Does Pay-for-Performance Improve the Quality of Health Care?

In the report Crossing the Quality Chasm (1), the Institute of Medicine called attention to the poor quality of health care in the United States. The Institute identified numerous factors contributing to poor quality, including the structure of the present health care payment system. The Institute found that, for certain clinical situations, health care payment arrangements may actually produce disincentives for quality. The largely untapped potential of the health care payment system to change physician and health care system behavior has stimulated interest in both the scientific literature (2, 3) and the popular press (4-6) for linking payments to performance on quality measures. Several health plans (3, 7) and the Centers for Medicare & Medicaid Services are using explicit financial incentives for quality (8, 9). The effectiveness of these programs has not been systematically evaluated, and despite enthusiasm about the potential for aligning financial incentives with high-quality health care, many fundamental questions about their optimal design, effectiveness, and implementation remain unanswered. For example, what types of clinical conditions or health care services should be the target of financial incentives to improve quality: chronic diseases, acute care, or preventive care services? How effective (and cost-effective) are financial incentives for quality? What are the optimum magnitude, frequency, and duration of financial incentives for quality? Should we reward achievement of an absolute threshold of performance, improvement over baseline performance, payment for each instance of a service regardless of the overall performance, or some combination of these? To whom should such incentives be directed: the patient (10), the health care provider, the provider group or hospital, or all of these parties? What types of quality measures should be rewarded: processes of care, outcomes, or both (11)? Are financial incentives for not providing inappropriate care (such as antibiotics for uncomplicated acute upper respiratory illnesses) effective? What is the optimum package of nonfinancial interventions (if any) to include with financial incentives for quality, for example, audit and feedback, recognition, clinical reminders, academic detailing, or information technology support (12, 13)? Can we expect the effect of financial incentives to persist after they are stopped? Because any effective intervention will have some unanticipated effects, will important patient care activities that are not rewarded financially be neglected? The purpose of this paper is to assess the relationship between explicit financial incentives and the provision of high-quality health care by systematically reviewing empirical studies. Because the evidence regarding the relationship between the financial incentives embedded in fee-for-service and capitation arrangements and the quality of health care has been thoroughly reviewed in previous work (14), we focused our review on literature that addresses explicit financial rewards for improving health care quality. Methods Study Identification and Selection We conducted a systematic search of the English-language literature in PubMed to find articles published between 1 January 1980 and 14 November 2005 whose main objective was to assess the use of explicit financial incentives to improve health care quality. Our search algorithms combined Medical Subject Heading (MeSH) terms and text words. We used the following MeSH terms: quality of health care; insurance, health, reimbursement; physician incentive plans; and reimbursement, incentive. We designated words and word phrases as text word terms in our search algorithms to ensure that all words in the title, abstract, MeSH terms, and MeSH subheadings that matched our words were extracted from the electronic database (15). We indicated the following words and phrases as text word terms in our search: quality, quality of care, payment, payment system, reimbursement, risk adjustment, physicians, financial incentives, financing, incentive, health care, bonus, insurance, performance-based, and fees. We reviewed additional publications found in bibliographies of retrieved articles, and we contacted experts about missing or unpublished studies. We included only English-language studies that reported original data. We were interested in identifying studies of explicit financial incentives directed at individual physicians and provider groups, as well as incentives at the level of the payment system, such as performance-based contracting. Eligible studies assessed the use of financial incentives as the independent variable and a measure of quality (such as immunization or cancer screening) as the dependent variable. Quality of care was defined as the degree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge (16). The domains of quality were defined as access to care, structure of care, process of care, outcomes of care, and patient experience of care. Access to care is the patient's attainment of timely and appropriate health care. Structure of care is a feature of a health care organization or clinician relevant to the provision of health care. Process of care is a health care service provided to or on behalf of a patient. Outcome of care is a health state of a patient resulting from health care. Experience of care is the individual's or population's report concerning health care (17). Study Inclusion Criteria Studies were eligible for review if they were original reports providing empirical results and assessed the relationship between the explicit financial incentive and a quantitative measure of health care quality (17). Reviewers assessed articles in an unblinded, standardized manner (18, 19). At least 2 authors reviewed the title and keywords of articles' PubMed citations to identify empirical studies. At least 2 authors then reviewed the abstracts of those studies to determine eligibility. All authors then abstracted and reviewed the full articles that addressed the objective of the review. When there were discrepancies, all authors met to discuss and reach consensus about article inclusion. There were no instances of disagreement in which consensus could not be reached. We excluded eligible studies if there was no concurrent comparison group or if there was no baseline, preintervention analysis of the groups on the quality measure. Concurrent comparison groups are important because some studies of quality may show dramatic improvement over time but no statistically significant differences between intervention and comparison groups. We included randomized, controlled trials and controlled before-and-after studies. Because of the paucity of literature on this topic, we also included observational studies that, although not studying a specific intervention, nevertheless examined the relationship between financial incentives and quality in a cross-sectional analysis. We categorized the results of each study according to the effect of the financial incentive on the measure or measures of quality. Positive studies were those for which all measures of quality demonstrated a statistically significant improvement with the financial incentive. Studies with partial effects showed improved performance on some measures of quality but not others. Negative studies were those for which all measures of quality demonstrated a statistically significant decrease in quality with the financial incentive. The final category was for studies demonstrating no effect. We used a checklist for methodologic quality published by Downs and Black (20). After we assessed the checklist for each article, a grade of 1 (poor) to 4 (excellent) was assigned to each included article. We did not use formal meta-analytic techniques because the included studies used many different measures of effect. Role of the Funding Sources The Veterans Health Administration, the Robert Wood Johnson Foundation, the American Heart Association, and the National Institutes of Health supported this study but had no role in design, conduct, or reporting or in the decision to submit the paper for publication. Results Search Results Our search for eligible studies is summarized in the Figure. Most of the articles were descriptions and not evaluations. Sixteen articles (21-36) that met the eligibility criteria were subsequently excluded because a concurrent comparison group was not analyzed or groups were not compared at baseline on the quality indicator (Table 1). The Appendix Table summarizes the 17 included studies. Two studies reported the effect of payment-system level financial incentives (37, 38). The remaining 15 studies evaluated financial incentives directed to the provider group (39-47) or individual physician (48-53). Appendix Table. Articles Identified as Assessing Explicit Financial Incentives and Health Care Quality from a Systematic Review of the Literature after Applying Study Inclusion and Exclusion Criteria Figure. Studies published between 1 January 1980 and 14 November 2005 and evaluated for inclusion in the systematic review of explicit financial incentives for health care quality. Table 1. Excluded Articles and Reason for Exclusion Financial Incentives at the Payment System Level We found 2 studies of financial incentives provided at the payment system level (37, 38). For example, Norton (37) studied the effectiveness of an incentive to improve access to health care for nursing home patients with debilitating acute and chronic conditions. The program included incentives to admit severely dependent patients, incentives for attainment of health status goals, and an incentive to discharge clinically appropriate patients. The intervention sites admitted statistically significantly more severely ill patients than nursing homes in the control group. Despite the administra