Michigan’s Fee-for-Value Physician Incentive Program Reduces Spending and Improves Quality in Primary Care An evaluation of one of the nation’s largest “fee-for-value” initiatives Synopsis demonstrates that physicians can control costs while improving their performance under a traditional fee-for-service arrangement. April 6, 2015 Primary care doctors who were offered financial incentives to form Authors Christy Harris Lemak, patient-centered medical homes and engage in quality improvement Tammie A. Nahra, Genna R. Cohen, activities reduced spending by 1.1 percent on a per-member per- Natalie D. Erb, Michael L. Paustian, month basis compared with a control group. Performance on David Share, and Richard A. Hirth Journal Health Affairs, April 2015 measures of preventive care and chronic disease management also 34(4):645–52 improved. Spending increased initially, but declined by the program’s Contact Christy Harris Lemak, Ph.D., second year of participation. Professor and Chair, Department of Health Services Administration, University of Alabama at Birmingham, Policymakers, health care providers, and payers are seeking ways to The Issue lemak@uab.edu reduce growth in health care costs while improving the quality of care. One strategy, known as fee-for-value, Access to full article. involves adding incentive payments to fee-for-service reimbursement. Commonwealth Fund–supported researchers examined Blue Cross Blue Shield of Michigan’s Physician Group Incentive Program, which uses this approach for more than two-thirds of the state’s primary care doctors. Physicians in the program can earn higher office visit fees, among other incentives, if they employ core tools of the patient-centered medical home—such as registries to track patients and manage their care—and if they achieve certain cost and quality targets. The evaluation analyzed the program’s impact on quality and spending from 2008 to 2011 for more than 3 million beneficiaries in 11,000 physician practices. Total spending by practices participating in the incentive program decreased by $4 per member per Key Findings month, or 1.1 percent more than in practices not taking part. These savings did not begin to accrue until • a practice’s second year, however; spending increased by $5.95 in the first year. Changes in spending were greater for children than adults. Participating practices decreased total spending on children by $5.44 per member per month, 5.1 percent more than nonparticipating practices. • Spending on adults decreased by $3.53 per member per month, or 1.1 percent more. For adult patients, savings of $1.85 per member per month were achieved through greater reductions in outpatient facility costs. Spending for professional services, meanwhile, declined $3 per member per • month. Inpatient facility costs, however, were higher, by $5.42 per member per month, or 0.5 percent. Participating practices achieved the same or better performance than nonparticipants over time on 11 of 14 quality measures. The researchers saw significant improvement on three of seven indicators related • to preventive care: adolescent well care, adolescent immunization, and well-child visits at ages 3 to 6. They also observed significant improvement on four of the seven quality measures for diabetes care: screenings for HbA1c, low-density lipoprotein cholesterol, nephropathy, and the delivery of ACE inhibitors to patients with hypertension. Rewarding primary care physicians for improved performance on quality and cost metrics can lead to higher The Big Picture spending initially because of increased billing for preventive care and chronic disease management. While these additional services can produce downstream benefits by reducing the need for outpatient care, achieving similar reductions in hospital spending may take longer to achieve, at least with commercially insured populations that “It is possible to have younger, healthier members. Payers designing similar reward programs transform should consider this when setting expectations for reduced hospital use. reimbursement within a fee-for-service framework to The study used Blue Cross Blue Shield of Michigan’s utilization and spending About the Study data collected between 2008 and 2011. To study the impact of the program encourage and over time, the authors compared the pre- and post-intervention performance of incentivize physicians practices that participated in the Physician Group Incentive Program and those to provide high-quality that did not. The program’s impact on quality was assessed between 2008 and care, while also 2010 and relied on Healthcare Effectiveness Data and Information Set (HEDIS) reducing costs.” process measures for preventive and evidence-based care. The study population included more than 3.2 million people under age 65 and more than 11,000 physician practices. Payers can contain costs and improve quality of care without disrupting the fee-for-service reimbursement The Bottom Line model but should anticipate that spending may increase before it declines. C. Harris Lemak, T. A. Nahra, G. R. Cohen et al., “Michigan’s Fee-for-Value Physician Incentive Program Reduces Spending and Improves __________________________________________________________________________________________________________________________________________________________________________ Quality in Primary Care,” Health Affairs, April 2015 34(4):645–52. This summary was prepared by Sarah Klein.