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Pay for Performance and EHRs

HEALTHCARE: Pay for Performance and Electronic Health Records

This is a guest post from Jonathan Krasner from BEI, a healthcare IT company located in Reston, Virginia. Jonathan talks about Pay for Performance and how it relates to Electronic Health Records (EHR).

We all know that our healthcare system is very expensive and massive efforts are underway to implement reforms. The reforms come in many different areas, with differing levels of impact as there is no “silver bullet” that will fix the system. One of the major reform undertakings has to do with how providers and hospitals are paid.

Currently, we operate primarily in a “Fee for Service” (FFS) environment. Under FFS, providers are paid for performing a specific service: an operation, procedure, consult, etc. One of the problems with FFS is that it assumes that providing a service is synonymous with a patient achieving a certain, generally positive, outcome (remission from disease, for example). That is not always the case. Alternatively, if you were to ask a patient what he/she would like to “purchase” when seeing a provider, they would reply with something like “I would like to get my condition under control”, or “I would like to be cured of this disease”, i.e. the patient would like to “purchase” an “outcome” or “result”.

The concept of “purchasing” an “outcome” has been around for a while and is known by various names: Pay for Performance, Outcomes-Based Payments, Value-Based Purchasing and Accountable Care are a few. Over time, the industry will standardize on a single term, but in this article we use the term Pay for Performance (P4P). There are several important things to know about P4P:

• Essentially, P4P uses financial bonuses to encourage physicians to meet standardized performance quality measures and to boost positive clinical outcomes and patient satisfaction (just as an aside, in the US today, 75% of all companies associate at least part of an employee’s pay to measures of performance).

• It does not apply to treating an individual patient. Rather it applies to a group of patients in a panel, where outcomes can be statistically predicted with accuracy.

• It cannot apply to all conditions and diseases. It only applies to patient panels with specific conditions. These conditions are those where the outcomes can be predicted with statistical accuracy. For example, starting October 1, 2012, hospitals will be reimbursed differently for three conditions: heart attacks, heart failure, and pneumonia. The payment rate allows only a certain amount of readmissions. If a hospital’s readmission rate is considered to be excessive, they will be subject to rate reductions.

We are not trying to argue the merits of P4P. However, it will become, in one shape or form, part of the payment system in the future. In addition to the Medicare announcement mentioned above, United Healthcare recently announced that they will be paying for some oncology services in this manner. Most major payers have some type of P4P program in place or are developing one.

But what does this have to do with EHRs? Plenty! Here are some thoughts:Doctor with EHR

• As mentioned above, P4P relies on a lot of data, from a lot of patients. You can’t P4P unless you can measure performance. You certainly cannot implement a P4P program with a physician that is using paper charts. The data that is resident in a physician’s EHR will be instrumental in determining what actual performance or outcomes are.

• As a side note to the above, the data must be available in a standardized electronic format for it to be evaluated.

• A shift to accepted evidence-based standards of care will be required. For certain conditions, physicians will be asked to use certain clinical policies and procedures. EHRs will be used to document that these standards have been adhered to.

• Many P4P programs will involve the concept of the Patient-Centered Medical Home. This does not just apply to primary care physicians. Part of PCMH involves identifying gaps in care – as an example, making sure every patient over 50 receives a colonoscopy at the appropriate intervals. These gaps in care can only be identified by and addressed using the data in an EHR. The EHR cannot only be used to identify gaps in care, but also any type of medical data point, i.e. patients with certain lab results, patients on certain medications, etc. By rapidly identifying patients with certain characteristics, physicians can quickly target appropriate care.

Meaningful Use is just the first step in the long journey of utilizing EHRs in the transformation of the healthcare system as we know it. EHRs will be used not only to improve clinical outcomes, increase practice efficiency but will also be an integral part of the payment systems of the future.

Visit BEI at or call Jonathan at 571-612-3344 for more information on this topic.

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