Pay for Performance

Abstract

Any time money changes hands in health care, perverse consequences can result. This fact of financial life applies to the entire spectrum of payment options, including the 2 methodologies that define its extremes: fee for service potentially rewards clinicians for doing more than patients need, whereas capitation potentially rewards them for doing less. Pay for performance is an intermediate payment approach with some attractive features, but it carries its own set of potential problems. In the absence of any perfect payment model, the challenge for leaders in health care is to understand the risks of various payment methods and consider how to mitigate them. Article see p 2978 This challenge has never been timelier. Interest in changing the payment system is approaching commitment because of the combination of rising healthcare costs, a historic economic downturn, and growing concern about the high proportion of Americans who are uninsured or underinsured. Pay for performance is widely considered a step in the right direction for the fragmented US healthcare system because it introduces incentives to clinicians and hospitals for more than the performance of visits, tests, and procedures. In its more rudimentary forms, pay for performance provides small (eg, 1% to 2%) bonuses for reduction of errors of underuse (eg, failure to measure low-density lipoprotein cholesterol in patients with diabetes mellitus) in their patient population. Just asking providers to worry about a population rather than just the individual patients who present with acute complaints is a subtle game-changer for American medicine. But pay for performance has limitations and raises concerns. At least in its early forms, it doesn’t seem to produce dramatic change. For example, hospitals that participated in a pay for performance demonstration project funded by the Centers for Medicare and Medicaid Services had 3% to 4% improvements in composite measures …