Paying for quality: health plans try carrots instead of sticks

Growing national attention to improving quality and patient safety is spurring development of quality-based financial incentives for physicians and hospitals. Health plans in particular are driving these pay-for-performance initiatives, according to findings from the Center for Studying Health System Change's (HSC) 2002-03 site visits to 12 nationally representative communities. For now, there is little standardization across plans in how quality improvement is measured, and incentive payments typically are modest in comparison with providers' total revenue. Nevertheless, today's nascent efforts can provide a foundation on which to build. Support from major plans and public and private purchasers, sufficiently large financial incentives properly aligned with base provider payment systems, and improvements in quality measurement can all help foster widespread provider acceptance and, ultimately, improvements in health care quality.