What Does "Pay For Performance" Mean?

September 8, 2008 NY Times has a fine essay on "Pay For Performance" (P4P) by Sandeep Jauhar, a cardiologist on Long Island, in which he discusses some "P4P" pitfalls .

The Fall, 2007 Health Care Financing Review (vol 29,Number1) is devoted to Pay For Performance. In Thomas and Caldis' introductory article, Emerging issues of Pay-for-Performance in Health Care the authors define P4P in economic terms: " . . . to include any type of performance-based provider payment arrangements including those that target performance on cost measures." Articles which follow state some less than rosy conclusions, such as "The bonuses are sensitive to disease manager perceptions of intervention, effectiveness, facing challenging targets, and the use of actual-to-target quality levels versus rates of improvement over baseline." Another article notes "Like all payment innovations, the P4P demonstration faces some challenges . . . .it remains to be seen how much control a demonstration participant can exert over its assigned beneficiaries when they retain freedom of provider choice and have limited incentives to restrain their use of services." A fourth article recognizes that without changes in physician behavior, the gains from redirecting patients from lower to high efficiency and quality providers are likely to be limited. Even the mechanics of statistical analysis, as described in a fifth article, are uncertain: ranking of small hospitals will be problematic.

Jauhar notes that legislation of professional behavior is likely to be associated with unintended consequences, such as physician avoidance of providing care to very sick, dying, high risk patients because they do not wish to be stigmatized by poor outcomes, or pressure upon a physician to treat prematurely or without knowing the necessary medical facts and test results. He describes the unthinking conversion of "guidelines" to performance standards, against which physicians are measured by hospitals, payers and Medicare.

In hospitals, medical staff members may labeled competent or incompetent, prudent or wasteful, good or bad, depending on whether their performance meets "guidelines" that were never intended to be mandatory. Jahuar describes Medicare's voluntarily physician self-report to Medicare on 16 quality indicators with financial rewards for compliance. Jauhar discusses the current "team" approach to medicare care in today's hospitals, in which it is difficult to assign either praise or blame to any of the many physicians, nurses, paramedics, respiratory therapists, surgical assistants, pharmacists, physical therapists and others involved in patients' care.

Driving P4P are economists, business people and economic analyses. The difficulty is that economists and business people are not physicians, and have no reason to understand that 50% of the the drugs, protocols and systems of treatment that they glorify today will prove to be either of no benefit or positively harmful in a few years. P4P focuses on efficiency ("cost control"), while claiming to promote quality, on maintaining the status quo, rather than innovative care which may prove to be better or worse than the "guidelines," and on satisfying marketing demands of payers who want to be able to claim that that their network contains "P4P" certified health care providers.

Jauhar has done the public a service by openly discussing P4P. Stay tuned: there's more to come.