Pay for performance
Encyclopedia
Pay for performance is an emerging movement in health insurance
(initially in Britain and United States). Providers under this arrangement are rewarded for meeting pre-established targets for delivery of healthcare services. This is a fundamental change from fee for service payment.
Also known as "P4P" or “value-based purchasing,” this payment model rewards physicians, hospitals, medical groups, and other healthcare providers for meeting certain performance measures for quality and efficiency. Disincentives, such as eliminating payments for negative consequences of care (medical error
s) or increased costs, have also been proposed. In the developed nations, the rapidly aging population and rising health care costs have recently brought P4P to the forefront of health policy discussions. Pilot studies underway in several large healthcare systems have shown modest improvements in specific outcomes and increased efficiency, but no cost savings due to added administrative requirements. Statements by professional medical societies generally support incentive programs to increase the quality of health care, but express concern with the validity of quality indicators, patient and physician autonomy and privacy, and increased administrative burdens.
s, like the avoidance of high-risk patients, when payment was linked to outcome improvements.
The 2006 Institute of Medicine report Preventing Medication Errors recommended "incentives...so that profitability of hospitals, clinics, pharmacies, insurance companies, and manufacturers (are) aligned with patient safety goals;...(to) strengthen the business case for quality and safety." A second Institute of Medicine report Rewarding Provider Performance: Aligning Incentives in Medicare (September 2006) stated "The existing systems do not reflect the relative value of health care services in important aspects of quality, such as clinical quality, patient-centeredness, and efficiency...nor recognize or reward care coordination...(in) prevention and the treatment of chronic conditions." The report recommends pay for performance programs as an "immediate opportunity" to align incentives for performance improvement. However, significant limitations exist in current clinical information systems in use by hospitals and health care providers, which are often not designed to collect data valid for quality assessment.
(AMA) has published principles for pay-for performance programs, with emphasis on voluntary participation, data accuracy, positive incentives and fostering the doctor-patient relationship
, and detailed guidelines for designing and implementing these programs.
Positions by other physician organizations reflect skepticism on the validity of performance measures, and promote accommodation for an individual physician's clinical judgement, protection for a patient's preferences, autonomy and privacy, and reversing the trend of health care cost reductions to accommodate the increased administrative costs required by participation in such programs.
(NHS) began a major pay for performance initiative in 2004, known as the Quality and Outcomes Framework
(QOF). General practitioners agreed to increases in existing income according to performance with respect to 146 quality indicators covering clinical care for 10 chronic diseases, organization of care, and patient experience. Unlike proposed quality incentive programs in the United States, funding for primary care was increased 20% over previous levels. This allowed practices to invest in extra staff and technology; 90% of general practitioner
s use the NHS Electronic Prescription Service, and up to 50% use electronic health record
s for the majority of clinical care. The first data show that substantially increasing physicians’ pay based on their success in meeting quality performance measures is effective. The 8,000 family practitioners included in the study earned an average of $40,000 more by collecting nearly 97% of the points available.
in the 1990s, California health care plans and physician groups developed a set of quality performance measures and public "report cards", emerging in 2001 as the California Pay for Performance Program, now the largest pay-for-performance program in the country. Financial incentives based on utilization management were changed to those based on quality measures. Provider participation is voluntary, and physician organizations
are accountable though public scorecards, and provided financial incentives by participating health plans based on their performance.
has various pay-for-performance ("P4P") initiatives in offices, clinics and hospitals, seeking to improve quality and avoid unnecessary health care costs. The Centers for Medicare and Medicaid Services
(CMS) has several demonstration projects underway offering compensation for improvements:
Health insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...
(initially in Britain and United States). Providers under this arrangement are rewarded for meeting pre-established targets for delivery of healthcare services. This is a fundamental change from fee for service payment.
