When pay-for-performance fails to perform

Pay-for-performance (P4P) programs for healthcare are in vogue around the country, but while they are a major staple of many reform efforts—including the Patient Protection and Affordable Care Act—studies of P4P to date have shown mixed results, according to a pair of articles published online in Health Affairs.

The first article, “Health Policy Brief: Pay-for-Performance,” published online Oct. 11, examined the current state of P4P programs, explaining that these initiatives intend to improve quality and efficiency by offering financial incentives to providers to improve outcomes, rather than simply offering a fee-for-service. Typical P4P programs, the brief explains, offer bonuses for such things as decreases in hospital readmissions, and impose financial penalties for negative outcomes, such as withholding reimbursement for the treatment of preventable conditions acquired during a hospital stay.

While this carrot and stick approach seems intuitive, studies into the effectiveness of such initiatives have demonstrated limited success, according to the brief. One cited example was the work of Rachel M. Werner, MD, PhD, of the University of Pennsylvania, and colleagues who found the Premier Hospital Quality Incentive Demonstration project initially demonstrated promising improvement in quality indicators compared with a control group, though these difference evaporated by the fifth year of the study.

A separate study of that same P4P incentive program showed no difference in mortality rates between participating hospitals and a control group in the treatment of patients with a number of conditions such as acute myocardial infarction and pneumonia.

The brief detailed a study from Dartmouth College researchers that demonstrated some P4P success within the Medicare Physician Group Practice Demonstration pilot program. Physicians in this program received bonuses if they achieved lower cost growth than controls and met quality targets, and there was a demonstrated improvement in quality as a result. However, researchers noted only modest reductions in spending growth.

The second article, also published Oct. 11 on the Health Affairs blog, attempted to explain the relative lack of success of P4P by looking through the lens of behavioral economics, which challenges “the traditional economic view that monetary reward is either the only motivator or is simply additive to intrinsic motivators such as purpose or altruism,” wrote Steffie Woolhandler, MD, of the City University of New York School of Public Health, and colleagues. “Studies have shown that monetary rewards can undermine motivation and worsen performance on cognitively complex and intrinsically rewarding work, suggesting that P4P may backfire.”

Woolhandler and colleagues wrote that no large-scale randomized controlled trials have definitively determined the effect of P4P in healthcare, but research in other settings has shown the impact of financial incentives. A trial involving more than 200 high-needs schools in New York City offered incentives of up to $3,000 per teacher based on student test scores, graduation rates and attendance. The study found incentives did not increase achievement, and that achievement declined, if anything.

Other studies showing the negative effects of financial incentives included a study of blood donors who were offered payments for donations. Donations declined among blood donors who had frequently donated in the past when no incentives were offered.

“Of course the absence of proof of P4P’s effectiveness does not prove that it’s ineffective,” wrote Woolhandler et al. “But, as with other clinical innovations, the mounting number of null studies should breed skepticism. Moreover, evidence suggests that ubiquitous gaming of quality measurement (e.g. by upcoding diagnoses) may uncouple reward from actual performance; even good people (including doctors and hospital leaders) cheat a little bit when they stand to gain from it, while deceiving themselves into believing they’re honest.”