Pay for Performance (P4P) – Concepts

Pay for Performance (P4P) – Concepts

Pay for Performance (P4P) is, to an extent, a misnomer. That’s because fee-for-service (FFS) is a form of pay-for-performance – it pays for every service and the performance sought is production of volume. However, P4P is commonly used to describe payment reform efforts that link a portion of a clinician’s or hospital’s revenue to certain performance criteria.

HCI3 developed one of the forerunners of P4P in the early 2000s and it’s still successfully being implemented in many states in the country. The program, Bridges To Excellence (BTE), rewards clinicians who can demonstrate they deliver high quality care as evidenced by their achievement of a BTE Recognition. The formula is simple and effective, and we’ve published its results quite extensively. Roughly at the same time, the UK launched its national P4P effort and so did the Integrated Healthcare Association in CA.

In each instance, the formula is similar. A basket of quality measures is defined and incorporated into a scorecard. Clinicians can then earn a bonus, or an increase in future earnings, based on their performance on the scorecard.

The bottom line: when well designed, it works.

Lessons Learned
Like for all programs, design matters. A well-designed program will achieve its objective, and here are the main ingredients, many of which come from research by Meredith Rosenthal and Adams Dudley:

  • Avoid “tournament-style” programs – these programs retroactively rank providers in deciles or quartiles and rewards are distributed based on that ranking. The primary drawback of this design is its uncertainty. A physician or a hospital could work hard to improve all year round and never get a reward.
  • Measure what matters – there are lots of measures to choose from, but only a few handfuls of outcome or quasi-outcome measures. Selecting measures should be done in careful consideration of the desired goal of the P4P program. If the goal is to increase immunization rates, then that’s the measure. And if the goal is to achieve better outcomes from patients with chronic conditions, then measuring blood pressure, cholesterol and blood sugar controls are among the ones to choose. We’ve published a paper on this topic.
  • Create meaningful incentives – our research and that of others is clear. If you want to pierce through the noise of FFS payment, you need a strong signal. And the greater the signal, the higher the response. We studied the response of physician practices in several communities to the size of an offered bonus and found that response rises with the size of the bonus. This isn’t surprising, and yet many P4P programs expect high response rates with paltry incentives…only to be disappointed.