Pay-for-performance and accountability: related themes in improving health care.

The recent surge of interest in value-based purchasing, or pay-for-performance, reflects a shift from preoccupation with the dramatic and continuous increases in health care costs to increasing concern about getting value commensurate with cost (1). When designed effectively, pay-for-performance targets all 3 measures of clinical performance: clinical quality, efficiency, and patient satisfaction. Most early initiatives to pay health care providers for providing evidence-based services, such as nominal payments aimed at enhancing immunization rates, were modest and narrowly focused. Over the past 5 years, efforts to improve quality of care through financial and other incentives have increased dramatically. More than 100 such programs currently exist. Reviews of the literature about early pay-for-performance programs indicate that the benefits are, at best, modest and strongly influenced by design features, although recent experience with greater financial incentives suggests a greater effect on performance (25). When I started my career in the late 1970s as an academic internist and geriatrician, I was skeptical of pay-for-performance, feeling that standards of care could not accurately assess the real benefits of my care of my frail elderly patients with multiple impairments. I still feel that way today because despite the rapid growth of the evidence base, we continue to measure relatively simple aspects of the process of care rather than measuring outcomes. I also felt then that pay-for-performance was a thinly veiled effort to increase efficiency rather than quality. Subsequent experience as the leader of a large academic health science center and as chief executive officer of a major health insurer has led me to believe that pay-for-performance holds substantial potential for enhancing quality of care. Fueled by the emergence of increasingly good evidence and relentless pressure from government and private payers to provide value, I feel the time may come when a substantial portion of physician compensation in the United States will be pay-for-performancedriven. Although I feel a sense of urgency, I recognize that broad application of pay-for-performance will depend on more widespread adoption of the electronic medical record, where progress seems to be moving at a glacial pace despite the obvious advantage of universal agreement about its important role in improving the reporting of quality of care. The Medical Profession and Value-Based Purchasing The medical profession is making formal commitments to be accountable in response to the surge of interest in evidence-based medicine and concerns about overuse of health care services. These commitments provide a moral and professional rationale for physicians and physician organizations to support efforts to control costs, improve quality of care, and participate in pay-for-performance initiatives. The American Board of Internal Medicine Foundation, together with the American College of PhysiciansAmerican Society of Internal Medicine Foundation (now the American College of Physicians Foundation) and the European Federation of Internal Medicine, promulgated a physician charter on medical professionalism, including specific professional responsibilities and commitments. One commitment focuses on using better quality-of-care measures across the health system. A second commitment, relating to the just distribution of finite resources, states, While meeting the needs of individual patients, physicians are required to provide health care that is based on the wise and cost-effective management of limited clinical resources (6). Although these commitments are well aligned with the goals of pay-for-performance, they emanate from leaders of professional organizations and may not necessarily reflect the views of practicing physicians. Nevertheless, the results of a 2004 poll of a sample of 400 randomly selected physicians (90% in private practice, 7% hospital based, 83% men, and 47% in primary care) suggest that practicing physicians do support efforts to control cost and quality through value-based purchasing. Seventy-one percent of physicians supported payments based on the quality of care they provide, and well over 60% thought that hospitals should also be paid on this basis. Almost 90% of physicians thought that the current reimbursement system did not reward them for providing high-quality care, and 62% supported public access to information about the quality of care they provide. Not surprisingly, physicians also expressed some concerns about pay-for-performance, especially the difficulty of establishing standards and measuring quality and the possibility that standard setters may not place a high priority on patients' needs (7). Design of Value-Based Purchasing Initiatives The design considerations in developing pay-for-performance programs include the clinical setting; the patient population; the specific incentives; the targets of the reward and the amount of the reward; and, particularly, the standards of performance (8). In addition, reliable data are central to the success of pay-for-performance. From this perspective, progress depends on widespread adoption. Clinical Practice The greater the proportion of the practice that is influenced by the payer (for example, health plan, Medicare, or Medicaid) implementing a pay-for-performance initiative, the more incentive physicians have to respond to the initiative (9). The prevalent mode of payment in the practice is also critical. If the quality improvement target requires additional physician actions (for example, tests, prescriptions, or reports), the likelihood of effectiveness in a practice setting in which these services are paid for individually will be greater than in a capitated practice. Conversely, capitated practices with salaried physicians would more easily adapt approaches aimed at reducing overuse of services. The patient population could affect the likelihood of success. Access to health care varies depending on race and ethnicity. Disparities in access might influence the effectiveness of pay-for-performance initiatives in groups with limited access (10). Target of the Incentive Incentive programs often pay only for superior performance. This approach runs the risk of merely redistributing funds from lower-performing physicians to superior performers without changing performance. Improving the overall quality of care in the community requires approaches that reward improvements even though the resulting performance may not be superior. Rosenthal and colleagues (11) described a health plan initiative that generously rewarded the highest-performing groups even though their performance did not change from its pre-incentive level. Lower-performing groups that improved received very modest payments. This type of experience can quickly erode support for pay-for-performance efforts. Programs should reward the level of performance and sustained improvement (12). Form of the Incentive Incentives come in different forms. Selection of the most effective incentive is influenced by many factors, including the magnitude of change that the pay-for-performance initiative requires to qualify for the reward. For instance, if the requirement for change is modest, a noncash incentive, such as lessening administrative burdens, may be effective. Channeling patients to preferred providers provides financial benefit to physicians but does not increase the unit cost to the payer. Reputational incentives include making providers' process or outcome results available to patients. To date, public release of information has not significantly affected patient decision making about choosing a physician or health plan (8, 13). Cash Incentives An important issue for cash incentives, whether increased fees or bonuses, is the target of the payment. Payments are generally directed toward physicians, disease management entities, hospitals, or clinics. Because many initiatives relate to the performance of interdisciplinary clinical teams, especially for high-quality care for patients with chronic disease or those receiving complex treatment regimens, fair allocation of rewards across team members is important. Payers can reward patients for going to the best providers by lowering the amount they have to pay out-of-pocket. How much should be paid? In a review of the U.S. experience, where most incentives are modest, the Agency for Healthcare Research and Quality failed to identify a consistent relationship between the magnitude of the incentive and the response (3). Most health plan efforts include financial incentives of less than 10% of physician income. The British National Health Service (NHS) has implemented a very substantial incentive for general practitioners, through which physicians can receive up to 25% of their income from quality-of-carebased incentives, a far greater commitment to performance-based payment than seen to date in the United States. Early results from this effort are discussed later in this article. Development of Standards of Performance To be acceptable to physicians, quality measures that will determine their rewards must be evidence-based; based on reliable, aggregated, observable performance information; transparent; and clinically important (14, 15). Many advocate a graded approach, starting by paying for merely reporting data rather than for specific levels of performance. In more advanced approaches, quality metrics include patient satisfaction, health care processes, adoption of computerized physician order entry in hospitals, and health outcomes, either alone or in combination. Should metrics be simple or complex? Most current standards are simple. They state a basic clinical service that all patients with a certain condition should receive, such as prescription of -blockers after myocardial infarction. Approximately 5% of patients are responsible for 50% of health care costs. They are typically