Both houses have passed a bill to permit hospitals to implement plans to provide physicians with performance-based incentive payments to increase quality of care and reduce costs. The New Jersey Hospital Association promoted this bill and presented the idea to MSNJ for input. Though MSNJ had concerns with potential loss of physician independence, we did not oppose the bill. Read details of the requirements for incentive programs:
A hospital that seeks to implement a plan will be required to establish a steering committee to: develop institutional and specialty-specific goals related to patient safety, quality of care, and operational performance; implement an incentive payment methodology that ensures fair and consistent payments that correlate with individual and collective physician performance; and adopt a mechanism to protect the financial health of the hospital. The plan may additionally include specific patient management tasks, care redesign initiatives, and patient safety and quality of care objectives. At least half of the members of the committee are to be physicians.
In developing the goals for a plan, steering committees will be required to ensure that there exist no incentives to reduce the quality or provision of medically-necessary care or to exceed best practice standards. In developing the payment methodology for a plan, steering committees will be required to ensure that physician performances are objectively measured in light of each physician’s own performance, the nature of the care provided, improvements in the physician’s performance over time, and local and regional standards. Additionally, the methodology is to ensure that payments objectively correlate with physician performances and are uniformly applied with regard to all physicians participating in the plan. Overall payments to individual physicians under a plan will be limited to 50 percent of the total professional payments for services related to the cases for which that physician receives incentive payments under the plan.
Hospital and physician incentive plans will be administered by an independent third party, which will be responsible for applying the plan’s incentive methodology and calculating direct incentive payments to physicians based on the physician’s performance in meeting the hospital’s institutional and specialty-specific goals, as determined using an incentive payment methodology that meets the requirements set forth in the bill. If the plan includes multiple hospitals, the hospitals will utilize a facilitator-convener to coordinate with each hospital’s independent third party administrator and steering committee to facilitate plan administration, disseminate best practices information, and serve as the point of contact with the Department of Health (DOH).
Except for plans limited to specific clinical specialties or diagnosis related groups, hospital and physician incentive plans will apply to all admissions and all inpatient costs related to those admissions in a given program. Plans will be open to all surgeons and attending physicians of record who have been on the medical staff of the hospital for at least one year, except that this restriction will not apply to hospitalists and physicians who are new to the participating hospital’s geographic area. Hospitals will have the discretion to additionally open their plans to other physicians involved in the provision of inpatient care. Each plan is to include a mechanism to limit incentives attributable to year-to-year increases in patient volume for physicians on staff with multiple admitting privileges. Patients are to be notified of a hospital and physician incentive plan in advance of admission.
A hospital or facilitator-convener will be required to file a prospective plan with DOH prior to the anticipated start date of the plan, and will be required to submit an annual report to DOH detailing distributions to physicians, the plan’s quality and cost performance standards, proposed revisions to the plan, and such other information as the department may require. DOH will be required to notify a hospital if its plan does not meet the requirements established under the bill, and provide the hospital with a reasonable opportunity to remedy any deficiencies in the plan. If a hospital does not bring its plan into compliance with the requirements of the bill, DOH will be permitted to terminate the plan. Physicians will be permitted to withdraw from a plan upon reasonable notice to the hospital, and hospitals may terminate a plan upon reasonable notice to DOH and to participating physicians.
The DOH will review each hospital and physician incentive plan at least once every six years to determine whether the plan is operated in compliance with this act and other relevant State and federal laws and regulations, and whether the hospital and physician incentive plan has resulted in a degradation of quality of health care provided to patients attributable to the hospital and physician incentive plan. The department will have authority to terminate a hospital and physician incentive plan if the department’s review finds that the hospital and physician incentive plan fails to comply with State or federal law, or if it results in a degradation of quality of patient care. A hospital and physician incentive plan would not expire or otherwise be terminated solely as a result of the department’s failure to conduct such a review.
The bill amends P.L.1989, c.19 (C.45:9-22.4 et seq.) to provide that payments made to a physician under a hospital and physician incentive plan do not violate the statutory prohibition against physician self-referrals.