Compensation Monitor

Pay-for-performance champions excited by California program's success

A quality incentive program in California is yielding results that could be replicated in Medicare and other pay-for-performance (P4P) programs nationwide, according to "Advancing Quality Through Collaboration: The California Pay-for-Performance Program." The report was issued by the program's sponsor, the Integrated Healthcare Association (IHA), a collaboration of California health plans, physician groups, and hospital systems.

The model, created over five years, allows "competing health plans to cooperate on the use of standardized incentives to help physicians meet evidence-based quality improvement targets," says Jenni Vargas, IHA chairwoman and health care delivery officer for Health Net of California.

Physician groups are awarded bonus payments for reaching performance goals in three areas: clinical measures, patient experiences, and investment in information technology (IT).

The report says that total incentive payments to physician groups were $37.4 million in 2003. Total payments made last year for 2004, the second measurement year, are estimated to be about $54 million — a substantial increase.

Payments to individual physician groups ranged from nothing to $4.50 per member, per month. Incentive payment for the second program year came to about 1.5 percent of total physician group compensation. This is relatively low compared to average pay-for-performance payments reported in a national survey. The P4P incentive payments are less than the total incentive amounts paid by plans to physician groups. For 2005, payments are about $26 million for the clinical measures, $22 million for patient experience, and $6 million for IT.

Total incentive payments ($ millions paid)

Source: Advancing Quality Through Collaboration: The California Pay-for-Performance Program

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