Pay-for-Performance Initiatives: Modest Benefits for Improving Healthcare Quality

Pay-for-performance initiatives have been suggested as a way to improve the quality of patient care and provide incentives to improve providers' performance. The Centers for Medicare & Medicaid Services has endorsed such programs to improve quality of care.

To examine the state of quality initiatives endorsed by the Centers for Medicare & Medicaid Services in which institutions, provider groups, and physicians are awarded incentives based on adherence to composite metrics.

A literature search was conducted using the keywords "pay-for-performance," "quality improvement," "medical errors," and "physician incentive plans."

Although quality of care has improved in healthcare settings that engage in pay-for-performance initiatives, what can be attributed to payer-incentive programs is uncertain. Studies demonstrate that, of the 25 hospitals classified by the Centers for Medicare & Medicaid Services to be in the lowest decile of quality improvements, all still made significant progress in adhering to quality metrics after participation in the study. Financial rewards, however, were distributed based on a predetermined threshold established by the Centers for Medicare & Medicaid Services to be given only to participants who fell in the top 2 deciles. Penalties were incurred by the 51 hospitals that were within the bottom 2 deciles despite making substantial improvements. At such institutions, large minority communities and Medicaid populations comprise the patient populations. Other pay-for-performance schemes, such as employer-based purchasing, consumer health-spending accounts, and collaborative groups, were studied, with little data to support definite benefits.

Examining rates of improvement in adherence to pay-for-performance initiatives when determining how to distribute financial rewards should be studied alongside the current classification by absolute deciles. By rewarding rates of improvement, potential elimination of quality disparities for hospitals that serve large Medicaid and minority populations can be achieved, because such organizations are encouraged to invest in quality improvement as a result of substantial progress made. Although alternative strategies like employer-driven value-based purchasing and collaboratives seem promising, the long-term effects of such initiatives still need to be studied. Creating greater financial incentives for individual providers to participate in pay-for-performance programs for many years to come will remain a challenge.