Also known as "P4P" or “value-based purchasing,” this payment model rewards physicians, hospitals, medical groups, and other healthcare providers for meeting certain performance measures for quality and efficiency. Disincentives, such as eliminating payments for negative consequences of care (medical error
Medical error
A medical error may be defined as a preventable adverse effect of care, whether or not it is evident or harmful to the patient. This might include an inaccurate or incomplete diagnosis or treatment of a disease, injury, syndrome, behavior, infection, or other ailment.-Definitions:As a general...
s) or increased costs, have also been proposed. In the developed nations, the rapidly aging population and rising health care costs have recently brought P4P to the forefront of health policy discussions. Pilot studies underway in several large healthcare systems have shown modest improvements in specific outcomes and increased efficiency, but no cost savings due to added administrative requirements. Statements by professional medical societies generally support incentive programs to increase the quality of health care, but express concern with the validity of quality indicators, patient and physician autonomy and privacy, and increased administrative burdens.
Preliminary studies and trends
Pay for performance systems link compensation to measures of work quality or goals. , 75% of all U.S. companies connect at least part of an employee's pay to measures of performance, and in healthcare, over 100 private and federal pilot programs are underway. Current methods of healthcare payment may actually reward less-safe care, since some insurance companies will not pay for new practices to reduce errors, while physicians and hospitals can bill for additional services that are needed when patients are injured by mistakes. However, early studies showed little gain in quality for the money spent, as well as evidence suggesting unintended consequenceUnintended consequence
In the social sciences, unintended consequences are outcomes that are not the outcomes intended by a purposeful action. The concept has long existed but was named and popularised in the 20th century by American sociologist Robert K. Merton...
s, like the avoidance of high-risk patients, when payment was linked to outcome improvements.
The 2006 Institute of Medicine report Preventing Medication Errors recommended "incentives...so that profitability of hospitals, clinics, pharmacies, insurance companies, and manufacturers (are) aligned with patient safety goals;...(to) strengthen the business case for quality and safety." A second Institute of Medicine report Rewarding Provider Performance: Aligning Incentives in Medicare (September 2006) stated "The existing systems do not reflect the relative value of health care services in important aspects of quality, such as clinical quality, patient-centeredness, and efficiency...nor recognize or reward care coordination...(in) prevention and the treatment of chronic conditions." The report recommends pay for performance programs as an "immediate opportunity" to align incentives for performance improvement. However, significant limitations exist in current clinical information systems in use by hospitals and health care providers, which are often not designed to collect data valid for quality assessment.
Commentary by physician organizations
In the United States, most professional medical societies have been nominally supportive of incentive programs to increase the quality of health care. However, these organizations also express concern over the choice and validity of measurements of improvement. The American Medical AssociationAmerican Medical Association
The American Medical Association , founded in 1847 and incorporated in 1897, is the largest association of medical doctors and medical students in the United States.-Scope and operations:...
(AMA) has published principles for pay-for performance programs, with emphasis on voluntary participation, data accuracy, positive incentives and fostering the doctor-patient relationship
Doctor-patient relationship
The doctor-patient relationship is central to the practice of healthcare and is essential for the delivery of high-quality health care in the diagnosis and treatment of disease. The doctor-patient relationship forms one of the foundations of contemporary medical ethics...
, and detailed guidelines for designing and implementing these programs.
Positions by other physician organizations reflect skepticism on the validity of performance measures, and promote accommodation for an individual physician's clinical judgement, protection for a patient's preferences, autonomy and privacy, and reversing the trend of health care cost reductions to accommodate the increased administrative costs required by participation in such programs.
- American Academy of Family PhysiciansAmerican Academy of Family PhysiciansThe American Academy of Family Physicians was founded in 1947 to promote the science and art of family medicine. It is one of the largest medical organizations in the United States, with over 100,000 members...
: "there are a multitude of organizational, technical, legal and ethical challenges to designing and implementing pay for performance programs" - American College of PhysiciansAmerican College of PhysiciansThe American College of Physicians is a national organization of doctors of internal medicine —physicians who specialize in the prevention, detection, and treatment of illnesses in adults. With 130,000 members, ACP is the largest medical-specialty organization and second-largest physician group in...
: "adoption of appropriate quality improvement strategies, if done right, will result in higher quality patient care leading to increased physician and patient satisfaction. But the College is also concerned that these changes could lead to more paperwork, more expense, and less revenue; detract from the time that internists spend with patients, and have unintended adverse consequences for sicker and non-compliant patients." "... concerned about using a limited set of clinical practice parameters to assess quality, especially if payment for good performance is grafted onto the current payment system, which does not reward robust comprehensive care." - American Geriatrics SocietyAmerican Geriatrics SocietyThe American Geriatrics Society : a professional society founded on June 11, 1942 for doctors practicing geriatric medicine. Among the founding physicians were Dr. Ignatz Leo Nascher, who coined the term "geriatrics," Dr. Malford W. Thewlis, who was named the first executive secretary of the...
