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Is P4P Working?

By HealthLeaders Media Staff  
   March 17, 2008

Well, that depends on what you mean by "working." Does P4P improve healthcare quality while holding down increases in cost? Does it bring better value for the healthcare dollar? The jury appears to still be out on those more pointed questions.

In my second year attending the National Pay for Performance Summit in Los Angeles, there was certainly no consensus. How could there be, given the sheer number of these programs that have been tried over the past few years? However, given the fireworks we saw on the panel bearing the title I stole for this column's headline, there's still a lot of disagreement over whether pay for performance, the practice of rewarding doctors and hospitals for gains in quality and cost control, "works." But even amid all the yammering back and forth between skeptics and true believers resembling a cable TV news network, if "working" means hospitals and physicians are changing their behavior to achieve a performance target in order to gain a slight edge in reimbursement or financial reward, P4P is indeed working.

Are the dozens of P4P programs rolled out by commercial payers and Medicare over the past few years measurably improving patient outcomes and saving on unnecessary treatment? Well, that certainly depends. The evidence is mixed on that front, especially if you're looking for scientific, peer-reviewed evidence. Certainly some of the early P4P programs were little more than attempts by insurers to reward the lowest-cost providers, regardless of quality. But no one can argue that they haven't gotten more precise and more focused on quality in the intervening years. That's happened not by the generous actions of health plans who realized some of their methodologies were flawed, necessarily, but often from settlements with state attorneys general and other pressure from providers to better tailor the programs.

Many P4P programs started out as voluntary initiatives. Certainly the Medicare ones have been, and the payments for the achievements are relatively small compared to the reimbursements hospitals get for procedures. The programs are all over the map in their complexity and the rewards providers get--sometimes for demonstrated improvement, and sometimes just for participating. But they were voluntary with an asterisk. Any provider who declined the first round of P4P participation would be just that much farther behind than those who decided that performance measurement was the future and they'd better figure out how to play.

Many physicians and hospitals are still skeptical that any measurement tool could conceivably account for the complexities in healthcare. It's not as simple as comparing patient outcomes, they say, and the outcomes' correlations with cost. Methodologies are flawed, they say, and pay for performance really is masquerade for cost control in a system where the health insurance companies, especially the for-profit ones, are simply looking for ways to pad their balance sheets. Besides, "my patients are sicker," they say.

Such complaints at one time held some water. But they're rapidly losing credibility in what seems to be documented evidence over the past five years that performance improvement tied to rewards does, in fact, help improve quality. As data becomes more granular, comparisons to determine whether certain doctors see sicker patients has been easier to determine and adjust for. But one thing has changed since P4P debuted. You don't hear too many hospitals or physicians rejecting the tool out of hand--that is, rejecting the concept that they must be measured. That's because as health costs creep inexorably higher, the ability of healthcare to extract a bigger slice of the GDP pie has become heavily constrained.

"If you're asking us to give more money, we're asking for proof the money has been well spent," says Francois de Brantes, executive director of Bridges to Excellence, one of the oldest employer-supported groups that seeks to improve healthcare outcomes and deliver value in healthcare. "We need more than, 'Trust me. I'm doing a good job.' "

In most other industries, buyers don't accept the manufacturer's word that the seller's degree from Harvard means his widgets are better than the guy from State U. They also don't accept that spending ever more on the production of said widgets guarantees the quality will be better. They want proof. So what's wrong with asking for proof in healthcare that doctors are washing their hands, operating on the right body part, not ordering unnecessary tests or not prescribing highest-cost prescription drugs or medical devices with little regard for their relative efficacy? The acronym may change, but my guess is that P4P isn't going anywhere.

One thing that was said at this inflammatory panel caught my ear. The biggest change in the dynamics between payers and providers has been the necessary involvement of the hospital finance suite in P4P programs. The additional money associated with many P4P programs has caused CEOs and CFOs to talk to clinicians to figure out how to improve measurement, documentation and performance in healthcare to try to get their hands on that extra money.

It's about time.

I'd love to hear how you feel about P4P. Has it "worked" in your markets? Why or why not? How could the measure sets be applied more fairly? What's being measured erroneously given that P4P is here to stay, and how can those sets be improved? Please e-mail me with your thoughts, comments and ideas.

Philip Betbeze is finance editor with HealthLeaders magazine. He can be reached at

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