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Innovative Health Reform Models: Pay-for-Performance Initiatives
Seth W. Glickman, MD, MBA; and Eric D. Peterson, MD, MPH

Innovative Health Reform Models: Pay-for-Performance Initiatives

Seth W. Glickman, MD, MBA; and Eric D. Peterson, MD, MPH

Pay-for-performance (P4P) programs have the potential to improve overall quality of care by narrowing gaps between what national care guidelines recommend and those treatments actually delivered in routine community practice. P4P is also viewed as a tool to promote more efficient use of healthcare resources while improving patient outcomes. P4P provides financial incentives for quality of service instead of quantity of service. Despite the promise of healthcare quality, concerns have been raised that P4P may have potential unintended consequences for patients, physicians, and hospitals. The shortcomings of many traditional P4P programs have fueled the emergence of new and innovative models of payment reform. P4P and newer models that link reimbursement with quality and efficiency show promise to improve patient outcomes and lower costs, but multiple approaches are needed to ensure that future initiatives provide value for key stakeholders, including patients, providers, and payers.

(Am J Manag Care. 2009;15:S300-S305)


What Is Pay for Performance?

The concept of linking financial incentives to the quality of healthcare provided has been termed pay for performance, or P4P. P4P has received significant national attention as a potential means of improving overall quality of care by narrowing gaps between what national care guidelines recommend and those treatments actually delivered in routine community practice.1-5 In an era of rapidly rising healthcare costs, P4P is also viewed as a tool to promote more efficient use of healthcare resources while improving patient outcomes. Over the past decade, commercial and federal payers have implemented a vast array of P4P initiatives. The structure of these programs is remarkably diverse, spanning a variety of payment models, intended targets (eg, hospitals, physician groups, individual providers), and clinical conditions. While a number of programs have shown promise, additional work is necessary to determine whether they achieve their intended long-term effects. The purpose of the article is to provide a brief overview of current P4P initiatives, discuss the evidence regarding their effectiveness, and provide insight into newer, innovative payment models that have emerged.

P4P Programs

More than half of commercial health plans in the United States currently use P4P incentives in their provider contracts.6 Many of these programs involve joint efforts among employers, health management organizations, pharmaceutical companies, physician groups, academia, as well as for-profit and not-for-profit organizations (Table).2,7-13 Complementing efforts by the private sector, the Centers for Medicare & Medicaid Services (CMS) has sponsored P4P demonstration projects in a variety of clinical settings, including physician practices, acute care hospitals, dialysis facilities, nursing homes, as well as programs to increase the adoption of information technology and disease management. The largest demonstration project to date is the Hospital Quality Improvement Demonstration (HQID) Project, which offers financial incentives to hospitals based on the inpatient quality of care for 5 clinical conditions-acute myocardial infarction, heart failure, pneumonia, coronary artery bypass surgery, and hip and knee replacement. In addition to these US programs, P4P has gained significant traction overseas.14-16 For example, the National Health Service (NHS) in the United Kingdom has invested massive resources in P4P initiatives. The NHS's Quality and Outcomes Framework, which provides financial incentives to primary care physicians for 146 quality indicators related to chronic disease and patient experience, has distributed over £2 billion to providers since 2004.

Potential Benefits of P4P

Compensation models that link financial incentives to performance have been widely implemented in other industries and are a powerful lever to influence behavior. P4P is seen as a way to create a "business case" for quality by better aligning payment with quality of service instead of quantity of service.17,18 This helps address the issue that hospitals and physicians are not necessarily rewarded for delivering high-quality care. For example, hospitals that produce better health outcomes may paradoxically face lower margins through phenomena such as diagnosis-related group switching and a reduction in unplanned rehospitalizations for the chronically ill.19 P4P also holds promise because many of the traditional approaches to improving quality, such as physician education, provider certification, and consumerism, have failed, largely due to the fragmented nature of our healthcare delivery system.20 Linking financial incentives to quality is also viewed by many as a more palatable approach than traditional managed care models where financial incentives are provided to physicians to limit referrals and see more patients per day.21

