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Return on investment in pay for performance: a diabetes case study
Kathleen Curtin1, Howard Beckman, George Pankow
1Client Services, Med-Vantage, San Francisco, USA. kcurtin@medvantagenic.com
Summary
Pay-for-performance programs in healthcare can yield a positive return on investment (ROI). This study demonstrates significant cost savings and a favorable ROI for a diabetes care initiative within a health maintenance organization (HMO).
Area of Science:
- Health Economics
- Healthcare Management
- Quality Improvement in Healthcare
Background:
- Rising healthcare costs necessitate innovative reimbursement models.
- Pay-for-performance (P4P) programs shift focus from volume to quality adherence.
- Limited data exists on the financial return on investment (ROI) of P4P initiatives.
Purpose of the Study:
- To compare the costs of implementing a P4P program with its resulting cost savings.
- To determine the ROI of a P4P program for diabetes care within a health maintenance organization (HMO).
Main Methods:
- A five-year partnership (2000-2004) between a health plan and an independent practice association (IPA).
- Performance scores reported at the individual physician level for quality, patient satisfaction, and efficiency.
- Financial analysis comparing program costs with diabetes care savings.
Main Results:
- Annual program cost: $1,150,000.
- Diabetes care savings: $1,894,471 in 2003 and $2,923,761 in 2004.
- ROI: 1.6:1 in 2003 and 2.5:1 in 2004.
Conclusions:
- This study reports the first positive ROI for an HMO-based P4P program.
- P4P programs, specifically for diabetes care, can be financially beneficial.
- The findings suggest that investment in P4P programs is a worthwhile endeavor.
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