Tools for Competing Successfully in a Pay-for-Performance Environment

Aaron DeBoer, Anita Iyenger and Tanay Dudhela, for HealthLeaders Media, February 4, 2008

The benefits of competing successfully in a pay-for-performance environment are relatively obvious-financial incentives, greater public awareness of quality, and improved physician-hospital alignment, to name a few. While the benefits are quite clear, the means to achieve them are often slightly more confusing. In order to successfully compete in a pay-for-performance environment, organizations must ensure they are equipped with the necessary tools.

Organizations that have been successful in implementing pay-for-performance programs show a common trait: significant investment in people, processes, and technology. While making these investments is neither easy nor cheap, failure to make them will greatly hinder an organization's ability to successfully compete in a pay-for-performance environment.


From a strategic perspective, organizations need leaders, managers, and clinicians who are committed to superior clinical outcomes and teamwork at every level. Leaders within the organization should develop a culture that encourages open and thorough communication. As organizations transition to this new, competitive environment, strong communication and collaboration between management and staff will be essential. Moreover, organizations will need to create a nonpunitive environment that promotes accountability at every level and encourages team members to bring forth any impending problems.

Many organizations will need to hire new staff and train existing staff to excel in a pay-for-performance environment. This will require staff to understand the goals of pay-for-performance programs so objectives such as the collection and reporting of quality and safety data can be met in an efficient manner. Organizations that do not invest in training and hiring staff members who understand the pay-for-performance environment will find it rather difficult to achieve success.


Success under pay-for-performance requires standardized processes on both the clinical and business sides of the enterprise. Organizations equipped with standardized processes, an innovative approach to solving problems, and a well-executed implementation plan will likely succeed with pay-for-performance.

Successful organizations will not perceive pay-for-performance programs as an arduous and costly investment of resources and capital, but rather, they will see it as an opportunity to pursue innovation in both clinical and business settings. As these programs continue to grow and the demand for quality care continues to increase, organizations that have taken the time to develop efficient processes and methods to solve problems will come out ahead.


Just as important as securing the people and processes necessary to succeed under pay-for-performance is securing the information technology required for participation. Hospitals that fail to do so will be lacking a critical tool for competing in such an environment.

Internally held provider data often resides in multiple clinical and business information systems, or worse, in paper charts. This makes the collection and merger of clinical and financial data difficult. Hospitals will have to adopt effective technologies to sufficiently collect and report data to be successful. Hospitals will begin to adopt business intelligence systems already prevalent in other industries.

Pay-for performance programs will change the way healthcare is delivered. The rewards for organizations that are able to successfully compete in such an environment will be handsome. While there are some barriers to entry in terms of investment of capital and resources, organizations will more than realize their investments if they can successfully compete in these programs.

Pay-for-performance will provide substantial financial rewards for organizations that are able to meet best practices and efficiently report quality data. However, the financial rewards are just the beginning, as pay-for performance programs will allow organizations to increase public awareness and improve physician-hospital alignment. Yet before any of these benefits can be realized, organizations need to be equipped to compete in a pay-for performance environment. They must have the people, processes, and technology in place before they can enter these programs. A failure to obtain the right tools will make success in pay-for-performance difficult to achieve.

Aaron DeBoer and Anita Iyenger are senior advisers and Tanay Dudhela is a consultant associate with the Noblis Center for Health Innovation. They may be reached at,, and, respectively.
Facebook icon
LinkedIn icon
Twitter icon