How to Improve Pay-for-Performance With Targeted Incentives

Traditional pay-for-performance (P4P) programs tend to result in significant waste for payers as healthcare providers receive bonuses as a result of patients already performing well. The industry could benefit from targeted P4P programs, which would focus efforts on patients who are at a much higher risk for poor outcomes, according to an article in JAMA.

Authors Aaron McKethan, PhD, from the Gillings School of Global Public Health at the University of North Carolina at Chapel Hill, and Ashish K. Jha, MD, MPH, from the Department of Health Policy and Management at the Harvard School of Public Health, argued for replacing largely disappointing traditional P4P programs with targeted ones that could yield more satisfying results.

“The bonuses would not be based on baseline performance for the entire patient population, but on success in changing outcomes for selected patients,” the authors wrote. “Therefore, it would reward high-quality health care professionals, not health care professionals whose patients are likely to do well irrespective of incentives.”

Instead of using performance measures that encompass all patients, targeted P4P uses a prediction model to identify at-risk patients. As a result, a targeted P4P program will incentivize clinicians for providing personalized care based on each person’s needs, preferences, and expected outcomes.

“Although there is an active and robust debate about the proper size of incentives, a different approach for structuring pay-for-performance programs that may be useful would be targeting clinicians’ financial incentives on carefully selected patients who are likely to benefit from extra attention,” Drs McKethan and Jha wrote.

Instead of focusing these efforts on patients who will do well regardless of the care they receive, the authors argue for P4P incentives concentrated on improving care and outcomes for the smaller subgroup of patients that frequently needs more attention and support. Targeting incentives in this way justifies larger investments and directs clinicians’ focus to patients that can improve population health with a little extra attention.

“No effort to link financial incentives to quality is perfect, yet traditional pay-for-performance designs have been disappointing,” the authors concluded. “Beyond changing the incentives or the performance measures, it might also be time to change the patients who are identified for targeted pay-for-performance programs.”