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Reimbursement and Pay-for-Performance

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Pay-for-performance programs have changed the way physicians provide care in many sectors of the health care industry. They impact reimbursement, especially in regard to Medicare and Medicaid. Pay-for-performance has effects on both the quality and efficiency of health care delivery, although its overall impact it a matter of debate. There are studies that show improvement in quality of care in some areas, and others that show no difference in outcomes. There may even be negative repercussions and ethical issues stemming from the enactment of these initiatives. The goal will be to revise and adapt the system within the evolving health care landscape in order to provide the best outcomes possible for both providers and consumers. Pay-for-performance

Pay-for-performance is an incentive program defined by the Health Care Incentives Improvement Institute as, “a term that describes health-care payment systems that offer financial rewards to providers who achieve, improve, or exceed their performance on specified quality and cost measures, as well as other benchmarks” (Pay for Performance, 2012). Pay-for-performance has become a popular tool to attempt to improve quality and efficiency in health care. It is becoming more widespread with the enactment of The Patient Protection and Affordable Care Act (PPACA), as it expands pay-for-performance programs. Long-term patient indicators are very difficult to measure, so performance measurement tools concentrate on short-term goals and chronic disease management benchmarks. Indicators may include specific chronic disease management markers, such as decreasing hemoglobin A1c levels in diabetic patients.

Other indicators include ensuring patients are receiving preventive care and alternatively, avoiding adverse outcomes (Carroll, 2014). The Institute of Medicine has found conflicting overall evidence regarding the success of pay-for-performance payments and has concluded there are potential downfalls if not utilized well. Some potential consequences include “decreased access to care, increased disparities in care, and impediments to innovation” (Shi & Singh, 2012, p. 490). According to Shi and Singh (2012), there are likely better incentive systems that could be developed to inspire and motivate a greater change in a more efficient manner. Pay-for-performance: Impact on Reimbursement

Pay-for-performance directly affects reimbursement by paying physicians based on outcomes, measured by a variety of indicators. One of the bigger challenges faced is that patients are not always following up with the same provider, so measurements of success or failure are unable to be accurately obtained, and reimbursement rewarded accordingly. Another challenge, according to Pham, Schrag, O’Malley, Wu, and Bach (2007) is that the financial incentives within the medical groups they studied were not lucrative enough to stimulate change in physician practice, and that in order to be more effective the incentives needed to be significantly higher. Those paying out the incentives though were reluctant to increase rewards because of inconsistent research that pay-for-performance produces positive outcomes (Pham, et al., 2007). There are many factors affecting the complicated reimbursement system and as Rosenthal (2006) points out, all forms of reimbursement influence care provided in some way or another.

“In whatever setting it is introduced then, pay-for-performance alters the financial incentives that influence physicians (either consciously or unconsciously) and should be considered in light of existing incentives that either reinforce or deter delivery of services” (Rosenthal, 2006, p. 164). Due to the complex nature of our health care system, extremely careful consideration must be given to any changes within the reimbursement system that may affect patient access, quality, or efficiency of care. It is also important to recognize areas that can be improved upon and be open to adapting our system to meet consumer demands and stay aligned with societal values. System Cost Reductions: Impact on Quality and Efficiency

Carroll (2014), makes an excellent point that “One of the reasons that paying for quality is hard is that we don’t even really know how to define “quality.” What is it, really?” He goes on to say, “it’s very hard to measure the things we really care about, like quality of life and improvements in functioning.” This is important to take into consideration with respect to the monitoring and specific measurements used for reimbursement. There has been very little data that pay-for-performance has had any overall cost reductions, and there is evidence that suggests negative outcomes, such as doctors avoiding high-risk patients because of the risk for decreased reimbursement. There have been some studies that have shown improvement in care with regard to particular outcomes, but these results have been inconsistent with between different health care providers (Rosenthal & Frank, 2006).

Pay-for-performance: Impact in Regard to Providers and Customers The goal of pay-for-performance programs is to incentivize doctors and health care providers to provide excellent, evidence-based care. This system works best if patients have one primary doctor that they follow-up with regularly. Unfortunately, As Pham, et al. (2007) found, “Typically, beneficiaries see many physicians, and no more than half their visits are with physicians or practices to which they would be assigned under current pay-for-performance models” (p.1132). One problem is that even doctors who perform their duties according to pay-for-performance standards don’t have control over their patient’s personal choices or compliance to prescribed therapies.

