National Pay for Performance Overview

Evolution of Pay for Performance in the United States

Innovative health insurance plan (health plan) pioneers US Healthcare (now Aetna) and HealthPartners launched pay for performance (P4P) programs in 1985 and 1993, respectively. During the 1990s, there were no more than 10 P4P programs in the U.S., but in the early 2000s, P4P received a strong boost when the Institute of Medicine (IOM) published seminal works on medical errors (To Err is Human, 1999) and overall quality (Crossing the Quality Chasm, 2001). These works engaged the industry by identifying not only serious quality flaws in health care delivery, but also how reimbursement systems actually contribute to the problem.

In the early 2000s, P4P grew rapidly among U.S. sponsors, including health plans, purchasers, and government agencies. Early P4P programs targeted primary care physicians with preventative care measures drawn from the National Committee for Quality Assurance (NCQA). In 2007, there were over 148 sponsors of P4P programs covering more than 60 million insured persons, and many sponsors had implemented more than 1 P4P program with broader sets of measures to target specialists and hospitals. Most of these P4P programs are sponsored by private, commercial health plans, and they include 28 state Medicaid agencies operating P4P programs.  Several demonstration projects operated by the Federal government are piloting pay for performance for hospital and physician organizations.  Physician P4P programs in the U.S. outnumber hospital programs
by 4 to 1.

The P4P Evolution Roadmap (see Related Resources to the right) shows a condensed view of likely P4P program evolution based on national surveys, a review of literature, and expert testimonies at multiple industry conferences. There continues to be considerable focus on the development of methodology standards for performance measurement, particularly in efficiency, accreditation of P4P programs, and evidence stewardship (comparative effectiveness). There is substantial investment underway by AHRQ in concert with other public policy organizations to identify further evidence-based medicine practices with the objective of measurement of adherence to such practices. The National Quality Forum (NQF) is leading focused efforts to collect, harmonize, and endorse additional performance measures.

Parallel to the evolution of P4P programs is the progress in data collection to support performance measurement. P4P sponsors are leveraging the data assets and infrastructure created under P4P and pay for reporting (P4R) programs to create regional clinical data exchanges to aggregate data and enhance collection of clinical values for outcomes measurement.

Pay-for-Performance in U.S. Government Medicare and Medicaid Programs (CMS)

CMS has a charter for transforming Medicare into an active rather than passive purchaser of high quality care. Through a value-based purchasing strategy, several U.S. government agencies (GAO, CBO and MedPAC) have recommended that CMS link payments to the value of care provided (affordability and quality) as well as pursue other intervention strategies in tandem with P4P such as medical home demonstration projects, bundled hospital payments, and public reporting.  In the past, CMS has experimented with multiple initiatives around P4P, public reporting, and P4R, and it continues to do so. Some of its earlier pilots are currently being scaled into national P4P programs that will reach most hospitals and physician practices. While the U.S. government-sponsored programs remain voluntary, their funding and breadth - both total numbers of participating providers and number of measures - could soon surpass any commercial program.

CMS is also launching multiple "proof-of-concept" pay, public reporting and P4P pilots to test measures for eventual public reporting in new delivery areas such as outpatient hospital services, nursing homes, and home health. Detailed summaries of current P4P, P4R and public reporting (PR) CMS programs (national, pilot, and completed) are shown below.

P4P Experience

To date, P4P programs have had mixed results. Despite rapid growth and widespread adoption of P4P in the U.S. over the past five years, the long-term benefits and results remain uncertain, and few U.S. programs have implemented efficiency measures to demonstrate financial return-on-investment (ROI). P4P programs have shown modest improvements in clinical quality measures and success in encouraging providers to adopt clinical decision systems. The experience of related P4R programs has been positive as well. CMS P4R programs have been successful in improving data capture, data quality, and testing measures and soliciting feedback before these are published.

In the future, much of the variation seen in many P4P and P4R approaches today will likely converge on a standardized measure set and measurement methodology for comparability, public reporting, and administrative simplification purposes.