: "quality measures (must) target not only care for specific diseases, but also care that addresses multiple, concurrent illnesses and (are) tested among vulnerable older adults. Using indicators that have been developed for a commercially insured population...may not be relevant" - American Academy of NeurologyAmerican Academy of NeurologyThe American Academy of Neurology is a professional society for neurologists and neuroscientists. As a medical specialty society it was established in 1949 by A.B. Baker of the University of Minnesota to advance the art and science of neurology, and thereby promote the best possible care for...
(AAN): "An unintended consequence is that current relative payments are distorted and represent a misaligned incentive system, encouraging diagnostic tests over thoughtful and skilled patient care. The AAN recommends addressing these underlying inequities before a P4P program is adopted. - The Endocrine Society: "it is difficult to develop standardized measure across medical specialties...variations must be allowed to meet the unique needs of the individual patient...P4P programs should not place financial or administrative burdens on practices that care for underserved patient populations"
United Kingdom
In the United Kingdom, the National Health ServiceNational Health Service
The National Health Service is the shared name of three of the four publicly funded healthcare systems in the United Kingdom. They provide a comprehensive range of health services, the vast majority of which are free at the point of use to residents of the United Kingdom...
(NHS) began a major pay for performance initiative in 2004, known as the Quality and Outcomes Framework
Quality and Outcomes Framework
The Quality and Outcomes Framework is a system for the performance management and payment of general practitioners in the National Health Service in England, Wales, Scotland and Northern Ireland...
(QOF). General practitioners agreed to increases in existing income according to performance with respect to 146 quality indicators covering clinical care for 10 chronic diseases, organization of care, and patient experience. Unlike proposed quality incentive programs in the United States, funding for primary care was increased 20% over previous levels. This allowed practices to invest in extra staff and technology; 90% of general practitioner
General practitioner
A general practitioner is a medical practitioner who treats acute and chronic illnesses and provides preventive care and health education for all ages and both sexes. They have particular skills in treating people with multiple health issues and comorbidities...
s use the NHS Electronic Prescription Service, and up to 50% use electronic health record
Electronic Health Record
An electronic health record is an evolving concept defined as a systematic collection of electronic health information about individual patients or populations...
s for the majority of clinical care. The first data show that substantially increasing physicians’ pay based on their success in meeting quality performance measures is effective. The 8,000 family practitioners included in the study earned an average of $40,000 more by collecting nearly 97% of the points available.
California
Responding to public backlash to managed careManaged care
...intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on...
in the 1990s, California health care plans and physician groups developed a set of quality performance measures and public "report cards", emerging in 2001 as the California Pay for Performance Program, now the largest pay-for-performance program in the country. Financial incentives based on utilization management were changed to those based on quality measures. Provider participation is voluntary, and physician organizations
Independent practice association
An independent practice association is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to managed care organizations on a negotiated per capita rate, flat retainer fee, or negotiated fee-for-service basis...
are accountable though public scorecards, and provided financial incentives by participating health plans based on their performance.
Medicare
In the United States, MedicareMedicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
has various pay-for-performance ("P4P") initiatives in offices, clinics and hospitals, seeking to improve quality and avoid unnecessary health care costs. The Centers for Medicare and Medicaid Services
Centers for Medicare and Medicaid Services
The Centers for Medicare & Medicaid Services , previously known as the Health Care Financing Administration , is a federal agency within the United States Department of Health and Human Services that administers the Medicare program and works in partnership with state governments to administer...
(CMS) has several demonstration projects underway offering compensation for improvements:
- Payments for better care coordination between home, hospital and offices for patients with chronic illnesses. In April 2005, CMS launched its first value-based purchasing pilot or "demonstration" project- the three-year Medicare Physician Group Practice (PGP) Demonstration. The project involves ten large, multi-specialty physician practices caring for more than 200,000 Medicare fee-for-service beneficiaries. Participating practices will phase in quality standards for preventive care and the management of common chronic illnesses such as diabetes. Practices meeting these standards will be eligible for rewards from savings due to resulting improvements in patient management. The First Evaluation Report to Congress in 2006 showed that the model rewarded high quality, efficient provision of health care, but the lack of up-front payment for the investment in new systems of case management "have made for an uncertain future with respect for any payments under the demonstration."
