Pay-for-Performance Programs:
the U.S. Experience
Eric Schneider, M.D., M.Sc.
Harvard School of Public Health
Brigham and Women’s Hospital
Boston, MA
“Market-oriented” strategies for
health care: a 20-year journey
Performance
Visibility
Peers
Performance
Rewards
Public
Performance
Feedback
Patients
Purchasers
Market Share
Payments &
Penalties
“Report Cards”
“P4P”
Public Reporting:
Limited Evidence of Impact
• Cardiac surgery patients did not use riskadjusted mortality results on hospitals,
surgeons
• Consumers are often befuddled by report
cards
• Scant evidence that consumers use health
plan report cards to select plans
Purpose of Measurement
Goals
PATHWAY 1
Selection
Change
Results
(Performance)
Selection &
Accountability
Measurement
for Improvement
Knowledge about
Process and Results
Knowledge about
Performance
Consumers
Purchasers
Regulators
Patients
Health Plans
Clinicians
Accreditors
PATHWAY 2
Organizations
Motivation
$$$
Two Pathways to Quality Improvement
Care Delivery
Teams and
Practitioners
The PAY in Pay-for-Performance
Total U.S. Health Expenditures (2001) = $1.4 trillion
Other private
Out-of-pocket
$76 billion
5%
$206 billion
14%
Medicare
$242 billion
17%
Medicaid
16%
Private Health
Insurance
$496 billion
35%
13%
$224 billion
Other public
$180 billion
Source: Katharine Levit, et al., “Trends in U.S. Health Care Spending, 2001,”
Health Affairs (January/February 2003)
Private Payers:
242 U.S. Health Plans on P4P
• 71% had programs to pay for performance
• 68% had P4P for physicians
• 42% had P4P for hospitals
Survey Data, 2005
Private Health Plans:
Expanding Scope of P4P
• Broad range of total dollars and ambition
– Thinking about it
– Modest payments, a few specific measures
– Large payments, many measures, grants for
IT
– Tiered networks
Public Payers: Many New
Demonstration Projects Under Way
• Centers for Medicare and Medicaid Services
– Premier Hospital Demonstration
– Physician Voluntary Reporting Initiative
• Medicaid state agencies
– Eleven state agencies using some form of P4P with
health plans
– Center for Health Care Strategies (CHCS) recently
initiated P4P Purchasing Institute for Medicaid
agencies
Premier Hospital Demo
• 2003-2006
• 278 hospitals participate voluntarily
• 34 process and outcome measures
– Heart failure, heart attack, pneumonia, coronary artery
bypass graft and knee replacements
• Hospitals can receive bonus based on
performance
– Top decile: 2% bonus on DRG payment for the condition
– Second decile: 1% bonus
• Year 1 bonus incentive payments:
– $900 to $847,000
P4P: Does it Work?
Early Results Paint a Nuanced Picture
• Quality improved
– Pre-post evaluations without control groups
• Quality improved slightly or not at all
– Quasi-experiments with contemporaneous
comparison groups
• Success and failure appear related to many
complex factors
– Program design
– Implementation
Factors Related to P4P
Success and Failure
• Sponsor leverage in fragmented payment
environments
• Amount of incremental revenue
• Selection, scope, and perceived validity of
quality measures
• Design of payout (low-performing
practices?)
• Readiness of physician practices for QI
• Effectiveness of QI innovations
Concerns about P4P in the U.S.
• Business model for development and
maintenance of standardized quality and
efficiency measure sets?
• Is the data infrastructure adequate for valid
measures?
• How will “gaming” be addressed?
• Is “new money” needed to retool MD practices?
• Will P4P undermine professionalism?
• Will P4P impede access and increase
socioeconomic disparities in quality?
Conclusions
• Pay-for-performance has captured
attention
• First formal evaluations show mixed
results
• Many questions remain unanswered, but
funding for rigorous evaluation may be
limited