Following in CMS' footsteps

The nation's largest public hospital system is ripping a page from the CMS' playbook, linking incentive payments to physicians' performance on quality indicators and, in the process, trying to shore up its ability to capture revenue under new federal programs.

The New York City Health and Hospitals Corp., a 14-hospital safety net system, recently announced the launch of a pay-for-performance program for its 3,500 affiliated physicians that will award up to $59 million in bonus payments over three years. Physicians will earn those incentives by reaching targets on a number of measures, including 30-day readmission rates for heart failure, average acute length of stay and administration of antibiotics prior to surgery.

The program is significant not only because of HHC's size and presence in the region, but also because it could motivate other public hospitals and systems to follow suit, experts say.

“I think it's a good model that will have implications for the whole marketplace,” said Dr. Bruce Siegel, president and CEO of the National Association of Public Hospitals and Health Systems. “It's a sign of things to come, and I expect that now that one large system has taken the plunge, others will follow.”

It's not the first time a hospital has entered into an incentive program with physicians, Siegel said. But past agreements have usually included one physician group or a single department, such as cardiology. “We've never seen anything this comprehensive,” he said.

The initiative has been in the works for more than a year, when negotiations began with HHC's three affiliate physician groups: the Physician Affiliate Group of New York, the Mount Sinai School of Medicine and the NYU School of Medicine.

Past contracts with the groups always included routine cost-of-living increases, but those pay hikes were absent this time around. Alan Aviles, HHC's president, argued such automatic increases are no longer financially feasible.

“If we provide any additional compensation for physicians, it has to be derived by new revenues generated or losses avoided,” he said.

HHC patterned its pay-for-performance program on the CMS' value-based purchasing program and readmissions reduction program, both of which launched in October. For instance, HHC included measures such as physician-provider communication and discharge instructions for heart-failure patients.

Also, the health system tied a portion of each affiliate's bonus payments to whether HHC retains its Level 3 designation under the National Committee for Quality Assurance's Patient-Centered Medical Home Recognition Program.

Each of the three affiliate groups' contracts contains a slightly different set of measures, based on negotiations. But they draw from a basic list of 13. PAGNY is set to receive $31.3 million over the next three years, while physicians at Mount Sinai and NYU will receive $13.75 million and $14 million, respectively.

The program is structured to help HHC stay out of the penalty range on both CMS programs, no easy feat for a public system with a tight budget and a large population of poor and uninsured patients. Aviles acknowledged that physicians weren't happy about losing their cost-of-living increases, but he said they weren't surprised.

“They are mission-driven and they understand the tremendous fiscal pressure faced by safety net providers,” he said.

Dr. Jasmin Moshirpur, dean of the Icahn School of Medicine at Mount Sinai, agreed that physicians were expecting such changes. She also predicted that most doctors could meet the program's targets fairly easily, although she said recent events such as superstorm Sandy and the influenza outbreak could make that more difficult on some measures, such as emergency department triage-to-admission times.

The pay-for-performance program faces another hurdle. While the contracts with the three affiliate groups are final, the Doctor's Council SEIU, a union that represents many of HHC's physicians, is still negotiating collective-bargaining agreements with the physician groups.

The union was initially receptive to the idea of an incentive payment program but says the devil is in the details. The Doctor's Council has taken issue with several of the program's measures, including the one that addresses ED triage-to-admission time. Such measures place responsibility for quality directly on physicians, despite the role other clinicians and staff members play in ensuring beds are available, a union spokeswoman said.

The union has also pushed for changes to the program that would give a different weight for readmissions among special-needs populations, such as the homeless.

The ongoing union negotiations have not stalled HHC's incentive program—it officially launched Jan. 1, Aviles said—but unless a contract is reached that includes the program, physicians won't be paid at the end of this year, as scheduled.

“The clock has started ticking, and we're collecting data. But if there are not collective bargaining agreements in place that authorize the groups to distribute the additional revenue, that money will revert back to HHC,” Aviles said.

Moshirpur said negotiations are going smoothly and she expects a contract soon.

Other public hospitals are taking notice, said Dr. Ram Raju, CEO of Cook County Health & Hospitals System, Chicago. He said such programs are much more likely to work when, like HHC, they take cost-of-living increases off the table. “People will take the bird in the hand over the two in the bush,” he said. “When the automatic increases go away, physicians are much more likely to accept the program.”