Concerns About P4P

Despite the promise of healthcare quality, concerns have been raised that P4P may have potential unintended consequences for patients, physicians, and hospitals.22 For example, most P4P programs reward providers based on evaluation of a limited number of process performance metrics. If hospitals and physicians become too focused on these metrics, they may lose sight of the global goals of healthcare (analogous to students studying just what is on the test).23 Some have argued that forcing hospitals and providers to follow select process patterns could stifle innovation and the ability or willingness of organizations to develop creative solutions to improving quality.24 Others have worried that the large fixed costs required to support P4P data collection and quality improvement programs could deviate important resources away from patient care and have unintended consequences.25 In a similar manner, the financial incentives in P4P could paradoxically exacerbate healthcare disparities-either by financially penalizing hospitals that treat underserved populations or by prompting caregivers to avoid sick and "high-risk" patients from their practice.26,27

Evidence Regarding the Effectiveness of P4P

While many have speculated on both the potential positives and negatives of P4P programs, the evidence regarding its impacts has been mixed.28-30 A systematic review conducted in 2006 identified 17 studies on P4P published between 1980 and 2005.31 These studies focused primarily on programs targeting preventive care services. The studies tended to be inconclusive due in part to their small sample size, specialized setting, and short-term follow-up. More recently, however, there have been investigations on the impact of large P4P initiatives sponsored by the US federal government and the United Kingdom. These studies have generally found that P4P programs were associated with modest improvements in process of care measures, yet none of these programs had an impact on patient outcomes or efficiency of care. For example, Lindenauer et al found that hospitals engaged in both public reporting and CMS' HQID P4P program achieved modestly greater improvements in quality than did hospitals engaged only in public reporting.3 The estimated incremental effect on a composite quality score for cardiac and pneumonia care ranged from approximately 2.8% to 4.3%. Glickman et al evaluated CMS' HQID program in a cohort of 500 hospitals participating in a voluntary quality improvement initiative for acute myocardial infarction and found that financial incentives were not associated with a significant incremental improvement in quality or reduction in mortality.4 Evidence from the large P4P program in the United Kingdom for asthma, diabetes, and coronary heart disease suggests that family practitioners achieved high levels of achievement in the first year of the program.14 Over the ensuing 3 years, however, improvements in the quality of care slowed and actually declined for conditions not linked to financial incentives.15 Unfortunately, few large-scale, randomized controlled trials have evaluated the effectiveness of P4P interventions.

Issues Involved in the Methodology for P4P Measurement and Provider Ratings

A key challenge to implementing P4P programs is selecting valid and reliable measures of quality and performance. The largest P4P programs to date have focused primarily on processes of care (ie, adherence to evidence-based treatment guidelines). For example, the 2009 CMS Physician's Quality Reporting Initiative is tracking 153 quality measures spanning multiple therapeutic areas.32 A number of professional organizations, including the National Quality Forum, the American Heart Association, and the American College of Cardiology developed consensus methodology for the selection and creation of performance measures.33,34 Performance measures must be valid (eg, have a robust evidence base supporting their use), accurate and reliable, easy to interpret, and allow for reliable comparisons among providers. Other important considerations are the clinical relevance of the outcome, adherence to the process measure, and variability in baseline adherence to the measure (ie, is there already a ceiling effect in performance?).

Despite the popularity of using process measures to gauge quality, such measures present significant challenges. Selecting performance measures that do not meet evidence-based criteria may negate their intended effects of improved efficiency and patient outcomes.35 For example, a recent study of quality measures for acute myocardial infarction in 1351 hospitals found that in a resource-constrained environment, hospitals that focus on "administrative" process measures (eg, smoking cessation counseling or discharge instructions) at the expense of clinical interventions (eg, aspirin or angioplasty) have worse patient outcomes.36 Another issue is the possibility of obtaining stable estimates of performance for small hospitals and physician groups or whether additional techniques are needed to account for small and unequal denominators. A recent study by O'Brien et al demonstrated that high-volume hospitals had better performance on average, but were significantly less likely to be identified as "top" hospitals (ie, top decile).37

Copyright AJMC 2006-2017 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
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