Improving Value

Pay for Performance (P4P)

Pay for Performance (P4P) is a reimbursement scheme in which providers are rewarded for quality of healthcare services. These programs link part of clinicians’ compensation to their performance on designated quality metrics and can range from small bonuses for a few quality indicators to constituting approximately one-quarter of providers’ incomes for performance on over 100 metrics.

Pay-for-performance initiatives have generally been designed to improve the quality of medical care, but there appears to be little consensus on whether these programs save money or cost money. A 2014 Rand report concluded that:

Although the past decade has witnessed a fair amount of experimentation with performance-based payment models, primarily P4P programs, we still know very little about how best to design and implement value-based payment programs to achieve stated goals and what constitutes a successful program.

Problems with these reimbursements methods include the fact that most physicians believe that quality measures currently in use are inaccurate. Risk adjustment measures are still rudimentary, and do not adjust for socioeconomic factors, leaving physicians and hospitals caring for high-risk populations, such as in poor urban areas, at risk for lower quality scores. Many questions remain about which models should purchasers adopt if they want the best savings and improvements in care and Which models are spreadable and scalable so a broader swath of the population can reap their benefits.

Despite the dearth of evidence on broadly successful models, P4P reimbursement is likely to be an oft used policy tool for the foreseeable future.  Hence, our best, near-term strategy is to continue to accumulate evidence while weighing these approaches against other options.

Two prominent P4P payment structures have been Hospital Value-Based Purchasing (VBP) and the Hospital Readmission Reduction Program (HRRP). VBP and HRRP have shown to have an impact on the quality of care that patients receive from hospitals. However, the effect that these payment plans have on the cost of healthcare is relatively unknown.