Pay for Outcomes Has Mixed Outcomes

David Wagner, Managing Editor | 3/30/2012 | 14 comments

David Wagner
One of the leading changes in the healthcare industry lately has been a movement to “Pay for Outcomes,” also known as “Pay for Performance” (P4P) or “Value-based Purchasing.”

If healthcare reform survives Supreme Court review, Medicare will begin changing the way it pays providers to reflect this new trend. Either way, many hospitals and industry experts see some form of pay for performance becoming standard in the medical industry.

But a recent study shows that actual effect of pay performance may not be better than traditional methods.

The concept behind paying for outcomes is fairly straightforward. Hospitals would be judged on whether they meet certain basic quality of care measures (for instance, whether a heart attack patient was issued beta blockers in a timely fashion). Patients (and insurers) would no longer pay for each itemized service or procedure. The belief is this would lower unnecessary procedures and put the focus back on the patient. Usually, incentives in the form of monetary bonuses are a part of the process to encourage quality of care. Medicare, for example, will penalize poor performing hospitals 1% and create a “bonus pool” for high-performing hospitals.

But a recent study published in the New England Journal of Medicine showed there was no difference in the mortality rate of hospitals using some form of value-based pricing and hospitals using traditional pricing. It didn’t matter if the hospital was already a low-performance or high-performance hospital. And hospitals that were only piloting P4P in certain types of conditions saw no difference between value-based priced conditions and non-value priced.

Considering the high amount of IT intervention to run a program like this, CIOs have to wonder what the point is. It sounds even worse when you read that a study in the Journal of American Medicine concluded that the biggest outcome for performance-based pricing is that already high-performing doctors were being paid better, but that in many cases, outcomes weren’t improving in those below the baseline. In other words, we end up paying more for the same standard of care.

If this is the case, why do we keep trying? This article shows that the hospitals in the New England Journal of medicine weren’t trying to directly lower mortality so much as improve the steps of care in the process. Granted, that seems silly, but it makes sense. Good care can’t necessarily prevent death. But it can lower mistakes, make patients feel better about their care, and improve chronic care, which is some of the most expensive and common type of medical care.

In the case of the Medicare payments, 70 percent of the incentives offered will be “process oriented,” meaning they will track whether medication was given in a timely fashion. P4P has been shown to improve these types of standard care. If P4P becomes more widely spread, one could assume that, eventually, mortality rates (or at least preventable mortality rates) will lower, and chronic care will lower in cost, due to more patients better controlling their conditions.

In the meantime, we’re having difficulty measuring the success of these programs. That’s bad news for CIOs who have to continue to track a rather highly complex set of criteria (that sometimes includes patient surveys as well as applications to pull data from EMR to track outcomes).

The best CIOs can do right now is to take the word of P4P proponents like Dr. Ashish Jha, professor at Harvard’s School of Public Health and author of the New England Journal of Medicine study. “Pay for performance is really important. This [report] says to me that we haven’t figured out the pay part, or the performance part,” said Jha.

For CIOs' sakes, let's hope they do figure out how P4P works, since Medicare will start using it as its standard in October of this year.

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David Wagner   Pay for Outcomes Has Mixed Outcomes   3/30/2012 5:32:56 PM
Re: Measuring success
@syedzunair- You're right that we might need multiple scenarios here. But the problem with that is that you can easily end up restricting innovation in care. For instance, if I pay you simply on whether the patient died, then you'll do what you can to keep them alive. If i pay you for the same treatment but base it on whether the patient gets a particular drug and a particular time, and you use the standard procedure, then the doctor who chooses to deviate form that path doesn't get paid or gets penalized in his pay.

Not a good idea right?

So, the problem with creating multiple scenarios is that the more you create the more chace you have of standardizing care in ineffective ways. We'll have to be very careful in creating them to avoid that.
syedzunair   Pay for Outcomes Has Mixed Outcomes   3/30/2012 3:54:28 PM
Measuring success
@David: It looks like a nice idea to pay for performance but I am not sure what metrics will be used to judge this success. There can be multiple metrics for multiple scenarios based on the complexity of the disease. Sometimes, just measuring success based on the final outcome might not be the right way, like you mentioned about the mortality rates. 

I think technology will play a pivotal role here in recording and setting up a matrix to reward hospitals/staff. 
David Wagner   Pay for Outcomes Has Mixed Outcomes   3/30/2012 2:30:06 PM
Re: Tricky...
@JPoe- You're right. Paying for excellence is something that sounds really good. But is excellence achieved by incentive? I often think the thing that drives excellence goes beyond money. But if excellent people aren't paid well enough for it, they might go do something else. tough challenge.
JPoe   Pay for Outcomes Has Mixed Outcomes   3/30/2012 1:40:31 PM
Tricky...
This will always be a controversial issue. I'm struggling with this, myself. In performance evaluations. In general, I'm an advocate of rewarding exceptional performance, and not rewarding those who perform poorly. Sounds simple. It's not.
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