Evaluating Pay-for-Performance: Q&A With Catalyst for Payment Reform Executive Director Suzanne Delbanco

One of the major shifts taking place in the healthcare industry is the transition from fee-for-service reimbursement to value-based payment models.

Last month, Suzanne Delbanco, PhD, executive director of the nonprofit Catalyst for Payment Reform, wrote a Health Affairs blog entry examining one of those value-based payment models: pay-for-performance. 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.

So far, the evidence has been mixed concerning whether pay-for-performance models can successfully reduce costs while improving quality. 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.

Here, Dr. Delbanco discusses the effectiveness and future of pay-for-performance payment models.

Question: What conclusions can we draw about pay-for-performance from the mixed research results so far?

delbanco headshot2Suzanne Delbanco: I think it's way too early to decide that the concept doesn't work. Most pay-for-performance experiments that we see today have been mild in the incentives that they provide. If you're only bringing the attention of the providers to a certain number of quality measures and you're not going to significantly impact their income…it's not going to have the influence that you think it will. With the exception of California, you don't see a lot of coordination across payers. It becomes a tiny signal to that provider. The fact that we haven't seen really strong and consistent evidence yet doesn't surprise me.

Q: What does the ideal, most successful pay-for-performance model look like? Do we know yet?

SD: I think one of the most important things with any payment reform right now is to try to get a multipayer collaborative going, and, in the commercial and public sectors, agree on which quality measures matter.

I also think increasing the size of the incentive is going to be important. They often represent a tiny amount of money. It may not be enough to enable physicians or hospitals to change their way of delivering care.

Q: How can policymakers determine the right incentive size?

SD: Trial and error. We don't know the answer yet. This is a question we've been asking for over a decade. I think we just need to keep experimenting. Any effort to evaluate a payment change in this healthcare system is complicated by the fact that there are so many variables. We have to experiment in various ways and do it boldly, get a sense of what seems to work.

Q: You said in your Health Affairs blog post that pay-for-performance can serve as a stepping stone toward shifting providers into payment arrangements with some downside risk. Do you think policymakers should look at this model as transitional?

SD: I think there will always be places where pay-for-performance will be the appropriate reform model, such as for services that are underused. Providing an upside bonus may be more effective than a shared risk program.

Pay for performance starts the dynamic of evaluating a provider's performance, without the provider needing to have the internal means of tracking their own quality or financial status. When you get into more complicated payment reforms like bundled payments…the provider needs to be able to assess how it's impacting them financially. Some smaller practices are not in a great position to evaluate that.

Q: What are your thoughts on the potential disproportionate effects on safety-net providers? For instance, an analysis by Harvard School of Public Health researchers found safety-net and public hospitals fare the worst in the Hospital Value-Based Purchasing program. Is pay-for-performance unfair for these providers?

SD: I haven't seen any research one way or the other. I understand where these providers are coming from. They don't think it's fair to be evaluated on the same criteria. But in the situation of pay-for-performance, there are many different ways to design it. I think it's wrong to say across-the-board pay-for-performance shouldn't be applied to these providers. There are ways to create these programs in a way that doesn't unfairly disadvantage them.

Q: What lies ahead for pay-for-performance? Where is it going in the next few years?

SD: It's funny because I think, in some ways, pay-for-performance seems old school now, when you think about all the new terms and methods you hear discussed.   However, there are some health plans that are still investing very heavily in it. In parts of the country that are still predominantly fee-for-service, it may be an appropriate way to orient fee-for-service providers to being held accountable for their performance.  I think it will continue to play a significant role as we look to evolve toward more effective payment models.

More Articles on Payment Reform:
3 Key Things to Know About Pay-for-Performance
How Pay-for-Performance Compensation Plans Can Facilitate Physician Alignment  
5 Reasons to Participate in the CMS Bundled Payments for Care Improvement Initiative 


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