Paying for performance: implementing a statewide project in California.

T he US health care system falls far short of providing care consistent with national standards of care and available knowledge. There continue to be wide variations in how care is provided, and a host of studies and reports point to substantial deficits in the quality of care being delivered.1–3 The study by McGlynn and colleagues4 that examined the delivery of care in 12 communities across the United States found that patients receive recommended care only about 50% of the time, irrespective of whether the care was preventive, acute, or chronic. These deficits were found across medical conditions as well. Moreover, work by Casalino et al with a national population of Physician Organizations (POs) found that they used less than 50% of recommended care management processes (eg, disease registries, guidelines, automated reminders), with great variability across organizations and chronic illness conditions.5 In recognition of these deficits, the Institute of Medicine released a landmark document Crossing the Quality Chasm,6 which was a national call to action. This report calls for significant change at all levels of the health delivery system, with particular emphasis on system redesign that will drive substantial improvements to close the quality gap. Of note, the report called for creating and aligning incentives for quality and increasing the transparency of quality information for quality improvement, accountability, and consumer choice. In 2002, the Robert Wood Johnson Foundation (RWJ) and the California HealthCare Foundation (CHCF) funded 7 demonstration projects under the Rewarding Results program to implement and evaluate financial and nonfinancial incentives for quality.7 The funding for this initiative totals more than $8.8 million and is impacting the care of 22 million Americans. Among the 7 projects, the largest is the Integrated Healthcare Association’s (IHA) Pay for Performance (P4P) program, which currently covers over 6.5 million or close to one quarter of all Californians. The sheer scope of P4P gives it great weight within the most populous state in the nation. The 7 participating health plans—Aetna, Blue Cross, Blue Shield, Cigna, Health Net, PacifiCare, and Western Health Advantage—have contractual relationships with all of the major capitated physician organizations, touch 45,000 physicians, and for some Independent Practice Associations (IPAs) represents 100% of their capitated revenue. This article describes the implementation of the IHA P4P program and explores the difficult decisions and collaborative structures that were created to make statewide P4P a reality in California. In contrast to several of the other Rewarding Results P4P demonstrations that involve only one health plan (eg, Excellus Health Plan in Rochester, New York, or Blue Cross Blue Shield of Michigan), this project is unique in that it involves multiple, competing commercial health plans in a large statewide initiative, thus representing the kind and scale of interorganizational coordination that may be needed to have substantial impact.