pursuit of high-value, equitable healthcare. This area of investigation opens the door to future insights into the relationship between financial incentives and quality improvement in healthcare, holding vast potential to shape future incentive-based measures and reporting. As such, MVC is committed to understanding and improving the effectiveness of its own incentive-based measures in partnership with BCBSM.
To learn more about MVC offerings and the MVC Component of the BCBSM P4P Program, please visit our website or contact us at Michigan-Value-Collaborative@med.umich.edu.
