New P4P Method Benefits Providers Caring for Disadvantaged Patients

A new pay-for-performance method would adjust payments in such a way that providers would not be discouraged from caring for disadvantaged patients, according to researchers at RAND.

The new approach, published in Health Affairs, kept financial incentives to encourage quality improvement, but was able to nearly double quality-based incentive payments to providers serving disadvantaged patients.

Under the current model, providers who care for disadvantaged patients tend to perform less well, which results in fewer resources available to help more challenging patients reach quality targets.

“Incentive programs run the risk of encouraging providers to avoid patients who may have greater challenges in meeting quality targets that providers are now being held accountable for,” Cheryl Damberg, the study's lead author and Distinguished Chair in Health Care Payment Policy at RAND, said in a statement.

The approach started with a standard incentive, but “post-adjusted” provider payments using predefined characteristics. The authors evaluated the approach by simulating the effect of the new payment scheme in 153 provider organizations in California that were eligible for incentive payments in 2009 through the Integrated Healthcare Association’s pay-for-performance program.

“The post-adjustment approach nearly doubled payments to disadvantaged provider organizations and greatly reduced payment differentials across provider organizations according to patients’ income, race/ethnicity, and region,” the authors wrote.

Among the factors used to adjust payment are the proportion of the patient population with low socioeconomic status and the monthly base capitation payment receive by the provider. The researchers used census data to sort provider organizations into pre-defined groups based on their patients’ income.

The new approach fully eliminated differentials across provider organizations based on categories defined by patient income and eliminated roughly half of the differentials observed based on race/ethnicity and geographic location of patients.

“Our pay-for-performance approach strengthened quality-based incentive payments to providers who care for disadvantaged patients, while only slightly weakening incentives for other provider organizations and eliminating the redistribution of money to well-resourced providers,” Marc Elliott, an author of the study and the RAND Distinguished Chair in Statistics.