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Pay for Performance – does it work?

Pay for performance, or P4P, is gaining traction amongst health care organizations, policy types, and some health plans as a potentially promising way to link compensation to outcomes. A study published in October indicates that P4P as presently practiced is in need of refinement and improvement.
The study published in JAMA and sponsored by the Commonwealth Fund, found that physicians compensated under a P4P program improved their performance in one of three metrics, showed no significant improvement in the other two, and three-quarters of the physicians receiving bonuses under the program were performing at the standard before the program’s inception.
The program compared 200 physician groups in two of Pacificare’s networks with a P4P program and compared them to a control group in another network that did not have a P4P program. Of note, the quality of care for two of the indicators, mammography and hemoglobin-A tests, improved for both the test and control groups, while the P4P groups’ performance improved 5.3% for Pap smears while the control group’s performance was only up 1.7%.
That said, physicians with the lowest quality scores before the P4P was initiated showed the most significant improvement. One wonders if this was not deviation towards the mean, or the Hawthorne effect, or if the improvement was driven by the program itself.
Obviously these programs need some improvement, and this study should not be interpreted as conclusive evidence that P4P is a non-starter. However, the industry would be well-served to take to heart some of the findings. One of the more obvious is that 75% of the physicians winning bonuses were already performing at that level before the program started. There are two views of this. One is that the payment reflects appropriate compensation for high-performing docs, and this compensation is a just reward for performance.
The other view is that the additional payment, as high as $270,000 for a physician group with 10,000 patients performing at the highest possible level, is a waste of resources as the extra pay is not justified by any improvement in performance.
Clearly, pay for performance is a contentious subject, with various groups including CMMS (contemplating P4P in Medicare) taking an active interest.
What does this mean for you?
Provider compensation is a dynamic field, with previous efforts at capitation, risk-withholds, Fee for service, U&C, DRGs and others all found to have limitations.
This may be overly simplistic, but simply finding the best docs and sending patients to them strikes me as the smartest, and easiest, thing to do.

3 thoughts on “Pay for Performance – does it work?”

  1. Everything old is new again! When I first started in the HMO business in ’85, PCPs were capitated with performance bonuses. Unfortunately, technology in the 1980’s didn’t do a very good job at identifying if the physician had met his or her performance goals. Very rarely was a phyisican awarded a bonus.

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Joe Paduda is the principal of Health Strategy Associates




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