P4P programs have modest impact, need better design
Pay-for-performance (P4P) programs for hospitals and physicians, often linked to public reporting, have modestly improved the quality of care delivered, according to a RAND Corporation study released Aug. 9 at a Capitol Hill briefing.

Brian M. Stecher, PhD, and colleagues found that the size and nature of the incentive is an important factor in the overall success of the program. For example, in many healthcare P4P programs, the potential financial rewards represent a small percentage of the overall physician pay and, as a result, may not serve as a strong incentive.

The study found that a strong knowledge base about the drivers of performance helped create consensus about who should be held accountable for what. However, there were often differences of opinion about the desirability and general contours of P4P programs and they are often created in spite of a lack of consensus about key issues.

Conflicts arose regarding the most appropriate people to target for behavioral change through P4P programs. For example, should the focus be on the physician, the practice site, the larger medical group, or an integrated delivery system of physician groups and hospitals? Generally, service providers prefer to be held accountable only for those aspects of service production over which they have clear and direct control.

Designers of P4P programs typically avoided measures that would be very expensive to collect (unless the measures were already captured for some other purpose). For example, the most detailed and complete outcome measures would require costly manual review and data extraction from numerous medical charts; accordingly, many P4P programs instead used less expensive surrogates (e.g., measures of inputs or outputs).

Stecher said there are several elements that contribute to an effective P4P program, including establishing goals that are widely shared among the groups involved in the program, providing clear and observable measures and providing incentives that apply to individuals or organizations that have control over the process.

The study makes several recommendations to developers of performance-based accountability systems, including:
  • Realize that performance-based accountability systems are not always the best option for improving performance. Designers must consider those factors that may hinder or support a system's effectiveness.
  • Determine if the performance measures are at the individual, department or organizational level.
  • Make the performance rewards large enough to matter, but not larger than the actual benefit of the improved performance.
  • Create measures that people can influence. Do not hold people accountable for problems outside of their control.
  • Implement the program in stages to allow for opportunities to modify the program as needed, and to identify and fix shortcomings in the program.
  • Monitor and evaluate the program. This is the only way to detect problems and improve the accountability system over time.

The study concludes that P4P programs represent a promising policy option for improving the quality of service-delivery activities in many contexts, and the evidence supports continued experimentation with and adoption of this approach. However, the prospects of effectiveness for a P4P program are highly dependent on the context in which it is to be implemented. Thus, careful attention should be paid to selecting an appropriate design for the P4P program and to monitoring, evaluating, and adjusting the system, as appropriate.

In the U.S., there are more than 40 hospitals and more than 100 physician/medical group P4P programs, according to the study.