Issue Brief: Pay-for-Performance Efforts Show Mixed Results

A new Issue Brief from Health Affairs and the Robert Wood Johnson Foundation reviews the background and current state of public and private pay-for-performance initiatives. In theory, paying providers for achieving better outcomes for patients should improve those outcomes, but in actuality, studies of these programs have yielded mixed results. This brief also discusses proposals for making these programs more effective in the future.

"Pay-for-performance" is an umbrella term for initiatives aimed at improving the quality, efficiency, and overall value of health care. These arrangements provide financial incentives to hospitals, physicians, and other health care providers to carry out such improvements and achieve optimal outcomes for patients.

Pay-for-performance has become popular among policy makers and private and public payers, including Medicare and Medicaid. The Affordable Care Act expands the use of pay-for-performance approaches in Medicare in particular and encourages experimentation to identify designs and programs that are most effective.

The typical pay-for-performance program provides a bonus to health care providers if they meet or exceed agreed-upon quality or performance measures, for example, reductions in hemoglobin A1c in diabetic patients. The programs may also reward improvement in performance over time, such as year-to-year decreases in the rate of avoidable hospital readmissions.

Pay-for-performance programs can also impose financial penalties on providers that fail to achieve specified goals or cost savings. For example, the Medicare program no longer pays hospitals to treat patients who acquire certain preventable conditions during their hospital stay, such as pressure sores or urinary tract infections associated with use of catheters.

The authors state that among the reasons for the mixed results to date are experiment design challenges, tension between providers and payers about the real goals of pay-for-performance programs, and concerns about how to adjust for differences in providers' patient populations (e.g. how to treat safety net providers).