Grants totaling $4.9 million were announced today for pilot projects to reward physicians and hospitals for higher quality. Under the innovative program, providers become eligible for financial or non-financial incentives after meeting specific quality goals tied to medical outcomes and clinical performance. All together, the six organizations awarded grants care for more than 22 million Americans.

The grant program, called Rewarding Results, is administered by the National Health Care Purchasing Institute (NHCPI). It will test ways to implement recommendations the Institute of Medicine made in their report Crossing the Quality Chasm to remove payment-related barriers to quality improvement, build in strong incentives for quality, and "provide an opportunity for providers to share in the benefits of quality improvement."

"Repeated studies show that poor health care quality is the third leading cause of death in the United States, increases annual health care costs by $450 billion, and costs employers $225 billion a year in lost productivity," said Kevin B. (Kip) Piper, director of NHCPI. "The RAND Corporation reports that much of American health care is outdated -– 50% of preventive care, 40% of chronic care, and 30% of acute care. By rewarding quality, we will empower doctors, nurses, and hospitals working on the frontlines to improve care."

NHCPI, a foundation-sponsored organization, helps Fortune 500 companies, Medicare, and other health care purchasers learn and share ways to improve quality. NHCPI's efforts focus on rewarding high-quality care and empowering consumers and purchasers through public disclosure of physician and hospital performance. NHCPI receives principal funding from The Robert Wood Johnson Foundation (RWJF). The grants announced today are made possible by RWJF and the California HealthCare Foundation, with additional support from the Commonwealth Fund.

In partnership, the federal Agency for Healthcare Research and Quality (AHRQ) has awarded $1.5 million to Boston University researchers to conduct a comprehensive national evaluation of all six projects.

"The National Health Care Purchasing Institute's work is nothing short of revolutionary. Right now consumers have more information to use in buying a television set than we have to help us choose a doctor or hospital for ourselves and our families," said Michael Rothman, senior program officer at RWJF. "The organizations working with NHCPI have it in their power to transform American health care so we all can make more informed choices and receive better health care at lower costs."

President and CEO of the California HealthCare Foundation Mark D. Smith, M.D., M.B.A., adds, "Working closely with their provider communities and using nationally recognized measures of quality, these projects will develop and test a variety of incentives. This effort represents a critical step toward creating a quality-driven health care system based on measuring, disclosing, and rewarding results."

"NHCPI's Rewarding Results program is a ground-breaking partnership of foundations, government, business, and the research community to help make the Institute of Medicine's vision a reality," said Carolyn Clancy, M.D., AHRQ's acting director. "It provides pragmatic incentives to physicians, nurses and others on the frontlines of medical care to improve quality and patient safety."

Grantees were recommended by an advisory panel of leading health care experts representing health care professionals, employers, and researchers in a nationwide competition, which attracted 57 applications. Grants are awarded to:

• Integrated Healthcare Association for a statewide project in California affecting eight million consumers enrolled in commercial HMOs, to develop incentives for clinical performance in six areas such as breast cancer and cervical cancer screening, asthma, and diabetes as well as patient satisfaction and information technology investments.
• Integrated Healthcare Association for a second pilot in nine California counties, affecting one million low-income children enrolled in the Medi-Cal (Medicaid) and Healthy Families (SCHIP) programs. To develop incentives to pediatric providers for superior performance and information system improvements as well as better identification and management of childhood obesity.
• Blue Cross of California, serving more than 4.1 million Preferred Provider Organization (PPO) enrolled health care consumers, to develop incentives for improved care for chronic conditions such as cancer, diabetes, asthma, and heart failure, as well as improved doctorpatient relationships.
• Blue Cross Blue Shield of Michigan (BCBSM), which serves 4.8 million consumers, to develop an incentive pool to reward hospitals based on their use of best clinical practices and best medication safety practices. BCBSM, the Michigan Health and Hospital Association, and researchers at the University of Michigan will partner in this effort to improve the quality of health care.
• Excellus Health Plan, Inc., which serves 400,000 managed care members in Rochester, New York, to provide incentives for improved prevention and treatment of chronic conditions such as diabetes, asthma, and coronary artery disease. Excellus Health Plan is partnering with the Rochester Individual Practice Association (RIPA) and the Rochester Health Commission to provide an incentive program that incorporates RIPA's financial plan with a reporting system that Excellus' Univera division developed.
• Massachusetts Health Quality Partners, a coalition of health plans, provider organizations, government agencies, and purchasers, affecting more than four million consumers, to provide and evaluate physician incentives for improving preventive care and chronic disease management.

  Throughout the three-year effort, NHCPI will share best practices with Fortune 500 companies, health plans, Medicare, and states for their use in rewarding higher quality and patient safety.

  "Under our traditional system, providers are paid for how much they do, not how well they do it. Favoring quantity over quality has become extraordinarily costly and dangerous for all Americans. By directly rewarding quality, we will provide much-needed resources and flexibility for physicians and hospitals to improve care and save more lives," said Piper.