Does Quality Follow the Money?

By Dina Overland

The health reform law places a lot of value in pay-for-performance insurance programs as a way to improve the overall healthcare system while decreasing costs and improving quality care. Policymakers believe insurers can incentivize doctors and hospitals through financial payments to ensure their patients don't get sick (or sicker than they already are).

Sounds good, in theory at least. But does it work in practice? A new study of the British pay-for-performance practice says no. The study, published in the British Medical Journal, examined the impact of performance targets on quality of care and outcomes among almost 500,000 British patients with hypertension over seven years. The authors didn't mince words when they concluded that the assumption that pay-for-performance benefits patients with hypertension is "questionable at best."

So, is all the hype about pay-for-performance insurance programs inaccurate? The answer is a definitive ... maybe.  

Many other studies have reached different conclusions. One determined that pay-for-performance programs seem to be having more of an impact on clinical quality and cost control than they had in the past. Conducted by MedVantage and the Leapfrog Group, the study's key results included that 56 percent of health plans believed clinical quality improved in 2008 among doctors participating in P4P programs. This compares with only 37 percent of plans that saw such improvement in 2006. Also, 25 percent of plans said P4P programs lowered physician costs in 2008, compared with just 15 percent in 2006.

Some of the improvement seen by health plans may be taking place because providers are investing more in meeting P4P goals. For example, 39 percent of plans said investment in health IT rose among participating physicians, compared with 14 percent two years before, according to the study.

Pilot pay-for-performance programs also have achieved cost-saving success. Last year, CMS concluded a four-year demonstration project involving 10 physician groups that, according to the agency, saved $38.7 million in Medicare expenditures. To date, the project has realized $98 million in savings, and its participants have qualified for more than $78 million in incentive payments.

"Based on what we have learned so far, we know the healthcare industry can meet high standards for improving quality of care while saving Medicare money," CMS Administrator Donald Berwick said when announcing those results.

If CMS is behind Medicare pay-for-performance programs, then I think it's likely here to stay--at least in the current dialogue of how to reduce healthcare costs while still improving quality of care and outcomes. Right?

But then there are studies like the one conducted by the Rand Corporation, which found medical disparities between poorer people and racial and ethnic minorities may increase with performance-based payments. Researchers concluded that average-sized physician practices serving the highest proportion of vulnerable populations received about $7,100 less annually than other practices. That difference could be even larger if greater amounts of money are put at stake in future pay-for-performance programs, the study authors said.

Other research shows that, rather than encouraging providers to shift resources toward overall quality improvement, pay-for-performance may instead only persuade providers to focus on narrow, incentivized areas. That's because they're only being rewarded for achieving specific health outcomes.

So, what's an insurer to do? Perhaps they should proceed with caution, fully recognizing the limitations of pay-for-performance and, when required to implement such programs, attempt to address the shortcomings