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Medicare Compliance & Reimbursement

P4P:

Paying Medicare Physicians For Performance Doesn't Make Sense, Researchers Claim

Published on Tue Mar 13, 2007

Hospitals thrive but primary care applications falter.

The concept of paying for performance in health care promises to reduce inefficiencies and costs simultaneously, but the benefits derived in hospital settings may not extend to primary care practices, according to several new reports on the subject.

The move to a pay-for-performance (P4P) health care system has affected nearly every facet of the industry. More than 50 percent of the country's HMOs, representing more than 80 percent of HMO enrollees, have instituted P4P programs, report Ashish Jha and Arnold Epstein of the Harvard School of Public Health. In addition, the Centers for Medicare & Medicaid Services (CMS) is running a three-year evaluation of P4P on hospital care, and Congress recently mandated that CMS incorporate P4P into Medicare, Jha and Epstein said in a statement.

Although the plethora of programs already in place suggests that P4P has already established itself as a proven means of cost-reduction, a new article from the New England Journal of Medicine implies that while paying for performance may work in hospitals, it does not significantly alter the cost or quality of care in primary care settings.

In hospitals, paying for performance has provided incentives that may be responsible for lowering morbidity rates and length of stay (LOS) times, according to a new report from the Commonwealth Fund.

"Hospitals are indeed becoming better at saving lives through better diagnostic techniques, early interventions, better treatments, more effective rescue efforts, reductions in errors and other initiatives," the report concludes. And these improvements come largely as a result of public demand for more efficient hospitals. "A steady, significant reduction in risk-adjusted LOS over time seems primarily to reflect ongoing financial pressures on hospitals to reduce costs," the report says.

Some industry insiders have expressed concern that the economic pressures of the P4P system imposed on hospitals may negatively impact the quality of care, but at least one data set cited in the report rejects the conclusion that decreased LOS time leads to the discharge of sick patients who will have to be readmitted.

"An examination of the CareScience private data (the public databases do not permit examination of readmissions) shows a basically flat readmission trend line, suggesting that the readmission rate has not significantly changed in the three years studied," the report states.

In Medicare primary care settings, paying for performance does not appear to boost quality or efficiency, largely because Medicare patients switch primary care physicians frequently and often need to consult with specialists. Only 35 percent of Medicare beneficiaries' visits each year resulted in a meeting with their assigned physician, the NEJM article reveals.

This dispersion of care to several different doctors creates additional administrative costs that negate the potential efficiencies of a P4P system, according to the report from a team of investigators led by Dr. Hoangami Pham.

After analyzing 1.79 million fee-for-service claims, Pham's team concluded that paying Medicare physicians for performance makes little sense. "In fee-for-service Medicare, the dispersion of patients' care among multiple physicians will limit the effectiveness of pay-for-performance initiatives that rely on a single retrospective method of assigning responsibility for patient care," the researchers discovered.

Still, Pham's findings should not wholly discourage proponents of P4P systems. Paying for performance clearly works in hospital settings; in fact, the leadership teams from four highly regarded hospitals recommended additional policy changes "supporting pay-for-performance programs that use 'carrots' (rewards) rather than 'sticks' (penalties)," according to the Commonwealth report.

In the face of both positive and negative outcomes from the many P4P trials currently underway, the lesson to be learned seems clear: While paying for performance might increase quality of care and cost efficiencies in some settings, policymakers should not look to it as a cure-all panacea. P4P systems are a part of the solution, but only a part; in primary care settings for Medicare patients, industry experts have yet to discover the most effective methods of increasing efficiency.

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