Aligning Physician and Hospital Goals Through Financial Incentives: Advocate Health's Clinical Integration Program

When Oak Brook, Ill.-based Advocate Health Care launched its Clinical Integration Program a little more than five years ago, very few organizations were aligning with independent physicians in ways that today would be viewed as the underpinnings of an accountable care organization. The program is one of the most successful pay-for-performance programs in the nation that financially rewards non-employed physicians who practice at Advocate hospitals for reducing costs and improving health outcomes. Today, more than 3,500 physicians participate in the program, which is approved by the Federal Trade Commission.

How the program works
Advocate's CIP includes 116 system-wide clinical and efficiency goals, which are updated annually, and the program is funded by commercial insurers that contract with the health system. The insurers provide an additional payment of approximately 10 percent of physician fees to a clinical integration pool, which is managed by the Advocate Physician Partners, an affiliate of Advocate Health Care. Each physician's performance is measured against the handful of measures that specifically pertain to his or her area is monitored, and those physicians who meet their goals receive financial rewards. Last year just one Advocate hospital alone — Advocate Good Samaritan Hospital in Downers Grove, Ill. — distributed $4.9 million to its participating physicians, according to David Fox, CEO of the hospital.

Each physician's specific reward is determined in the following manner: 70 percent of the payment is determined by the individual physician's achievement, and 30 percent is determined by the achievement of all physicians at the hospital where the physician is affiliated. Enrollment in the program is optional for members of Advocate hospitals' medical staffs, and participation does not restrict physicians from practicing at other facilities, says Mr. Fox. Advocate Good Samaritan achieved a 96 percent participation rate last year.

Program impetus
Advocate began developing its CIP in 2002 in order to get in front of what it thought was on the horizon — pay-for-performance programs and bundled payments to hospitals and physicians for services.

The system believed that if it could use financial incentives to better align physicians, it could improve health outcomes and reduce costs to insurers and patients. While this type of reimbursement reform hasn't come to fruition as quickly as expected, the program well positions the system's hospitals for success when these reimbursement changes do take effect.

In the nearer future, however, the program puts Advocate one step ahead of its competitors in regards to changes in government payors' reimbursement policies. Medicare has already announced it will stop paying for certain readmissions in two years, and additional reimbursement restrictions and changes brought on by health reform are sure to come. "While healthcare reform has been passed, no one is really sure what it will mean exactly for hospitals and doctors. What we do know is that in the future, hospitals and doctors will need to work even better together. We will become more accountable for the health of the populations we jointly care for," says Mr. Fox. "We think our physician-hospital organization is uniquely structured so that we can successfully operate together under health reform."

Evaluating cost savings
Knowing that it would need to prove its cost savings in order to receive funding from insurers for the program, Advocate began meticulously tracking how meeting its CIP goals translated into actual savings. "If we were going to get these dollars, we needed to demonstrate higher levels of clinical performance and efficiency than other systems," says Mr. Fox. The savings, not surprisingly, have been significant. For example, CIP's "Generic Prescribing Initiative," which rewards physicians who prescribe generic drugs over more costly name-brand medications for a percentage of their prescriptions, was estimated to save Chicago-area insurers and patients an additional $14.8 million in 2009 above local provider network norms, says Mr. Fox.

Other goals are more directly related to clinical outcomes. For example, physicians at Advocate are rewarded for keeping their diabetic patients' HbA1c (a test to determine blood sugar level) scores better than the national average. "You want an HbA1c score of less than '7,' and nationally, only 13.5 percent of diabetics in PPO plans score less than a '7' on this test," says Mr. Fox. "Our diabetic patients score below '7' 47 percent of the time, which is three times better than the national norm." According to Advocate's calculations, this translates to an additional $2 million in annual savings above the community performance level.  

Advocate also has a goal related to computerized physician order entry. Advocate's target for physicians at Good Samaritan in 2009 was that 55 percent of all orders would be entered using CPOE. CPOE increases adherence to evidence-based medicine and can improve health outcomes. Additionally, CPOE will likely be one component of the 'meaningful use ' guidelines required by hospitals to receive government funds for healthcare IT. By encouraging physicians to use CPOE now, the hospital better positions itself to meet the guidelines and receive the funds.

Looking ahead

Although Advocate seems well positioned for its future under reform, what about all the other health systems and hospitals who haven't yet made such forward-thinking moves? While they can certainly use the best practices of Advocate to develop their own program, Advocate has entered into a joint venture to make it's program available to other healthcare systems and provider organizations to assist them in establishing and managing a similar program in their communities.

To learn more about Advocate's CIP, visit

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