- A set of 10 hospital quality measures which, if reported to CMS, will increase the payments that hospitals receive for each discharge. By the third year of the demonstration, those hospitals that do not meet a threshold on quality will be subject to reductions in payment. Preliminary data from the second year of the study indicates that pay for performance was associated with a roughly 2.5% to 4.0% improvement in compliance with quality measures, compared with the control hospitals. Dr. Arnold Epstein of the Harvard School of Public Health commented in an accompanying editorial that pay-for-performance "is fundamentally a social experiment likely to have only modest incremental value."
- Rewards to physicians for improving health outcomes by the use of health information technologyHealth informatics.Health informatics is a discipline at the intersection of information science, computer science, and health care...
in the care of chronically ill Medicare patients.
Negative incentives
As a disincentive, CMS has proposed eliminating payments for negative consequences of care that results in injury, illness or death. This rule, effective October 2008, would reduce payments for medical complications such as "never events" as defined by the National Quality Forum, including hospital infections. Other private health payers are considering similar actions; the Leapfrog Group is exploring how to provide support to its members who are interested in ensuring that their employees do not get billed for such an event, and who do not wish to reimburse for these events themselves. Physician groups involved in the management of complications, such as the Infectious Diseases Society of America, have voiced objections to these proposals, observing that "some patients develop infections despite application of all evidence-based practices known to avoid infection", and that a punitive response may discourage further study and slow the dramatic improvements that have already been made.Multiple providers for complex disorders
Pay for performance programs often target patients with serious and complex illnesses; such patients commonly interact with multiple healthcare providers and facilities. However, pilot programs now underway focus on simple indicators such as improvement in lab values or use of emergency services, avoiding areas of complexity such as multiple complications or several treating specialists. A 2007 study analyzing Medicare beneficiaries’ healthcare visits showed that a median of two primary care physicians and five specialists provide care for a single patient. The authors doubt that pay-for-performance systems can accurately attribute responsibility for the outcome of care for such patients. The American College of Physicians Ethics has expressed concern:Pay-for-performance initiatives that provide incentives for good performance on a few specific elements of a single disease or condition may lead to neglect of other, potentially more important elements of care for that condition or a comorbid condition. The elderly patient with multiple chronic conditions is especially vulnerable to this unwanted effect of powerful incentives.
Deselection, ethical issues
Present pay-for-performance systems measure performance based on specified clinical measurements, such as reductions in glycohemoglobin (HbA1c) for patients with diabetes. Healthcare providers who are monitored by such limited criteria have a powerful incentive to deselect (dismiss or refuse to accept) patients whose outcome measures fall below the quality standard and therefore worsen the provider's assessment. Patients with low health literacy, inadequate financial resources to afford expensive medications or treatments, and ethnic groups traditionally subject to healthcare inequities may also be deselected by providers seeking improved performance measures.See also
- Bundled paymentBundled paymentBundled payment, also known as episode-based payment, episode payment, episode-of-care payment, case rate, evidence-based case rate, global bundled payment, global payment, package pricing, or packaged pricing, is defined as the reimbursement of health care providers "on the basis of expected...
- CapitationCapitationCapitation can refer to:*Poll tax, or head tax, a tax of a fixed amount per individual*Capitation , a system of payment to medical service providers...
- Evidence based medicine
- Guideline (medical)Guideline (medical)A medical guideline is a document with the aim of guiding decisions and criteria regarding diagnosis, management, and treatment in specific areas of healthcare...
- Health maintenance organizationHealth maintenance organizationA health maintenance organization is an organization that provides managed care for health insurance contracts in the United States as a liaison with health care providers...
- Patient safetyPatient safetyPatient safety is a new healthcare discipline that emphasizes the reporting, analysis, and prevention of medical error that often leads to adverse healthcare events. The frequency and magnitude of avoidable adverse patient events was not well known until the 1990s, when multiple countries reported...