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.

View Comments: Newest First | Oldest First | Threaded View
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The_Phil   Pay for Outcomes Has Mixed Outcomes   4/7/2012 10:14:44 AM
Re: Measuring success
Maybe not in the ER since it is mostly ciritcal situations involved. But in regular check-ups and non-critical visits, it might. They may wonder whether it's profitable to offer one medication over another OR push something they're not truly behind just to pay their bills. Sad but true.
David Wagner   Pay for Outcomes Has Mixed Outcomes   4/2/2012 3:56:10 PM
Re: procedure over patient
@kstaron- i suppose that's what might end up happening. But the goal is not the same as teaching to the test. The goal is to prevent bill padding. And the goal is stop paying doctors the same whether they care or whether they don't and whether they succeed and whether they don't.

But you're right, what ends up happening is that the execution is poor. This is being lead mostly by the medical community though so they seem to think they can get it right.
kstaron   Pay for Outcomes Has Mixed Outcomes   4/2/2012 2:43:17 PM
procedure over patient
This sounds suspiciously like standardized testing for healthcare. Which leads to 'teaching to the test'. If a doctor has to worry about the procedure for care more than the patient, will that really improve healthcare?
David Wagner   Pay for Outcomes Has Mixed Outcomes   3/31/2012 10:53:27 PM
Re: Measuring success
@the_Phil- I think it is fair to say that if ANYONE does they do. I'd hate to think I'm in the ER and I'm bleeding out and there's even a tiny bit of the doctor worried about the medicare payment for his insitution if he deviates from the standard of care. I hope they wouldn't. But at some point the best doctors in the toughest situations shouldn't be penalized by some administrator for trying to save my life.
David Wagner   Pay for Outcomes Has Mixed Outcomes   3/31/2012 10:51:30 PM
Re: Measuring success
@syedzunair- My biggest problem with medical compensation not the method we choose so much as the expectation from doctors that they should be paid gigantic sums of money. I know they go to school a long time, but they seem to feel entitled to live a CEO's life for doing a job that is mostly routine with rare exceptions. They're glorified mechanics in my mind.

I get annoyed by their snobbery and elitism. Regardless of how we pay them, i think they shold make half of what they do at least. But that is completely personal feeling not based on any theory of the best way to run a medical system.
Skr2011   Pay for Outcomes Has Mixed Outcomes   3/31/2012 9:50:49 PM
Re: Tricky...
@JPoe  What makes it complicated?
Damian Romano   Pay for Outcomes Has Mixed Outcomes   3/31/2012 1:58:52 PM
Re: Measuring success
@syedzunair - Without a doubt something needs to change with respect to the healthcare industry. I tend to like the P4P concept. But as David noted, implementing, maintaining, and substantiating this is, well, the hard part.
The_Phil   Pay for Outcomes Has Mixed Outcomes   3/31/2012 10:13:46 AM
Re: Measuring success
"...doctors know best when to opt for standard procedures and when to innovate"

Are you sure about that? I think doctors can easily get caught up in the day to day operations of their business. As well as getting bogged down by insurance regulations and coverages. So, from what I have seen, they can quickly end up in situations where they do NOT innovate for a multitude of reasons.
JPoe   Pay for Outcomes Has Mixed Outcomes   3/31/2012 9:38:39 AM
Re: Tricky...

Yeah, and I'm sort of on the fence on a few things, knowing that there are different schools of thought on how best to leverage a person's compensation to get them to perform better. At the moment, I'm taking this on a case-by-case basis.
syedzunair   Pay for Outcomes Has Mixed Outcomes   3/31/2012 3:47:32 AM
Re: Measuring success
You are right, innovation is required in medical care and doctors know best when to opt for standard procedures and when to innovate. 

To be honest, I don't like the idea of P4P in the healthcare field. It might be useful for other professions where lives of people are not directly at stake. 

What do you think? 
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