Selected research from leading health care experts whose findings have a direct bearing on public policies effecting medical progress. Research is chosen based on its quality and relevance by the Medical Progress Today editorial staff.

Selected Research

Early Experience With Pay-for-Performance
Meredith B. Rosenthal, PhD, The Journal of the American Medical Association, 10-12-05

Markets are constantly in motion. Incentives and information change rapidly, and producers who don’t meet new market requirements are forced to adapt or exit the market. But when third-party payers set the rules of the game instead of consumers, the wrong incentives—or at least inefficient ones—can emerge. This article documents one of the pitfalls involved in many third-payer systems: providers can lack strong incentives to innovate.

The premise that insurers (both private and public) should pay bonuses when health care providers meet certain quality standards is worth considering. This study used three “process measures of clinical quality: cervical cancer screening, mammography, and hemoglobin A1c testing” to evaluate potential gains associated with one pay-for-performance system.

We evaluated a natural experiment with pay-for-performance using administrative reports of physician group quality from a large health plan for an intervention group (California physician groups) and a contemporaneous comparison group (Pacific Northwest physician groups). Quality improvement reports were included from October 2001 through April 2004 issued to approximately 300 large physician organizations. …
Improvements in clinical quality scores were as follows: for cervical cancer screening, 5.3% for California vs 1.7% for Pacific Northwest; for mammography, 1.9% vs 0.2%; and for hemoglobin A1c, 2.1% vs 2.1%. Compared with physician groups in the Pacific Northwest, the California network demonstrated greater quality improvement after the pay-for-performance intervention only in cervical cancer screening (a 3.6% difference in improvement [P = .02]). In total, the plan awarded $3.4 million (27% of the amount set aside) in bonus payments between July 2003 and April 2004, the first year of the program. For all 3 measures, physician groups with baseline performance at or above the performance threshold for receipt of a bonus improved the least but garnered the largest share of the bonus payments.

The researchers concluded, in short, that “paying clinicians to reach a common, fixed performance target may produce little gain in quality for the money spent and will largely reward those with higher performance at baseline.”

In real markets, competition drives innovation. But bonus payments from insurers for hitting X will only mean that providers will hit X. This may improve a few providers who weren’t reaching that standard before, but it may also overpay many providers for doing what they were already doing. And once insurers tie increased payment to any given standard, that standard will increase pressure for uniform behaviors, even when deviation from the norm might actually represent an improvement.

One potential solution to this problem is giving consumers (patients) a greater role in selective effective and innovative providers. But to make consumer involvement effective, patients will need transparent and readily available information about the price and quality of provider services. Hopefully, further pay-for-performance experiments will examine how patients can be more actively involved in the quality improvement process.

Project FDA.
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