Leapfrog Introduces ROI Estimator for P4P

February 07, 2007 | "Pay for performance" is a hot buzz phrase, but the success of these programs may be limited without a standard method for evaluating their benefits. This month the Leapfrog Group stepped into that cost-analysis gap, introducing the ROI Estimator. This Web-based tool enables employers and health plans to "show the potential return on investment, both in terms of lives and money" in a hospital-based pay-for-performance program, says Catherine Eikel, Leapfrog director of programs.

Until now, there have been few tools to assess the financial and clinical outcomes resulting from using the Leapfrog Hospital Rewards Program, which was launched two years ago. The incentive program is based on nationally accepted quality measures aimed at reducing medical errors and standardizing hospital care, while rewarding hospitals for improved inpatient care performance.

Although the ROI Estimator is designed for use with Leapfrog's plan, "we hope that it will be used as an open source tool for other organizations that want to demonstrate the ROI for other pay-for-performance programs," says Eikel.

The ROI Estimator, which is based on actuarial analysis that Towers Perrin conducted for Leapfrog, is designed to show potential return on investment in five clinical areas: heart bypass, heart attack care, angioplasty, community-acquired pneumonia, deliveries and newborn care.

Users can input company background information, including number of covered employees; review and estimate number of hospital admissions and average cost of admissions, enter information about how the Leapfrog program will be administered, and review potential benefits.

Eikel admits that one of the drawbacks of the ROI Estimator is that it does not incorporate economic benefits from reduced absenteeism and improved productivity at work. It also cannot be used by hospitals that are reimbursed on a case-rate or disease-related group basis, "but we hope to add these features later this year."

Results given by ROI Estimator are just that—"estimates based on the best research we had available," says Brett Plumber, director of research at the HSM Group, a project collaborator with Web-enabled calculator experience. Discern Consulting, another partner, added expertise in healthcare analysis. "Portions of the calculator are forward looking, and we make assumptions about hospital performance improvement in the future," adds Guy D'Andrea, president of Discern.

A year in the making, the original prototype of the ROI Estimator included only financial, not clinical returns. But "the clinical piece is another very important part of the equation. Lives that are saved are a pretty compelling return on investment," says Sheryl Bronkesh, president of the HSM Group.

There are no plans to create a ROI estimation tool for health IT investments, says Eikel, because a "slice" of health IT—physician's computerized order entry—is a included in the current tool. Leapfrog, however, is in the initial stages of developing a tool that estimates ROI for hospitals that participate in the LeapFrog Hospital Rewards Program.

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