U.S. Healthcare, the nation's largest publicly owned operator of HMOs, continues to develop innovative ways to measure and improve the quality and efficiency of its hospitals and physicians.
Since 1987, the Blue Bell, Pa.-based company has been applying analytic tools developed by a subsidiary, U.S. Quality Algorithms, for use in studying the practices of its providers.
U.S. Healthcare then rewards year-end "bonuses" in the form of higher capitation payments to those hospitals and physicians who consistently achieve the highest levels of performance.
In its latest quality-control effort, the HMO company has developed a "primary-care office report card" to help its 1.6 million enrollees choose from among 5,000 primary-care physicians under contract with the HMO in 2,500 medical offices in eight Northeast and Mid-Atlantic states and the District of Columbia. The report cards address customer-service issues as well as quality of care (See graphic).
Enrollees will be able to receive copies of the reports simply by phoning a toll-free number, said Antonio P. Legorreta, M.D., USQA's medical director. "It's a very important first step in trying to share information and helping enrollees make a decision," he said.
U.S. Healthcare also is developing similar report cards in six specialties to help improve the performances of its 20,000 specialists, he said.
Dr. Legorreta described the report cards as a provider-driven "management tool" that helps physicians improve their practices by comparing their performances with those of their peers.
The criteria used to create the report cards were developed by compiling the best clinical practice information gleaned from academic reports and comparing opinions of national experts along with critiques by the HMO company's own physicians.
U.S. Healthcare took this laborious approach because it wanted to avoid developing so-called "black boxes" that would force physicians to deliver care in a certain way, Dr. Legorreta said.
Physician cooperation."Eighty to 85% of our physicians respond very well to this (academic credentialing) approach," he said. "We have seen improvement in a number of areas such as enrollee satisfaction. Although the financial component is important, physicians still want to be ranked at the head of their class," he said.
He would not say how many physicians have left the company's networks rather than comply with the performance measures. U.S. Healthcare has the reputation of being a tightly managed HMO company that does a good job in giving its providers financial incentives not to order more medical tests than are necessary.
The emphasis on quality and efficiency has given the firm a medical-loss ratio of 72.7%, significantly below the national average of 79.5%, according to industry reports. As a comparison of medical expenses to revenues, the medical-loss ratio is a key yardstick of HMO performance and profitability.
The company's approach has paid off handsomely for investors. U.S. Healthcare's market capitalization is nearly $7 billion-about twice its market value of $3.5 billion in 1992, making it the largest investor-owned HMO operator. The company's common stock has been priced at about $41 per share in NASDAQ trading.
Grading hospitals. Hospitals also have played a key role in the company's success. The HMO has performance-based contracts with about 45 facilities. Quality criteria include enrollees' satisfaction with their care and how well a hospital met predetermined quality-improvement goals.
When the program went into effect in 1992, it was believed to be the first time an HMO had expanded such a quality-control program to include hospitals (May 11, 1992, p. 60).
The quality-based payments vary from hospital to hospital and take into account such factors as severity of illness, intensity of service and integrity of information.
In some cases the company has gone a step further and has begun discussions with certain hospitals and physicians on the possibility of forming joint ventures that would involve the sharing of equity or other forms of shared control.
Under the payment system, U.S. Healthcare pays hospitals a "retainer" to provide care to enrollees at the facility. It also pays the facilities an amount determined by its achievement of quality goals and the number of enrollees who actually use the hospital's services.
The company uses feedback from both physicians and hospitals to help develop the final "grades" for both hospitals and physicians.
That information also is being collected by the firm to help create report cards on its own health plans for use by employer groups. The data, based on the Health Plan Employer Data and Information Set (known as HEDIS 2.0), eventually will become "a yardstick by which employers can compare the performance of HMOs," Dr. Legorreta said.
Late last year, U.S. Healthcare released its first of such report cards, which graded the performance of its 600,000-enrollee health plan in Pennsylvania. Categories included preventive services such as childhood immunization and prenatal care. So far, it's the only report card in the country based on HEDIS (Jan. 10, p. 41).