Pay-for-Performance Study Results Disputed

Published October 12, 2009

Hospitals included in a Medicare pilot project linking payments to government evaluations of the quality of care provided to patients saw sharp decreases in the number of people who died from heart attacks. Advocates of “pay-for-performance” initiatives have hailed that result, and it has prompted U.S. Senate Finance Committee Chairman Max Baucus (D-MT) to propose a broader program for it in his health care legislation.

But Dr. Philip Alper, a clinical professor of medicine at the University of California-San Francisco and the Robert Wesson Fellow in scientific philosophy and public policy at the Hoover Institution, says pay-for-performance programs have negative consequences and ultimately raise health costs.

“Pay-for-performance initiatives on average have not had a lot of success,” Alper said. “It is possible to enhance quality of care through pay-for-performance projects—people do get motivated to do better as they get paid more or get a bonus—but the problem is, what happens next? The answer isn’t good.”

Raising Costs

Alper likens pay-for-performance initiatives to one-shot bonuses, which raise the cost of health care over time.

“Do we assume the higher quality of care provided by pay-for-performance is the new standard of care?” Alper asked. “We are not going to keep adding pay-for-performance bonuses, so before long the new care provided by pay-for-performance becomes standard, and part of the cost. Before long, the cost of care has risen.”

But Stuart Guterman, assistant vice president for Medicare’s Future at the Commonwealth Fund, a private foundation in New York City, disagrees.

“Pay-for-performance sends a message through the price structure that quality is something we want to reward and that we are willing to pay for,” Guterman said. “And that is a better signal than our current fee-for-service structure.”

Guterman believes the U.S. health care system needs pay-for-performance initiatives to give medical providers a list of steps for each patient, cutting payments if the steps are not followed, to ensure quality care.

“The current system is just sending the wrong signal,” Guterman said. “Pay-for-performance has an important part to play if we want to change the health care financing structure of our country.”

Gaming the System

But Alper notes pay-for-performance programs are naturally subject to exploitation by providers.

“Depending on your level of computerization, you can use the numbers to obtain pay-for-performance awards. So much of pay-for-performance is basically an assemblage of information,” Alper said. “Large practices or medical institutions, which are highly computerized, have enormous advantages over other hospitals or smaller practices. At any rate, most pay-for-performance literature has not shown long-term benefits.”

Guterman admits the evidence of success for these projects is spotty.

“The evidence overall of pay-for-performance is mixed,” Guterman said. “Though if we want an alternative way to pay for care, and basically get the fee-for-service system out of the way, pay-for-performance has a role.”

Thomas Cheplick ([email protected]) writes from Massachusetts.