A Business Prescription
Why more and more businesses are turning to incentive programs to rein in soaring costs for employee healthcare
Physician A. O'tayo Lalude is an apostle of rigorous diabetes management. When patients come to his Louisville, Ky., office, they get the works--a battery of preventive measures ranging from blood sugar, cholesterol, and urine tests to counseling on diet, exercise, and how to quit smoking.
While better versed than many of his primary-care peers in the finer points of managing the chronic disease, even Lalude admits his attention to detail has improved since joining Bridges to Excellence, a voluntary "pay for performance" initiative that singles out and rewards physicians who achieve quality- of-care goals.
These days Lalude (rhymes with holiday) keeps a checklist with every diabetic patient's chart reminding him to order necessary lab tests and specialist referrals. He used to assume that patients would keep their appointments for diabetic eye-care screenings. Now he checks with the ophthalmologist for no-shows.
Trend du jour. Earlier this year, he joined an elite class of Bridges physicians recognized for delivering high-quality diabetes care. For his efforts, he'll receive a $700 bonus, or $100 per Bridges patient he treated in 2004. That's small change in the whole scheme of running a medical practice, but his earnings could swell in future years as program sponsors begin encouraging patients to switch to better doctors by offering coupons good for discounts on, say, diabetic supplies. "I knew I was doing a good job," he says, "but I wanted my peers to see what I was doing."
Basing provider payments on quality was a nascent concept when General Electric, Procter & Gamble, Ford, UPS, Verizon Communications, and others launched Bridges in 2002. Today, it is the trend du jour in healthcare. More than 100 performance-based programs are in place across the United States, nearly triple the number up and running in 2003, according to Med-Vantage, a healthcare software firm in San Francisco. Today, most large health insurers have some sort of provider incentive program. Medicare alone has demonstrations in the works at 10 sites.
It's not hard to see why purchasers and payers are fiddling with provider payments. The average premium for a family of four is approaching $10,000 a year, according to a Kaiser Family Foundation/Health Research and Educational Trust survey.
Foisting onerous managed-care constraints upon resistant doctors and patients, a common practice of the mid-1990s, did not solve the nation's healthcare problems. So employers are taking a different tack. By demanding higher quality, they hope to rid the healthcare system of costly errors and inefficiencies. "We didn't get into this to save money; we got into this to improve value," insists Robert Galvin, GE's director of global healthcare.
To the average consumer, paying doctors and hospitals to do what they ought to be doing anyway might seem a bit cockeyed. "I think that Joe and Jane on the street are very wary of this whole thing and appropriately so, because one could ask the question, 'Haven't we always done this?' " observes David Nash, professor and chairman of health policy at Jefferson Medical College in Philadelphia.
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