Professor: Marie Simington
Heath care in the United States is at a critical point. The concerns of health care are debated from kitchen tables all the way to Washington D.C. A Senate Finance Committee report, Transforming the Health Care Delivery System, says, “In 2008, the United States spent more than 17 percent of our gross domestic product (GDP) on health care – more than any other industrialized country in terms of total per capital spending. By 2017, health expenditures are expected to consume almost 20 percent of GDP, or $4.3 trillion annually. While spending is high, our nation ranks low in many areas of quality. The report goes on to state, “This combination of high spending and lagging quality is unsustainable for patients, business and state and federal governments.” A contentious solution for addressing this problem is value-based purchasing (VBP), which maintains that buyers should hold providers of health care accountable for both costs and quality of care. An example of VBP is Pay-for-Performance (P4P). Pay-for-Performance is an incentive-based reimbursement system that rewards top performers. In other words, Pay-for-Performance is a health care payment model that offers financial rewards to providers who achieve or exceed specific quality benchmarks. P4P is destined to have a significant impact on the entire health care landscape and will provide an opportunity to improve the quality and efficiency of care in the U.S.
Pay-for-Performance approaches payments to physicians and hospitals on the basis of performance, measured as: (1) performance on agreed-upon quality measures relative to the performance of other providers in a market; (2) absolute performance, i.e. attainment of predetermined quality targets; and/or (3) quality improvements over time, compared with relative or absolute quality improvement benchmarks. Performance payments based on selected quality measures (and in some cases the cost of care) may be disbursed in a number of ways: they may be made to hospitals, networks of physicians, medical group practices, or individual physicians; they may be made as a percentage of total provider fees for relevant care, or on a “per member” basis (per month or annually) for specific patients—for example, patients with specific diagnoses, whose care determines provider performance on selected measures. Payments may also be made to provider entities as a percentage of cost savings achieved relative to a benchmark. The Affordable Care Act expands the use of pay-for-performance approaches in Medicare in particular. In some cases payers may reduce payment to providers for poor performance compared with peers or for not meeting performance goals. This is not to be confused with the Affordable Care Act outlined provisions designed to encourage improvements in the quality of care. Some are not actually pay-for-performance programs, as previously defined. For example, Medicare's Hospital Readmissions Reduction Program, which took effect on October 1, 2012, can reduce payments by 1 percent to hospitals that have excessively high rates of avoidable readmissions for patients experiencing heart attacks, heart failure, or pneumonia. Perhaps the best known of the programs under the law that will pay for performance are Accountable Care organizations (ACOs)--groups of providers that agree to coordinate care and to be held accountable for the quality and costs of the services they provide. (Health Policy Brief, 2012). The Affordable Care Act does however expand pay-for-performance efforts in hospitals by establishing a Hospital Value-Based Purchasing Program. Starting in October 1, 2012, hospitals were rewarded for how well they perform on a set of quality measures as well as on how much they improve in performance relative to a baseline. The better a hospital does on its…