Private Pay-for-Performance Growing Rapidly, Provider Risk More Slowly

The Catalyst for Payment Reform (CPR) released the results of a survey on September 30, 2014, which finds that private health plans have dramatically increased the use of some payment methods that are intended to reward quality and efficiency. CPR’s project, the National Scorecard on Payment Reform, measures the extent to which payment reforms have been adopted in the commercial group market. In 2013, CPR found that 11 percent of health plan payments to network providers were designed to reward quality in some way; in 2014, that percentage had jumped to 40 percent. Still, CPR found, 60 percent of health plan payments are not yet tied in any way to improvements in quality or safety or to minimizing unnecessary spending. By far the majority of these payments are fee-for-service- (FFS)-based.

The CPR promotes many of the same reforms in the private sector as the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) does in the public sector. Specifically, patient-centered medical homes, accountable care organizations (ACOs), and bundled payments all are high priorities. CPR found that 15 percent of the members of commercial plans were attributed to providers who participate in an ACO or similar payment model.

Defining Terms

CPR’s stated goal is that by 2020, 20 percent of all payments be made using methods that have been proven to increase value. So far, CPR found the value-oriented methods most commonly used include pay-for-performance, bundled payments, and shared savings, all of which reward providers for achieving specified goals. CPR describes these methods as having an upside, but no downside, because the providers are not at financial risk if the quality goals are not met. Under CPR’s definition, it found that 38 percent of all payments to hospitals were value-oriented, as were 10 percent of payments to outpatient specialists and 24 percent of payments to outpatient primary care physicians.

CPR posits that the addition of shared risk would create an even stronger incentive for providers to avoid waste or other unnecessary spending. Currently, 53 percent of value-oriented payments have a shared risk component, while 47 percent do not.

Next Steps

CPR plans to increase and focus on tracking of payments and plan features that increase transparency of cost and quality, in other words, give consumers the information that they need about the costs they will pay under their particular coverage plan. It found that 82 percent of cost information provided by responding health plans gives consumers this information. It also is measuring the extent to which the tools for choosing a physician or a hospital include integrated cost calculators.

Survey, Methodology, and Funding

CPR’s Scorecard is based on voluntary responses to surveys of private health plans. They do not purport to be based on a random sample of all plans. CPR also produced a National Compendium on Payment Reform, which tracks projects in detail. To be considered, proposed payment methods designed to minimize waste or improve efficiency also must have a component that addressee quality or safety. The research is funded by the Commonwealth Fund and the California Health Care Foundation.