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Case Study: State of Maine Ranks Providers Based on Quality

Summary: A state employee health plan designated hospitals, and later primary care physician practices, that met certain performance criteria as "preferred" providers, and then gave employees incentives to use them. While this initiative appears to have improved the quality of care, its impact on costs has not yet been evaluated.

By Vida Foubister

Issue: Maine, a state with a relatively modest per capita income, has the fourth highest health expenditure per capita in the country. This is not only a burden for the state's government, but also for companies. "In order for our private sector partners to stay in business in the state, they have to be more competitive," says Frank A. Johnson, executive director of the state's Employee Health & Benefits program.

Led by its trustee board's belief in value-based purchasing, the state employee health plan began evaluating provider performance in 2006. It first encouraged enrollees to use hospitals with higher quality care, adding physician ratings at a later stage of the initiative. "The whole idea of focusing on value, clinical outcomes, and how it relates to cost is getting far more attention than it was several years ago," Johnson says.

This process helped a statewide, employer-led health care coalition establish criteria to identify high-performing hospitals and physicians. It also educated plan enrollees about health care quality and the role they can play in holding providers accountable for their performance, generating interest in the public reporting of quality data.

Organization/Leadership: Maine Employee Health & Benefits provides health insurance to state employees, retirees, and their dependents, using Anthem Blue Cross and Blue Shield as a third-party administrator to process its claims. The Maine State Employees Health Insurance Program is a member of the Maine Health Management Coalition, an employer-led partnership that includes hospitals, health plans, and physicians and aims to improve the value of health care in the state.

In addition to being governed by state law, the health plan is overseen by a 22-member trustee organization composed of labor and management representatives, which gives each party a single vote. Called the State Employee Health Commission, it must reach consensus on vendor selection, benefit design features, and the health plan's overall plan strategy.

Frank A. Johnson serves as executive director of Maine Employee Health & Benefits.

Target Population: Maine Employee Health & Benefits has nearly 40,000 covered lives, which includes about 30,000 active state employees and their dependents and 10,000 retirees and their dependents. The average age of employees is 47; these employees work throughout the state in a wide range of jobs.

Among the retirees, almost half (about 4,500) are not eligible for Medicare, most of whom are younger than 65 and others who do not qualify for other reasons. They are instead enrolled in the program's point-of-service plan. These non-Medicare retirees "influence our plan expenses considerably," says Johnson. While they make up about 14 percent of the point-of-service population, they consume about 30 percent of its expenses.

Implementation: Though the State Employee Health Commission embraced the principles of value-based purchasing, it was initially unable to enter into contracts that did not adhere to the state's geographic access standards. Established by the Bureau of Insurance as part of the Health Plan Accountability Act, the intent of these standards was to ensure plan enrollees had adequate access to provider networks. However, the standards impeded the ability of self-insured groups and health plans to differentiate health benefits based on quality measures. This changed in 2005, when the legislature amended the statute, giving the Commission a waiver to develop and implement tiered provider networks and tiered benefits that adjust payments based on the quality and efficiency of care. As a result, state employees have begun to select physicians and hospitals based on their performance, encouraged by financial incentives for choosing high-value providers.

The pilot project grew out of this exemption and has progressed in several phases: the first phase was implemented July 1, 2006, the second phase July 1, 2007, and the third phase October 1, 2008.

Key Measures: The State Employee Health Commission chose hospital quality and patient safety as its initial focus, because health plan payments to hospitals make up more than 50 percent of plan expenses and comparative data were available on hospital performance. The measures used to identify "preferred hospitals" were chosen by the Maine Health Management Coalition's Pathways to Excellence Hospital Steering Committee, which included representatives from the Coalition, Maine Hospital Association, and the Maine Quality Forum—a government organization created through the Dirigo Health Reform Act in 2003 to improve the quality of health care.
Hospitals were tiered in this first phase of the project based on their performance on three measures:

1. The Leapfrog Group's safe practices survey, which assesses performance on a series of National Quality Forum–endorsed patient safety practices that apply to all hospitals.

