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In their quest to cut costs, Western New York's HMOs earned reputations in the 1990s for being stingy with hospitals, second-guessing medical opinions and limiting expensive tests and referrals.

That's changing now, and the change is not coming about by accident. Nor is it coming without a cost.

The region's major health plans are paying bonuses to doctors and hospitals to provide high-quality care.

The tactic started several years ago in an almost experimental way with a handful of physicians. But in the last month or so, all of the major health insurers signed new reimbursement contracts with the hospital systems here that tied payments for services to quality initiatives.

It's hoped the quality measures -- they range from making sure heart attack patients take aspirin after discharge to installing sophisticated computer systems to prevent medication errors -- will reduce costs in the long term.

But the deals gave the hospitals large increases in the fees they receive, which is one of the reasons health insurance premiums are rising so much again next year.

"The industry has operated with a 'naked market' approach -- get the most services for the least amount of dollars. We're trying instead to look at the overall benefit to patients," said Frank Colantuono, president and chief executive officer of Independent Health.

Why change?

Physicians have become fed up and patients are unhappy with insurance plans that appear to focus more on managing costs than on managing care. Large employers, faced with spiraling costs for health insurance, want to know what they're getting for the money they spend.

There also is growing recognition that improving quality is the right thing to do.

"In the past, it was all about finance people haggling over unit costs of care," said Dr. Susan Graham, president of the medical staff at Kaleida Health. "Now, for the first time, we've realized we are all in the same boat. We're all responsible for the quality of care."

She and others said key players in Buffalo's medical community have come to agree that the region's health system needs doctoring itself.

Insurers over the years have pushed hospitals to close unneeded buildings and operate with greater efficiency. Numerous reports show the quality of care varies widely from hospital to hospital in a region known for longer-than-average hospital stays and higher-than-average rates of surgery. Meanwhile, hospital officials, their facilities deeply in debt, have been warning that they don't have the money to invest in renovations, new technology, more nurses and some hard-to-recruit specialists. Many doctors complain that they are reimbursed below what colleagues receive in other cities, including Rochester, Syracuse and Albany.

Said Colantuono: "Health care is less expensive in this area compared to other regions of the country. We thought that was a good thing. But we've come to realize that we needed more investment."

The merger of the hospitals into Kaleida Health and the Catholic Health System also has given the hospitals more clout. Health insurance companies no longer have the upper hand in contract negotiations and can't threaten to steer their members to a rival hospital.

It was time for the carrot instead of the stick.

"The mergers enabled the hospitals to negotiate higher rates. But our position is that if we're going to compensate at a higher rate, then there have to be quality measures," said Stephen G. Jepson, senior vice president and chief operating officer of Blue Cross and Blue Shield, a division of HealthNow New York.

A strategic investment

The quality initiatives stem from many studies that indicate not all physicians and hospitals adhere to the best medical practices.

A key report in 2001 by the Institute of Medicine, the organization that advises the federal government on medical matters, found that some doctors do not keep up with advances and new treatments do not reach many patients.

For example, studies show that many heart attack patients do not get something as simple as aspirin, a drug that can prevent a second attack, when they are discharged.

"When you look at the Buffalo area, heart disease and cardiac care dominates the medical landscape in terms of hospital volume," said Dr. Michael Cropp, executive vice president and chief medical officer at Independent Health. "Well, in the future, the heart attack patient who leaves the hospital without an order for aspirin is going to be an extreme anomaly. That's a strategic investment that we feel needs to be made."

Among other things, the health insurers have linked higher reimbursement at hospitals to efforts to reduce the length of patient stays, death rates for heart surgery, and the incidence of post-operative pneumonia and wound infections. They also are providing incentives to hospitals to consolidate surgical programs for complex procedures, such as heart surgery.

Studies show that, in general, physicians who do more of a particular procedure have better results with that procedure.

Pressure to do well

The better that hospitals perform in such initiatives, the more money they will receive.

"There's more financial risk for the hospital, but it's not a punishment," said Dr. Cynthia Ambres, executive vice president and chief medical officer at Kaleida Health. "It puts pressure on the institution to do well and is aligned with the goals we have set for ourselves."

Health insurance companies also have turned down the volume in the public debate over how to get rid of the region's costly, unneeded hospital buildings. Officials said "excess capacity" will take care of itself as the focus shifts to reducing lengths of stay and unnecessary admissions.

"By focusing quality measures around things like length of stay, you can get at the problem," said Thomas Hartnett, president and chief executive officer of HealthNow.

This region is not alone on the quality bandwagon.

An organization called the Leapfrog Group, a coalition of the country's largest corporations covering 35 million patients, was formed two years ago to promote three hospital practices and provide more information about quality of care to patients.

"We went to the leading patient safety experts in the country and basically asked them to come up with the equivalent of antilock brakes, air bags and seat belts for the health care industry," said Suzanne Delbanco, executive director of the Washington-based group.

They arrived at three goals:

Install computer systems for ordering medications. The Leapfrog Group says this would prevent many of the estimated 1 million medication errors that occur annually in the United States because of illegible handwriting on prescriptions, decimal point errors and overlooked drug interactions.

Limit intensive-care unit staffing to physicians with special training in the care to critically ill and injured patients, at least for eight hours a day. Death rates are much lower in so-called "closed staffing" ICUs versus those that rely on primary-care doctors backed by consultations from experts.

Steer patients to hospitals with the best results for high-risk treatments and procedures, such as surgery to bypass clogged arteries around the heart. Because little information is available on patient outcomes, the Leapfrog Group recommends tracking how many procedures a hospital performs each year. Research has demonstrated a relationship between high volumes and good results.

Bonuses for doctors

Some critics contend the computer systems for ordering drugs are expensive, and the programs overall are bound to add to the rising cost of health care. Others point out that there's no consensus nationwide on what should be measured to improve quality, how to measure it or what should be done with the data once it is measured.

The idea of paying incentives for performance has been in place for several years for a small but growing number of area physicians.

At health maintenance organization Independent Health, for instance, doctors earn bonuses if they meet a series of benchmarks for patient satisfaction, physician access, colorectal cancer screening rates, mammography and immunization rates, and asthma and diabetes care.

Dr. Allyn Norman, an internist in Getzville, said the measures have made him a better physician, benefited his patients and given him a sizable increase in income.

He said he has changed his practice to do more screening for diabetes, breast cancer and other illnesses. He has also adopted same-day scheduling to give patients better access to him and his nurse practitioners.

As a result, his quality incentive pay has grown each year. It was $18,000 in 2000 from Independent Health alone and around $36,000 in 2001, he said.

"It's not about being paid to do the right thing, because physicians are not going to maliciously not do the right thing," Norman said. "It's about wanting to do a better job of managing your patients and getting rewarded for your performance."


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