3 Key Things to Know About Pay-for-Performance

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Seeking to contain costs while improving quality of care, the healthcare industry is moving toward value-based payment models.

One of these models is a "pay-for-performance" system. In a blog post for Health Affairs, Suzanne Delbanco, PhD — executive director of the nonprofit Catalyst for Payment Reform — examined pay-for-performance. Here are three key points Dr. Delbanco made about the payment model.

1. It's an "upside-only" system and is relatively popular as a payment reform model. CPR defines a pay-for-performance model as one that gives healthcare providers the chance for a financial upside, such as a bonus, but no added penalty or downside. An estimated 85 percent of state Medicaid programs were expected to operate some type of pay-for-performance program by 2011, according to a 2010 report from the National Conference on State Legislatures.

2. The evidence is mixed concerning the effectiveness of pay-for-performance models. A CPR analysis of several pay-for-performance models in effect during the past decade found some produced positive results, while others did little to contain costs and improve affordability. For instance, the California P4P program, managed by the Integrated Healthcare Association, showed the model can raise quality scores for participating physicians. On the other hand, CMS’ Premier Hospital Quality Demonstration, which was in effect from 2003 to 2009, produced only small quality improvements and didn't affect spending.

3. Pay-for-performance may work best when highly targeted and in difficult markets. A 2013 study from the Robert Wood Johnson Foundation suggested pay-for-performance initiatives may be the most effective when rewards go directly to individual clinicians. Using an upside-only model can also be easier in markets where enacting payment reform has historically been difficult and unsuccessful because of factors such as providers' unwillingness to accept new models that increase financial risk, according to Dr. Delbanco.

More Articles on Payment Reform:
CMS Bundled Payment Program: Orthopedic & Spine Surgeons Have Another Chance to Enroll
10 Steps to Build a Business Case for Payment Reform  
Paying for a Permanent Solution: How Cost Still Stands in the Way of SGR Repeal 

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