2. Maine Health Management Coalition's medication safety survey, which assesses the protocols and practices in hospitals related to the safe use of medications. In 2008, the survey focused on five elements: how prescriptions are double-checked; how medicines are given; how medicine is stored; use of bar code scanning technology to confirm patient identity and medication information prior to administering medications; and established systems to identify and follow patients with poor renal function. The survey was designed by a committee of hospital pharmacists—under the direction of the Coalition's former executive director, who was also a hospital pharmacist—as Leapfrog's computerized order-entry ratings do not apply to most hospitals in Maine, a state that only has three tertiary facilities.

3. Results from the Centers for Medicare and Medicaid Services (CMS) Hospital Compare Web site measuring clinical performance for acute myocardial infarction, heart failure, pneumonia, and surgical infections.

To be designated as preferred, hospitals must have: completed the 2005 Leapfrog safe practices survey; demonstrated the hospital "has made good early stage effort in implementing recommended safe practices" according to the Maine Health Management Coalition Medication Safety Survey; and have had an aggregate CMS clinical measure score that meets or exceeds the national average.

In the second and third phases of the pilot, the Commission adopted the Maine Health Management Coalition's blue ribbon designations to identify preferred hospitals. Preferred institutions have to receive blue ribbons in patient safety (based on the Leapfrog survey results and the Coalition's medication survey) and selected clinical quality measures (as reported to Hospital Compare). Though the blue ribbon benchmarks are calculated somewhat differently than those used in phase one of the pilot and are slightly more challenging, they are based on the same, most recently available, data sources. The Coalition also measures patient experiences, based on the Hospital Consumer Assessment of Healthcare Providers and Systems survey, and this will be added as a third criterion for the preferred hospital designation in 2010.

A tiered benefit for primary care practices was introduced in phase two of the pilot. Again, this was based on the Maine Health Management Coalition's Pathways to Excellence Physician Steering Committee's blue ribbon designations, which assess a practice's use of clinical office systems, adult diabetes care results compared with national guidelines, use of appropriate heart disease tests and treatment, childhood immunization rates, and treatment of pediatric asthma. Those practices that achieve two or three blue ribbons are identified as "preferred practices."

Process of Change: The first phase of the pilot had two objectives: to make state health plan members aware that health care quality varies by provider, that quality of care matters, and that quality can be improved; and to encourage providers to publicly report their performance.

Maine Employee Health & Benefits held 60 informational sessions throughout the state to educate employees and retirees about the tiering initiative. Hospital leaders were informed early in 2006 that their institutions' performance would be evaluated, and those hospitals that met the criteria established by the Pathways to Excellence committee would be designated as "preferred hospitals."

The initial benchmarks were fairly modest to "downplay hospital objections in the first phase, with the intent of ramping up the measures with successive rating periods," says Johnson. The first set of preferred hospitals, released on July 1, 2006, included 14 of the state's 36 hospitals (Table 1). Hospital performance, which is reassessed every six months to note a provider's progress in meeting established benchmarks, improved at 11 institutions by January 1, 2007, increasing the number of preferred hospitals to 25.


 Table 1. Maine Hospitals "Preferred" Designations Following the State Employee Health Plan's Launch of a Tiering Pilot

 Number of "Preferred Hospitals"

 July 1, 2006    


 Jan. 1, 2007


 Aug. 1, 2007   


 Jan. 1, 2008


 Oct. 1, 2008


 Feb. 1, 2009


To be designated as a preferred hospital from July 1, 2006 to Jan. 1, 2007, institutions must have met the performance criteria established by the State Employee Health Commission for phase one of the pilot. The criteria for subsequent preferred designations, from Aug. 1, 2007 to Feb. 1, 2009, were established at the outset of phase two. (See Case text for more details on these performance criteria.) There are 36 hospitals in Maine, three of which are tertiary facilities.

While neither the health plan nor employees were expected to save money during this first phase of the pilot, services billed by preferred hospitals were exempt from a member's annual deductible. (As these services did not contribute toward the annual deductible, members were likely to meet the deductible regardless of whether the hospital at which they received care was "preferred.")

In the second phase of the pilot, Maine Health Management Coalition's blue ribbon designation was used to identify preferred hospitals. Though the same measures were used for this designation, the benchmarks were set incrementally higher. As a result, the number of preferred hospitals dropped to 16 on August 1, 2007; the member incentive to seek care at these institutions remained the same.

