5 Things About Pay-for-Performance

With the most expensive healthcare in the world, and not a lot to show for it—quality of care is no better than other high-income countries—the US healthcare system has had to find a better way to pay for and improve care.

Pay-for-performance (P4P) programs have the potential to improve overall quality of care and the prevalence of these programs has increased in the last 15 years. Here are 5 things to know about P4P and how it can impact healthcare in the move to value-based care:

1. P4P is an umbrella term.

The general concept behind P4P is that providers will be paid more money for achieving a certain goal rather than being paid for just providing care. P4P is part of the push to pay for quality not quantity of care provided.

In order to be paid through P4P, clinicians have to achieve better outcomes based on the measures being used. As such, choosing the right measures, the ones that will get the outcomes you are looking for—for example, measuring blood pressure and cholesterol if you are trying to improve outcomes for patients with chronic conditions—is critical for the success of a P4P program.

2. There has been a proliferation of measures.

P4P programs took off and grew exponentially. The Health Care Incentives Improvement Institute reported that P4P programs grew from just 39 in 2003 to 160 in 2007, a 310% increase in just 4 years. What also increased rapidly was the number of quality measures. This has led to “measure fatigue” as providers are required to report on a number of measures for multiple programs and payers.

Relief may be on the way, though. CMS and America’s Health Insurance Plans recently collaborated to simplify quality measures and released 7 core sets of measures that were created to reduce complexity for reporting clinicians while still ensuring high-quality care for patients.

3. P4P has been around for 15 years.

The first P4P program to emerge in 2001 was the California Pay for Performance Program, which included financial incentives based on utilization management. CMS started using P4P in 2005 with its Medicare Physician Group Practice Demonstration, a value-based purchasing pilot. Through the program practices meeting quality standards were eligible for rewards.

4. Results are mixed.

Aaron E. Carroll, MD, MS, who writes for The New York Times’ The Upshot and the Incidental Economist, wrote in 2014 that results for P4P programs have been “disappointingly mixed.” The biggest problem is that for P4P programs to work, it’s not enough to just change the payment structure—physician behavior needs to change as well.

That same year, McKesson found that while survey participants rated P4P as a critical component to reimbursement models, they also noted that P4P is difficult to effectively implement.

5. Ensuring P4P does not increase racial/ethnic disparities.

One issue that Dr Carroll noted is that sometimes the metrics chosen for the programs include measurements outside the control of the provider. In particular, hospitals caring for the poor might be penalized more.

However, a new P4P method can adjust payments using predefined characteristics. A RAND study appearing in Health Affairs found that post-adjusted payments reduced payment differentials across provider organizations according to patient income, race/ethnicity, and region.