Managed Care Reimbursement

Pay for Performance Programs Quadruple Nationally, Triggering Criticism

Anytime you mess with someone's money, you're sure to receive complaints. That is certainly true of pay-for-performance (P4P) programs, which are exploding in number and generating plenty of criticism, particularly from physicians. In the past five years, the number of physician pay-for-performance programs has almost quadrupled, going from 39 in 2003 to 148 in March of 2007.  

This information came from the Provider Pay-for-Performance Incentive Programs: 2004 National Study Results, which was conducted jointly by Med-Vantage  and The Leapfrog Group.  The study counted 84 pay-for-performance programs in 2004 and 107 in 2005.  The steady increase in P4P programs across the United States is not without criticisms, however.

A report published by PricewaterhouseCoopers in August and entitled Keeping Score* A comparison of pay-for-performance programs among commercial insurers identified significant flaws in P4P. Looking at 10 different P4P programs, researchers found that the programs used almost 60 different physician performance indicators; that no one indicator was used by all 10 programs; and no two programs rewarded providers the same way.  In addition, rewards or incentives offered to participating physicians were generally too low to make a significant difference.  The report found that "the wide variation in program structures, performance metrics, and rewards structures mutes their potential impact."

In California, P4P is already pervasive and succeeding because of a unified program structure that addresses some of the flaws identified in the PricewaterhouseCoopers' study.  The P4P dollars in California are significant. For example, Blue Cross of California announced that it was rewarding 126 physician groups a total of $69 million in bonuses for performance in 2006.  Blue Shield of California announced that it distributed $31 million in bonus money a week earlier.  The Blue Cross and Blue Shield programs in California are part of the Integrated Health Association's pay-for-performance effort , which includes 200 California medical groups and seven health plans.  "Data acquisition is coordinated, and we use the same quality metrics across the entire set of provider organizations so in this program we have minimized the administrative burden," said Michael Belmen, Medical Director for Clinical Quality and Innovations at Blue Cross of California.

In fact, the experience of California's multi-year P4P program is evidence that pay-for-performance can work when implemented correctly.  Physicians, laboratories, and hospitals should all expect to see an expansion in both the number of P4P programs and the clinical and service factors that they address in the coming years.  There seems to be no reticence by health insurers to initiate P4P programs with financial incentives to motivate doctors, hospitals, and laboratories to deliver consistent and continuously improving healthcare services. 

Related Articles:

• Pay for Performance Programs for Providers Now Total 150 
• Provider Pay-for-Performance Incentive Programs: 2004 National Study Results 
• Keeping Score* A comparison of pay-for-performance programs among commercial insurers