Pay-for-performance measurement helps set the bar for quality, efficient care


Best practices are at the heart of P4P and require that providers be evaluated on delivery-of-care effectiveness, outcomes

This section is sponsored by Thomson Medstat, a healthcare information company that provides decision support solutions, benchmark databases, market intelligence, and research services for managing the cost and quality of healthcare. Medstat works with health plans, hospitals and provider networks, employers, government agencies, and pharmaceutical companies. An AHIP Solutions Partner, Medstat is part of The Thomson Corporation, a global leader in providing integrated information solutions to business and professional customers. For more information, visit or e-mail us at

It is documented that the cost of healthcare has been soaring over the past decade. This could be considered acceptable or at least understandable if the quality of care were improving at the same time. However, evidence shows that quality of care has not been improving, at least not in a significant way. As a result, high healthcare costs accompanied by variable healthcare quality have become a key political issue, a major concern for consumers, and a business worry for health plans and employers who know that improved healthcare quality will result in healthier patients with lower healthcare costs.

These plans and employers are trying new approaches for encouraging providers to more aggressively focus on quality of care in order to reduce overall healthcare costs.

In recent years, healthcare professionals have come up with a promising concept: pay-for-performance, or P4P. Briefly defined, P4P is a system of accountability that measures the performance of healthcare providers and rewards those providers for following clinical guidelines and achieving positive clinical outcomes. P4P is viewed by plans and employers as a sound business approach for achieving excellent clinical outcomes in a cost-effective manner.

"Health plans historically have measured provider performance, but the focus has almost exclusively been on overutilization and cost-reduction through utilization review and external controls," says Jeffrey Hanson, vice president and pay-for-performance practice leader for healthcare-information/consulting firm Thomson Medstat, which develops, implements, and administers provider profiling and P4P programs.

The problem with the typical "provider profiling" approach is that it narrowly focuses on overutilization and encourages service reduction that can harm the quality of care.

According to Jon Conklin, vice president of performance measurement at Thomson Medstat, "The essence of P4P is that it's a best-practices model. It tries to pinpoint those physicians who consistently provide the best-quality care in the most cost-effective manner, then sets the bar for other physicians to reach."


In terms of evidence-based treatment guidelines, there appears to be a lack of incentive for physicians to even try to reach that bar. In a recent white paper on P4P that Conklin co-authored, he writes that "the gap between established treatment guidelines and the actual manner in which care is provided . . . is wide and deep." In that paper, he cites these worrisome examples of just how wide and deep that gap has grown:

The P4P concept requires, of course, that providers be evaluated as to the efficiency and effectiveness with which they deliver care, as well as the extent to which outcomes are positive.

The industry has already begun to see medical experts, corporations, government bodies, and professional organizations come together to develop universal performance measures.

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