Designing Incentives to Improve Care: Tools from the Leapfrog Group

May 4, 2006

Overview


The Leapfrog Group is a coalition of many of the nation's largest corporations and public agencies founded by The Business Roundtable, a national association of Fortune 500 CEOs, to address patient safety and quality issues in the American health care system. Freely available resources developed by Leapfrog offer assistance to employers, health plans, Medicaid agencies, and other purchasers in designing, implementing, and evaluating financial and nonfinancial incentives to reward physicians and hospitals for providing high-quality care. These materials include profiles of insurers, purchasers, and employers that have implemented incentive programs; models of potential incentives; strategies for determining the business case for such programs and communicating their benefits; and other practical materials.


The Issue: Current payment systems fail to encourage and even tend to discourage quality improvement efforts. For example, a physician practice that invests in a diabetes management program that reduces the need for office visits not only is not reimbursed for the expense of the program but also may lose the revenue that unnecessary visits would have generated; similarly, additional reimbursement generally is not available for hospitals that provide follow-up care for patients with congestive heart failure, and they also may lose the revenue from the readmissions that are avoided. Rewarding clinically effective care through financial incentives and other means has the potential to improve the quality of care. Many payers, including Medicare, have been looking for ways to align payment incentives with the quality of care. But there is little known about the efficacy of pay-for-performance (P4P) programs and few guidelines for implementing them.

Organization: The Leapfrog Group, a coalition of many of the nation's largest corporations and public agencies that buy health benefits for employees, retirees, and their dependants

Target Populations: Health care purchasers, consumers, and policymakers

T he Intervention: With partial support from The Commonwealth Fund, the Leapfrog Group led the Rewarding Results initiative, an effort to improve health care quality—particularly for patients with chronic disease—by aligning incentives with the desire for high-quality care. Starting in 2002, the Leapfrog Group provided technical assistance and collaborative workshops to a diverse group of organizations, including Medicaid agencies, state-based coalitions, a large commercial health insurer, a managed care plan, a hospital program, and an employer. The largest and most diverse effort to date to test the efficacy of P4P, the initiative found that both financial and non-financial incentives can, indeed, spur improvements in care. Yet, the effort revealed that such programs can be tricky to implement, and that incentives need to be well designed and properly supported. To share the lessons from this initiative and other activities, the Leapfrog Group created a set of freely available resources designed to guide payers through the technical considerations involved in adopting P4P, including:

  • setting the size of financial rewards;
  • engaging physicians in continuous quality improvement;
  • investigating whether return on investment and quality gains outweigh financial investments and labor;
  • sustaining improvement through use of health information technology and other infrastructural changes; and
  • considering whether P4P can work in all settings.
The rich collection of resources includes:
  • The Fund-supported Incentives and Rewards Compendium is a searchable database of current incentive and reward programs aimed at improving health care. The compendium documents and categorizes financial programs, such as those that reward providers with quality bonuses, and non-financial programs, including those that reward providers with public recognition. The majority of the programs included in the compendium are initiated by health plans, purchasers, and purchasing coalitions and target hospitals, physicians, health plans, and consumers.
  • The Fund-supported "Business Case Primer" lays out the factors to consider when evaluating the benefits and costs of an incentive and/or reward program. It defines elements of the return on investment and teases out the direct, indirect, and hidden costs of health care.
  • Ensuring Quality Health Plans: A Purchaser's Toolkit for Using Incentives provides advice to payers on how to ensure value—and reduce variation in quality—through a number of motivational incentives.
  • The Incentives & Rewards Communications Primer aims to help quality improvement leaders effectively communicate the goals of P4P to three critical audiences: consumers, physicians, and the media.
  • Quality Incentive Models identify 11 types of incentive programs for heath care providers, from quality bonuses to reduced administrative requirements.
For Further Information: Contact Suzanne F. Delbanco, Ph.D., CEO of the Leapfrog Group, at SDelbanco@leapfroggroup.org.