FEATURE

Pay for Performance:
Latest Buzz in Quality Improvement

In the past few years, public reporting and pay-for-performance have emerged as promising mechanisms for quality improvement in both inpatient and outpatient settings. Dr. Peter Lindenauer and his colleagues, Drs. Michael Rothberg and Evan Benjamin, have published a study examining the effectiveness of pay for performance in the February 1st issue of the New England Journal of Medicine.

In a first-of-its-kind study, Lindenauer and his team studied the use of financial incentives in an inpatient setting – previous work focused on ambulatory settings. Using data from the Hospital Quality Alliance, they looked at the incremental effect of layering financial incentives on top of public reporting on 10 quality measures spread across 3 clinical conditions: acute myocardial infarction, heart failure and pneumonia. Hospitals in the top 2 deciles of performance received 1-2% bonus payments at the end of the year, while hospitals that underperformed ran a concomitant risk of financial penalties. Over 2 years, there was an absolute gain in quality of care of 2-5% per condition in the pay-for-performance group compared to public reporting only.

Dr. Lindenauer expects that proponents will use the results of the study to argue that pay-for-performance works and that the incentive scheme just needs to be tinkered with. In this study, hospitals that were already performing well received incentives though they showed little or no improvement, while many with dramatically improved performances received nothing. He questions whether those hospitals will lose interest if they continually fail to earn bonuses and believes there may be better ways to structure financial incentive programs to ensure longer term success.

It's these added complexities, Lindenauer says, that could prompt those concerned about financial incentives to ask whether their small extra benefits outweigh their costs.

Since it its likely that pay-for-performance will be implemented in a budget-neutral way, some have proposed offsetting incentive costs by imposing penalties on poor performers. “But the risk of doing that,” says Lindenauer, “is that hospitals caring for the poorest, underserved patients —the safety-net institutions— could be at highest risk for penalties. And this could exacerbate existing inequalities in care.”

These politically charged decisions will have to be addressed as Medicare prepares its “value based purchasing” plan for 2009. Lindenauer thinks this study will help them as they ask what did and didn’t work, and how can they make it more effective when it’s not just a 200 hospital demonstration, but fully implemented in 6,000 hospitals.