Pay for performance: Public and private sector coalitions link provider reimbursement to quality reporting programs

Physicians insist that pay-for-performance programs should be voluntary and include risk-adjustments.

Pay for performance. Pay for quality. Performance-based payment. Quality-based incentives. Whatever the term, they all refer to a blossoming number of initiatives that link provider payments to quality of service. The aim is to use payment incentives to improve the delivery of healthcare across the country. The trend reflects growing frustration over rising expenditures for healthcare without any parallel improvement in care quality. Government agencies, employer coalitions and health plans are establishing programs that encourage hospitals, physicians and other providers to meet quality standards. Those providers who are able to demonstrate improvements in care and more efficient performance stand to reap financial rewards as well as enhanced public images.

Many physicians, however, consider P4P as just the latest scam dreamed up by HMOs and insurers to reduce provider payments. Doctors are leery of performance standards developed by payers and other third parties; they want a say in what is measured and how it is disclosed to the public.

Blue Cross Blue Shield of Massachusetts announced in May its aim to double to almost $200 million the amount it spends each year on performance incentives for healthcare providers. The program will boost incentive payments to 13% of total reimbursement, up from 10% this year; an individual doctor could receive more than $10,000 based on performance measures, such as how many patients receive cholesterol screenings, pap smears or mammograms. BCBS of Massachusetts would like to find a way to measure quality performance of cardiologists and oncologists, but has been hampered by disagreement on appropriate measures for such specialists.

The Agency for Healthcare Research and Quality (AHRQ) is a central player in the growing P4P campaign. At the National Pay-for-Performance Congress in Los Angeles last February, AHRQ director Carolyn Clancy noted that despite years of effort, there remain large gaps in quality of care, healthcare costs are rising, and "we're not always paying for care that makes sense." To address these problems, AHRQ has developed a decision guide to help payers and providers adopt quality-based purchasing programs (see sidebar). The agency also seeks to better integrate measures of efficiency with quality and include chronic disease management activities in these programs.


The Centers for Medicare and Medicaid Services (CMS) is encouraging P4P programs through a number of pilots authorized by the Medicare Modernization Act of 2003 (MMA). The Premier/CMS Hospital Quality Incentive program, a three-year P4P demonstration, has shown quality improvement at many of the 260 participating hospitals providing data on 33 indicators in five clinical areas. This has resulted in bonuses totaling almost $9 million to top-scoring organizations; the program expects to start reducing rates for those providers that fail to meet quality measures. A recent analysis by Premier estimates that Medicare could have saved nearly $1 billion if all hospitals followed established quality care measures in treating pneumonia or heart bypass Medicare patients.