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Health Affairs and RWJF examine pay-for-performance model in new report

Posted on October 18, 2012 | No Comments

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A report recently published by Health Affairs and the Robert Wood Johnson Foundation (RWJF) centers on the “pay-for-performance” model of health care payment. Pay-for-performance  is an umbrella term that encompasses payment initiatives aimed at improving the quality, efficiency, and overall value of health care. This payment model contrasts with the traditional payment for medical services, which is predominatly fee-for-service or based on the volume of care provided. Providers are traditionally paid based on the complexity of services they provide, as opposed to the quality. The pay-for-performance arrangements, on the other hand, provide financial incentives to hospitals, physicians, and other health care providers to carry out such improvements and achieve optimal outcomes for patients. The Affordable Care Act (ACA) expands the use of pay-for-performance approaches in Medicare in particular. The Health Affairs / RWJF policy brief reviews the background and current state of public and private pay-for-performance initiatives and explores options to make these programs more effective in the future.

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A study conducted by a team of British researchers found that pay for performance systems not only can make health care more cost-effective, but can also save lives. The pay for performance model charges patients for the value of the care received as opposed to the quantity. The idea behind the system is that it will motivate doctors to provide only the care that will actually benefit their patients. The study, published in the New England Journal of Medicine (NEJM), looked at a northwest region of England before and after it implemented a pay for performance model. The system allotted payments to hospitals based on their performance on a set of 28 quality measures. Hospitals could earn up to a 4 percent boost in payment. The payment changes were associated with 890 fewer deaths, or a 1.3 percent decrease in mortality rates. The improvement rates only appeared within the pay for performance program, suggesting that the quality-driven payment system contributed to the mortality reduction. The researchers have yet to identify the root driving the observed changes. Under the Affordable Care Act (ACA), hospitals will receive bonuses if they achieve certain quality measure thresholds, and will be penalized if they fail to reach goals.
Medicare’s flagship hospital pay-for-performance program, the Premier Hospital Quality Incentive Demonstration, began in 2003 but changed its incentive design in late 2006. The goals were to encourage greater quality improvement, particularly among lower-performing hospitals. However, the authors of a recent Health Affairs article found no evidence that the change achieved these goals. Although the program changes were intended to provide strong incentives for improvement to the lowest-performing hospitals, the authors found that in practice the new incentive design resulted in the strongest incentives for hospitals that had already achieved quality performance ratings just above the median for the entire group of participating hospitals. Yet during the course of the program, these hospitals improved no more than others. The findings in this article raise questions about whether pay-for-performance strategies that reward improvement can generate greater improvement among lower performing providers. They also cast some doubt on the extent to which hospitals respond to the specific structure of economic incentives in pay-for-performance programs.
Health policy experts and lawmakers believe that measuring and publicly reporting information about the performance of physicians, hospitals, and other health care providers is critical to improving health care quality and controlling costs. Advancing health information access and transparency is a goal of the Patient Protection and Affordable Care Act (ACA) [1], which includes a number of provisions to incentivize quality measurement and reporting and to enable more informed consumer decision-making. Across the country, community organizations, such as the Alliances participating in the Robert Wood Johnson Foundation’s Aligning Forces for Quality initiative, have been demonstrating the power of using private payer and Medicaid medical claims data to measure and publicly report on provider performance. Their work could be further strengthened by access to Medicare claims data because it is the single largest pool of information about how health care is delivered in America. Combining Medicare data with data from other public and private payers such as Medicaid and employer sponsored plans, holds the potential to generate more complete and accurate provider performance measurement information, thereby further empowering consumer engagement and quality improvement.
Health policy experts and lawmakers believe that measuring and publicly reporting information about the performance of physicians, hospitals, and other health care providers is critical to improving health care quality and controlling costs. Advancing health information access and transparency is a goal of the Patient Protection and Affordable Care Act (ACA), which includes a number of provisions to incentivize quality measurement and reporting and to enable more informed consumer decision-making.
CMS announced that it will share more than $15 million in savings with 166 home health agencies that participated in a pay-for-performance demonstration project. "This demonstration," says a CMS press release, "is part of CMS' value-based purchasing initiative to improve the quality and efficiency of care furnished to Medicare beneficiaries."