The Trouble With Pay-for-Performance
And although P4P seems to make common sense, and P4P based programs are now widely used by both CMS and commercial payers, Ryan says one shortcoming is that they're probably too limited in scope and in scale.
"One of the problems with the programs that have been implemented to date is that incentives aren't high-powered," says Ryan. "P4P represents less than 1% of revenue for providers in some cases."
An analogy would go something like this: Two competitors are hired to build a fence. A high-quality fence would bring Competitor A $100, and a low quality one that built by Competitor B would bring him $99. The cheaper fence could be the worst fence in the world, and fall down tomorrow, but as long as it was standing today, Competitor B would be paid the agreed-upon $99. Competitor A might build the best fence ever and still been paid $100.
What incentive does Competitor B have to improve? Not much. What incentive does he have to continue to labor intensively for his high quality fence? Again, not much.
If it now seems ridiculous that providers would make the sorts of investments that would help them improve quality and attain such meager bonuses, it is, Ryan says.
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