Performance Based Compensation: Benchmarking, Monitoring and Improving Quality


February 6, 2012


Last week’s Alert discussed the growing trend toward including performance measures in contracts between hospitals and anesthesia groups.  We identified clinical quality, efficiency and patient satisfaction measures developed by the Surgical Care Improvement Project (SCIP), the Medicare Physician Quality Reporting System (PQRS), the American Society of Anesthesiologists (ASA), the Anesthesia Quality Institute (AQI), Press-Ganey and the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS).  All of these measures can be the basis of hospital or ambulatory surgery center contracts for performance-based payment.

Many contracts set forth the quality, efficiency and customer satisfaction activities that are part of the anesthesia group’s quid pro quo for their hospital compensation package without explicitly linking performance rates to payment.  Increasingly, though, the anesthesiologists must meet or exceed agreed-upon benchmarks to earn their payment.

Choosing Benchmarks

The benchmarks can be external or internal.  External benchmarks allow for comparison to similar institutions or providers – or to national or regional averages. 

Almost all U.S. acute care hospitals report performance data on a set of 36 measures that are published on Medicare’s Hospital Compare website; failure to report successfully results in a 2.0 percentage point reduction in an institution’s annual Medicare update.  Among the 36 measures tracked on Hospital Compare are the 12 SCIP measures on preventing blood clots, preventing infections and managing beta blockers perioperatively, rewritten in consumer-friendly language.  Some measures that are familiar to anesthesiologists are reported thus:

Using the Hospital Compare data would give Alton Memorial Hospital a baseline of 89 percent of outpatients receiving timely administration of prophylactic antibiotics, compared to a statewide level of 96 percent and a nationwide top decile of 100 percent.  Barnes Jewish Hospital would have a baseline of 77 percent of indicated perioperative beta blockade rates, 17 percentage points below the statewide average.  The baseline figures for the hospitals can also be used for longitudinal, internal comparisons. In using these hospitals’ data, we are not vouching for the accuracy of the information, but merely illustrating the use of one widely known public source of performance data.

Several of the organizations mentioned above, e.g. Press-Ganey and the AQI, also offer performance data across providers.  The clinical and practice management literature is of course replete with potential benchmarks.

Tracking a clinician’s or a department’s performance longitudinally, against that individual’s or department’s own baseline performance, would seem to give the most accurate picture of improvement.   Comparative information from other institutions or sites may have been developed under different conditions and it may have measured different issues despite similar terminology.   Within one’s own hospital or department, several years’ worth of data may be necessary in order to smooth out peaks and valleys and produce valid benchmarks, or to establish trends.  Choosing precisely what to track prospectively based on one’s own assessment of specific patient outcomes needing improvement, however, and determining how best to capture and report the data, are likely to deliver the most relevant and credible measurement of performance.

2. Linking Performance and Financial Targets

At its simplest, a performance based compensation system will consist of a process or an outcome targeted for improvement, a goal or success rate to be achieved, and a set dollar amount or other reward that will be paid when the goal has been reached.

Many hospital-anesthesia group agreements contain more sophisticated progressive incentives for increasing levels of achievement or compliance.   As an example, consider an ambulatory surgery center where OR turnover time is averaging 20 minutes.  An internet search for OR efficiency metrics shows, hypothetically, that the national average turnover time is 8 minutes.  Reducing the ASC’s average to 12 minutes will make it possible to perform one additional case per day at an average net profit of $300. The parties agree that the anesthesia group will receive one-third of the additional revenue (if any) at the end of the month, and more if they further reduce turnover time. The progressive incentive payment structure will be as follows

  • Average room turnover time of 10-12 minutes: incentive payment = $100/day
  • Average room turnover time of fewer than10 minutes = $150/day
  • Average room turnover time of more than 12 minutes = no payout

Another example of a progressive incentive payment schedule for an anesthesia group would tie income support (a.k.a. the stipend) to attainment of set goals.  A percentage of the stipend might be withheld during the performance period and paid out if the target is met.  A bonus could be added for exceeding the target. For example, a group’s aggregate SCIP scores are currently at the 90th percentile.  Its hospital has agreed to a $1 million stipend, with $900,000 payable in quarterly installments and the remaining $100,000 payable at the end of the year if the group scores at the 92nd percentile.  The group has the opportunity to earn an additional $100,000 if it has raised its performance on the SCIP measures to the 96th percentile.

3. Operational Issues

There are several questions that the anesthesia group and the hospital or surgery center administrator should address at the outset.  These include:

  • If performance on a given performance measure is below the target, will the group have the opportunity to remedy the shortfall and still earn the funds withheld?
  • Will particular measures be retired and replaced after there is evidence of consistent compliance?
  • Who will monitor and report the performance indicators?
  • At what time intervals will each indicator be reported?
  • What will be the payout intervals – monthly, quarterly, annually?
  • What will be the dispute resolution mechanism in case of disagreement on whether targets have been met?

For some anesthesia practices, the concept of performance-based compensation is already old hat.  For others, it offers new opportunities but it also places earnings at risk, and not every risk will be 100 percent within the practice’s control.  With accountability being the watchword of the decade, however, we are likely to see more and more compensation tied to measurable performance and outcomes.  As with so many developments, the anesthesiologists who decide to lead the change are apt to have the advantage.

With best wishes,

Tony Mira
President and CEO