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Grant Will Help Develop New Provider Payment System

By Miriam Straus, CQ Staff

May 23, 2008 -- The Robert Wood Johnson Foundation (RWJF) announced this week it would provide $6.4 million to develop a system that aims to link health provider compensation to the quality and efficiency of care.

The money will go to the Prometheus Payment model, developed by the not-for-profit organization Prometheus Payment, Inc.

This system uses clinical practice guidelines to establish an "evidence-informed case rate" for the total cost of treating a patient with a particular condition. This rate accounts for all of the providers who would treat that patient, such as a physician, hospital, and pharmacist, and it is adjusted to reflect the severity and complexity of the condition. The rate is then combined with a margin for potential complications as well as a margin for profit, according to the Prometheus Web site.

Providers would receive compensation for providing the recommended care, but a portion of their payment would be withheld. That portion—10 percent of the total payment for doctors, and 20 percent for hospitals—would be paid back based on the provider's score on quality and efficiency measures, the Web site said.

Providers cannot receive payment for efficiency if their quality scores are below a certain threshold—an effort to discourage providers from withholding care in order to increase their efficiency scores.

Health care teams will negotiate prices and which parts of the case rate they will deliver, Prometheus said in a press release. Participation in the system is voluntary.

"[This] approach gives every clinic, hospital, and physician an incentive to do business with the right counterpart and gives them all an incentive to collaborate," said Prometheus Board Chairwoman Alice G. Gosfield in a statement.

John R. Lumpkin, the director of the RWJF health care group, said in a statement, "One of the biggest problems of our broken health care system is that health care providers get paid regardless of whether it is the right care at the right time."

The new grant will allow Prometheus to expand its set of case rates and develop a scorecard to report information to the public on performance and prices. In addition, the grant will provide for the implementation and assessment of the pilot programs, according to press releases by the two organizations.

The first areas to debut the model will be Rockford, Ill., Minneapolis, Minn., and two other locations that will be named shortly, Prometheus said. Local employers will work with providers to implement the system in Rockford, while in Minneapolis, health plans and providers will undertake a "full-scale test" of the new payments, Prometheus said in its release.

Pilot programs should be operational by January 2009.

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