Another potential negative impact on customers is that providers may deselect patients whom they don’t think they can meet pay-for-performance goals and thus would negatively affect them financially. Rosenthal (2006), makes an excellent point that “If it is to succeed in promoting patient health and value for the health care dollar, pay-for-performance will require careful design and effective safeguards against potential unintended consequences including those associated with patient selection incentives” (p. 164). The patients at highest risk for de-selection are often those in groups already at risk for inadequate health access and care. Patients who are uneducated regarding the health care system, those struggling financially, and certain ethnic groups are more likely to have decreased access to care in a pay-for-performance system (Cannon, 2006). Pay-for-performance: Impact on the Future of Health Care

With the enactment of the Affordable Care Act there has been expansion of pay-for-performance programs in order to attempt to improve quality of care, although lawmakers themselves acknowledge the lack of evidence regarding its efficacy (Shi & Singh, 20012). Nix (2013), makes the argument that “The new Medicare initiatives contained in the PPACA, or Obamacare, fail to alter the systemic factors that are responsible for quality issues in the first place. They are thus unlikely to have the desired effects on provider behavior” (p. 1). As the PPACA changes the health care marketplace, hopefully adaptations are made based on current research in order to improve care. As research has already shown modest to no improvement overall with pay-for-performance programs, hopefully changes can be implemented to improve upon the system, or move in a different, more efficient direction. Conclusion

Pay-for-performance, like many health care trends, has both its upsides and downsides. Pay-for-performance is increasingly used as an innovative tool intended to improve efficiency and service quality in the United States, and around the world. In theory, pay-for-performance has the potential for positive impact, although evidence is inconclusive at this point that Pay-for-performance improves quality of care or health outcomes overall. Rosenthal (2006) summarizes the issues well in saying, “It is reasonable to conclude therefore that pay-for-performance can positively affect quality of care, but payors have a lot to learn about how to do so effectively” (p. 162). We need to remember that every person has different health care needs, and treatment should be tailored on an individual basis in order to provide the most efficient, ethical care. Pay-for-performance can be a tool to better outcomes for patients while increasing profit for physicians and hospitals, but only if proper safeguards are in place to ensure that potential downfalls are not overlooked.


Cannon, M. (2006). Pay for performance: Is Medicare a good candidate? Yale Journal of Health Policy, Law, and Ethics, 7(1), 1-38. Retrieved from http://object.cato.org/sites/cato.org/files/articles/cannon_p4p.pdf Carroll,
A. E. (2014, July 28). The new health care: The problem with ‘pay for performance’ in medicine. New York Times. Retrieved from http://www.nytimes.com/2014/07/29/upshot/the-problem-with-pay-for-performance-in-medicine.html?_r=1&abt=0002&abg=1 Nix, K. (2013). What Obamacare’s pay-for-performance programs mean for health care quality. Retrieved from http://www.heritage.org/research/reports/2013/11/what-obamacares-pay-for-performance-programs-mean-for-health-care-quality#_ftnref22 Pay for performance- Models. (2012). Health Care Incentives Improvement Institute. Retrieved from http://www.hci3.org/content/pay-performance-models Pham, H., Schrag, D., O’Malley, A., Wu, B., & Bach, P. (2007). Care patterns in Medicare and their implications for pay for performance. The New England Journal of Medicine, 356(11), 1130-9. Retrieved from http://search.proquest.com.contentproxy.phoenix.edu/docview/223924155?pq-origsite=summon Rosenthal, M. (2006). How will paying for performance affect patient care? AMA Journal of Ethics, 8(2): 162-165. Retrieved from http://journalofethics.ama-assn.org/2006/03/pfor1-0603.html Rosenthal, M., & Frank, R. (2006). What is the empirical basis for paying for quality in health care?. Medical Care Research and Review, 63(2): 135-57. Retrieved from http://mcr.sagepub.com/content/63/2/135 Shi, L., & Singh, D. A. (2012). Delivering health care in America: A systems approach (5th ed.). Retrieved from The University of Phoenix eBook Collection database.

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