Doctors $: Pay for Performance

Physician's Money Digest, December31 2004, Volume 11, Issue 24

As the cost of health care continuesto rise, a new debate isfocusing on whether Americansare receiving the quality health carethey're paying for. In response, severalhealth insurance plans are tinkering witha variety of pay-for-performance formatsfor physicians. The jury is out on whetherany of these programs will actuallyimprove the quality of health care.

A major challenge is finding out whatquality health care looks like. Since qualitycare is so hard to define, plans oftencome up with complex measurement criteria.Critics charge that making the criteriasimpler will run the risk of trackingfactors just because they're easy to monitor,rather than because of their impacton quality of care.

As a result, there are several differentpay-for-performance models. Plansmay base incentive payments on a widearray of factors (eg, preventive services,disease management, information technologyimprovements, and patient satisfaction).Each health insurance plan canhave different benchmarks.

Measuring Up

Yet another problem comes up at theother end of the treatment curve: howto measure whether the quality incentiveswork. Some plans measure outcomes,such as whether morbidity andmortality rates are better than statisticalaverages. Others measure the processitself, looking at whether patients aregiven appropriate treatment and followupcare on a timely basis.

Critics argue that such yardsticks areat best subjective, and that they do avery poor job of measuring the qualityof health care. As for the theory thatpaying extra for quality performancewill save money in the long run, mosthealth care experts agree that currentlythere is no evidence that an increasedemphasis on quality will affect costs.

Working the System

Linking incentive payments to outcomescan also lead to unwanted consequences.Because outcomes can beaffected by several factors, including apatient's overall condition, doctorswhose incentives are tied to how welltheir patients respond to care may avoidtaking on patients who are too sick to dowell. Payments must somehow be structuredso that doctors aren't penalized ifthey care for seriously ill patients.

Other worries concern the outrightmanipulation of the incentive system.When payments are tied to certain proceduresor clinical indicators, a medical practicemay be able to massage a patient's datato get more money, without actually doinganything to improve their quality of care.

Dare to Compare?

Although pay-for-performance programshave historically used standardizedmeasures as a benchmark to evaluatephysician performance, patients, when surveyed,seem to prefer assessments thatcompare a physician's performance to thatof other doctors. Most doctors, on the otherhand, are opposed to this type of measurement,preferring to be judged against moreobjective criteria.

Physicians also question whether theincentive payments, which range from 1%to 5% of revenue from the health plan, arehigh enough to have a positive effect ontheir behavior. Some argue that paymentswould have to reach a level of about 10%above regular compensation to have animpact in terms of the quality of care.

However the nuts and bolts of individualprograms shape up, pay-for-performance isalready a major factor in health care. About50% of all primary care physicians who participatein an HMO are now in some sort ofincentive-pay program, and some forecasterssay that almost all third-party payers willhave some form of incentive-pay programin place within a few years.