Expert Commentary

Pay for performance: We’ll be better off

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How P4P benefits our practices and our patients



Like everything else, Pay for Performance (P4P) has inherent rewards and risks. For our patients, rewards include improved clinical care and outcomes, and for us, enhanced earnings. Among potential risks are a failure to earn higher compensation if we don’t participate in a voluntary P4P program, and/or finding our practices excluded from “preferred” status as more plans move toward tiered networks. P4P might be one way a plan decides which practices to include in a preferred network, advertising only practices that meet the “higher standards” of P4P.

Like it or not, P4P programs are already a reality for many of us, and their continued proliferation seems inevitable. This article describes the typical trajectory of a P4P program, the importance of being involved in program design as early as possible, and the challenges and successes of P4P thus far.

P4P goes a long way back

In 1986, Robert Fulgham wrote an insightful book entitled All I Really Need to Know I Learned in Kindergarten.1 It’s hard to argue with the basic premise of that title. When I think back to my early school years, I remember well the reward for achievement: a gold star. And I was intent upon achieving my teacher’s goals. Why? For the gold star, of course. That was my first experience with P4P.

Let’s fast forward a few decades to focus on more sophisticated versions of the gold star, and consider what we need to know to be ready for P4P in our own practices.

5 critical questions

Although our involvement with P4P in health care has so far been limited, we are rapidly recognizing some of the challenges involved. Questions that must be answered include (but clearly are not limited to) the following:

Although a Robert Wood Johnson Foundation report issued in November 2005 concluded that P4P programs “can improve both medical care and quality of life by giving health-care providers a financial incentive to seek measurable improvements in the health of their patients,”2 it may be too soon to make such a statement. According to a comprehensive and heavily documented article from the August 15 issue of Annals of Internal Medicine,3 “ongoing monitoring of incentive programs is critical to determine the effectiveness of financial incentives and their possible unintended effects on quality of care.”

Answers are on the way

We should soon be able to begin answering some of these questions, however. According to a major survey from 2005, the number of P4P programs in the United States more than tripled over the previous 2 to 3 years, totaling 115 in 2005,4 and it is very likely that the rate of increase will accelerate. The 2005 survey also disclosed some key findings, including the following:

Department of Defense started it

The concept of P4P is not new outside the realm of health care. Besides dominating the education process (remember those gold stars!), it has been around in government and the business world for many years:

Business experts question validity. Just as the P4P model is beginning to creep into health care, questions are being raised about its validity. In 2002, the McKinsey Quarterly asked “Has pay for performance had its day?”10 Business journals questioning its value include a source no less luminous than the Harvard Business School.11 The arguments suggest that a formal program with defined objectives might have the unintended consequence of stifling both creativity and new ideas.10 And, as more participants achieve the higher goals, it becomes more costly for the company, necessitating upward adjustment of goals, which might frustrate participants.11

P4P a “natural” for big-business health care? Application of P4P principles is in many ways the natural next step as “big business” and health-care models become further intertwined.

Measures that overlap 2 specialties are not necessarily bad

Measuring “clinical improvement” or “quality” is particularly challenging. Outcomes are difficult to measure and influenced by many factors, only some of which are within our clinical control.

Should we use Health Plan Employer Data and Information Set (HEDIS) measures as a proxy for quality, such as rates of cervical or breast cancer screening? We must agree that it's good to screen for breast and cervical cancer. Unfortunately, many HEDIS measures fall into the no-man’s-land between obstetrics and gynecology and primary care—especially something like mammogram compliance.


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