Pay for Outcomes Has Mixed Outcomes

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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.