April 2006: Point/Counterpoint on Pay for Performance

Robert M. Centor, MD; Michael S. Barr, MD


April 19, 2006

In This Article

Counterpoint: Quality Measures and Pay-for-Performance

On "Counterpoint" we welcome Michael S. Barr, MD, MBA, FACP, Vice President, Practice Advocacy & Improvement, American College of Physicians.

Pay-for-performance (P4P), pay-for-quality, pay-for-reporting -- these are all terms that, for many physicians, elicit as much enthusiasm (perhaps even less) as getting paged in the middle of the night to treat a common cold. However, for better or worse, this is one of the hot topics in reimbursement for medical care. Not only is P4P a third-rail topic unto itself, but it involves other such notable issues and buzzwords as payment reform, quality improvement, patient safety, healthcare costs, efficiency, and value. P4P is often coupled with phrases such as "value-based purchasing," "evidence-based benefit design," "consumer-directed healthcare," and "performance measures" -- just to name a few. All of these terms relate in some way to assessing quality and cost, and using the resulting information to develop alternative means of directing patients and compensating physicians.

The Institute of Medicine report from 2001, Crossing the Quality Chasm,[1] laid out 6 aims for 21st century healthcare, and another report, published in 1999, To Err is Human,[2] reported a very high number of avoidable deaths from medication-related errors. The key messages of these reports, as well as subsequent studies, are that there are gaps in the quality of care and health disparities across different populations of Americans, and that higher cost does not equal better care.[3] The Commonwealth Fund Medicare Chartbook illustrates an inverse relationship between the cost of care and quality of care across the United States -- that is, quality was highest in the lowest-cost regions -- and the lowest quality was associated with the highest cost. The annual cost of care for a Medicare beneficiary in Hawaii, one of the highest-quality states, was around $4000, whereas prior to Hurricane Katrina, the cost of care for an average Medicare beneficiary in Louisiana was $8000 - and this was the state where the lowest quality of care was measured.[4]

In addition to data demonstrating the variability of healthcare costs and quality across the United States, double-digit growth in public expenditures on programs such as Medicare and Medicaid, as well as rising private sector healthcare premiums, have led employers to insist on "value" for the money they spend on healthcare. Over time, payers have introduced performance and efficiency measures as a condition of contracts, have created pay-for-performance programs, and have begun to use physician-specific performance data to inform consumers. Payers are now generating evidence-based benefit designs to direct patients to physicians who are perceived to be delivering higher quality for lower cost.[5] Congress tried to introduce value-based purchasing at the end of 2005 and is likely to revisit this in 2006 by linking calls for reform of the current sustainable growth rate formula for setting Medicare payment rates to acceptance of accountability for quality. In November 2005, the Centers for Medicare and Medicaid Services (CMS) announced the Physician Voluntary Reporting Program (PVRP). The PVRP may form the basis for a pay-for-reporting program by late 2006 or 2007.[5]

Over the next few years, it is likely that an increasing portion of physician payments will be based on achieving measurable quality improvements. There is no single model.[6,7] However, programs will require physicians to demonstrate value by reporting their performance based on quality, efficiency, and patient experience measures. CMS will likely tie elements of reimbursement to physicians' willingness to be held accountable to these measures and to report to the public on the results. Performance measurement data will be used to generate publicly available reports on quality -- and patients will select physicians who are guided by those reports.

Many physicians have indicated significant concerns about P4P, and rightfully so. The challenge, however, is for physicians to reframe their thinking so that they consider the external realities motivating change in healthcare and the perspectives of consumers, purchasers, and payers - remembering that when physicians aren't wearing white coats, they are also consumers and purchasers of healthcare. Although healthcare professionals probably do not think of medical care as being ranked the way consumer products are, it is probably fair to say that people outside of healthcare are not as quick to make that distinction. There are already over 100 private-payer pay-for-performance programs covering more than 40 million patients, and consumer-directed health plans are becoming more popular with employers.[8] These numbers will continue to increase.

In response to the changing environment, the American College of Physicians (ACP), American Academy of Family Physicians (AAFP), America's Health Insurance Plans (AHIP), and the Agency for Healthcare Research and Quality (AHRQ) convened the Ambulatory Care Quality Alliance (AQA) in 2004. The AQA charge is to "improve healthcare quality and patient safety through a collaborative process in which key stakeholders agree on a strategy for measuring performance at the physician level; collecting and aggregating data in the least burdensome way; and reporting meaningful information to consumers, physicians and other stakeholders to inform choices and improve outcomes." A full discussion of the AQA is beyond the scope of this brief article, but all documents are made public on the AQA Web site. It is now a large multi-stakeholder organization that is developing principles and guidance for private and public payers on performance measurement, public reporting, and data aggregation. Medical professional societies such as the ACP and AAFP were able to leverage the work of the AQA to influence CMS to modify the original PVRP set of measures for primary care and the methodology by which CMS intends to collect measurement data.

Healthcare providers and health systems are being pushed to accept accountability for costs, quality, and the variation in the relationship between cost and quality -- which some refer to as efficiency. Pay-for-performance is not the answer to the dysfunctional payment system. However, it is one mechanism being promoted by consumers, purchasers, and payers. If done correctly, P4P could provide better alignment between those physicians who are effective at improving care by investing in the infrastructure to provide that enhanced care -- and at least some marginal recognition in the form of compensation for those services. The ultimate goal, however, is to redesign the reimbursement system and move away from the fragmented, episodic, illness-oriented fee-for-service model, to one that recognizes the value of patient-centered, physician-guided care. This model would acknowledge that quality is enhanced when coordination of care, investment in health information technology, and accepting accountability for documenting improvements in quality are supported by compensation commensurate with effort -- a component of which would be pay-for-performance.


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