A tiered benefit was also introduced for primary care practices, effective July 1, 2007. As with the hospital tiering initiative, Maine Employee Health & Benefits held 35 information sessions across the state to explain the preferred physician designation, and members were offered a modest incentive to seek care from preferred providers. Office visit copayments are waived for care received at these high-value practices, as is the annual deductible for any services billed by the practice.

The third phase of the pilot, rolled out on October 1, 2008, revised the benefit in response to a $3.5 million reduction in plan funding for the fiscal year 2009. The benefit changes included a bigger financial incentive for employees to seek care from preferred hospitals. Copayments of $100 per day for inpatient admissions and $50 per event for outpatient surgery were introduced; these fees are waived for admissions and services at preferred hospitals. A $50 copayment for advanced imaging, including MRIs, CT scans, PET scans, and SPECT and nuclear cardiology, applies regardless of where care is received. As of February 1, 2009, the number of preferred hospitals reached 28.

Results: The State Employee Health Commission has identified several improvements in provider performance since the pilot was rolled out:

First, the number of hospitals completing the Safe Practices Score section of The Leapfrog Group's Hospital Survey increased from 18 in 2005 to 35 in 2006. Within this same time frame, the number of hospitals completing the Maine Health Management Coalition medication safety survey increased from 30 to 36 hospitals. Further, as of January 1, 2007, all hospitals are providing data to both organizations.

Second, the number of preferred hospitals has increased from 14 at the outset of the pilot, on July 1, 2006, most recently to 28, on February 1, 2009. This increase has occurred even as the performance benchmarks have become more challenging.

Third, the CMS core clinical measures for Maine hospitals have improved, both individually and collectively.

And fourth, the number of primary care practices achieving two or three blue ribbons has increased. Among the 447 practices, those achieving two blue ribbons increased by 20 percent (114 to 137) from 2007 to 2008, and those achieving three ribbons increased by 35 percent (103 to 139) in the same period. Overall, more than 50 percent of the primary care practices have achieved either two or three blue ribbons.

Implications: At the same time that more providers have achieved preferred status, plan members have responded to the incentives to seek care from these hospitals. Claims data demonstrate a 5 percent shift in outpatient services from non-preferred to preferred hospitals. Though similar data are not available on physician services, it is likely that the financial incentive will have a similar effect on enrollees seeking primary care.

A hospital's status as a non-preferred or preferred provider does not appear to follow a pattern relative to its location in a rural or urban area, nor to its location's economic status. While two of the four largest hospitals that the state employee health plan contracts with have failed to make the preferred list at one point, several small rural hospitals, as well as a small community hospital in an economically challenged community, have consistently received this designation. Further, proximity doesn't appear to override a hospital's quality rating. "The preliminary data suggests that members have been willing to travel to a facility other than their local hospital for outpatient services," says Johnson.

Competitive markets have seen the most movement of physicians from non-preferred to preferred status. While there are geographic pockets of the state that lack preferred primary care practices, they occur in both urban and rural areas, and often in the same areas that have a paucity of physicians generally. Johnson also notes that the program was not intended to disrupt existing doctor–patient relationships, but only to encourage employees looking for a new physician to consider practices with a preferred designation.

There also is anecdotal information that employees are pushing local hospitals that have failed to achieve preferred status to make improvements in quality. Motivated plan members, in one instance, were able to make the necessary change—ensuring constant access to a pharmacist to monitor medication dispensing—a condition of their hospital's certificate of need application. The state's Department of Health and Human Services assesses a hospital's need for expanded services or facilities through these applications. This process gave state employees an opportunity to make their case for improvement to the hospital leadership at a certificate of need hearing, which they had requested. "It was clearly more important for the local hospital administrator to hear from them rather than some bureaucrat in Augusta," says Johnson.

As a result of this success, several health systems have expressed an interest in learning about the Commission's incremental approach to benefit tiering. The health plan's leadership also has been asked to present their experience to organizations including The Leapfrog Group, the National Business Coalition on Health, the Robert Wood Johnson Foundation, and the National Leadership Council.

Lessons Learned: At the outset of the project, the Commission chose to update the preferred hospital list every six months to reflect, in a timely manner, efforts that hospitals were making to improve their performance. However, this has led to some frustration among hospitals, particularly those that have moved on and off the preferred list, and to confusion among employees about whether they stand to benefit from the financial incentives. "It's been a tricky analysis to determine what kind of movement we are seeing and why," admits Johnson.

As a result, the Commission plans to update the preferred hospital designation on an annual basis, following CMS's release of the most recent 12 months of clinical data. It also might establish an absolute threshold for performance on the CMS measures, as comparing hospitals to the average performance of hospitals nationwide creates a moving target. "We're really hoping the list will stabilize," Johnson says.

While the education sessions for plan members were "costly and resource intensive," they appear to have paid off, says Johnson. Explaining the importance of health care quality to employees and retirees and sharing the data sources used to establish a provider's preferred designation ultimately has helped to ensure the pilot's success. "They understood what we were trying to accomplish and they became instrumental in getting hospitals to move from noncompliance to compliance and becoming preferred hospitals," he says.

Limitations: Despite the ability to demonstrate some effect on quality, at least for those dimensions of care measured and publicly reported as part of the pilot, the program's impact on cost has not been evaluated. Further, in order to fully implement value-based purchasing, cost and efficiency measures must be introduced to the program.

The Commission is exploring partnerships with academia to assess the return on investment and potential savings of the hospital tiering pilot. It also plans to push for increased cost transparency at the provider level, and consensus on protocols for evidence-based medicine.

Next Steps: The Commission would like to identify preferred specialty physicians—a step in which plan members have also expressed an interest. Currently, representatives from six specialties—cardiology, cardiothoracic surgery, OB/GYN, orthopedics, gastroenterology, and general surgery—have been working to establish a series of process and clinical outcomes measures to use to establish this designation. However, most of the specialties have yet to make much progress in developing these measures, leading the Commission to consider combining the primary care and specialty designations and instead asking the primary care physicians who led the Pathways to Excellence physician steering committee "to push the agenda," says Johnson. This approach also makes sense given that primary care physicians participating in a multi-payer, patient-centered medical home pilot will start assuming some risk for specialty care referrals this year. "They'll have an interest in identifying the more efficient specialists and hospitals," says Johnson.

The Maine Health Management Coalition plans to continue publicly reporting providers' quality of care. However, it has a small grant to help facilitate a transition from using Coalition performance measures for physician practices to nationwide standards such as those established by Bridges to Excellence and for National Committee for Quality Assurance accreditation. Practices that meet these new standards for the blue ribbon designation will retain their preferred status for three years.

Only one other Maine employer, Hannaford Bros, a northeast supermarket chain, has implemented a performance incentive similar to the state's tiering pilot, says Johnson. But he believes that the basic principles are transferrable, both within Maine and in other markets.

"In our experience, if you have a fairly strong statewide presence like we do, or a fairly strong local presence, then you can change the dynamics in the marketplace," says Johnson. "The biggest obstacle for many of our colleagues has been to make the case internally, within the organization. In the end, paying for value and quality makes a lot more sense then the perverse system we have right now, where you're just paying for volume. Once you have that acceptance and acknowledgement, then it just makes life a whole lot easier."

This study was based on publicly available information and self-reported data provided by the case study institution(s). The Commonwealth Fund is not an accreditor of health care organizations or systems, and the inclusion of an institution in the Fund's case studies series is not an endorsement by the Fund for receipt of health care from the institution.

The aim of Commonwealth Fund–sponsored case studies of this type is to identify institutions that have achieved results indicating high performance in a particular area of interest, have undertaken innovations designed to reach higher performance, or exemplify attributes that can foster high performance. The studies are intended to enable other institutions to draw lessons from the studied institutions' experience that will be helpful in their own efforts to become high performers. It is important to note, however, that even the best-performing organizations may fall short in some areas; doing well in one dimension of quality does not necessarily mean that the same level of quality will be achieved in other dimensions. Similarly, performance may vary from one year to the next. Thus, it is critical to adopt systematic approaches for improving quality and preventing harm to patients and staff.

For Further Information: Contact Frank A. Johnson, executive director of Maine's Employee Health & Benefits, at [email protected]

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