Pay-for-performance purchasing, sometimes referred to as value-based purchasing, is a method of adjusting fee-for-service payments to reflect the quality of the health care provided. Performance-based payment is being used in a wide variety of ways around the country, including by many private insurers and in pilot programs within Medicare.
Evidence on the impact of pay for performance on the quality of care and the cost of that care is mixed, reflecting the paucity of large experiments using these methods as well as the focus of these programs on quality improvements, not cost efficiency. Still, some findings are clear. Pay for performance can significantly improve the delivery of evidence-based care processes, which is not surprising since we know from experience with the Medicare fee schedule that rewarding some types of care more than others results in a shift in the services physicians and hospitals provide. For example, experts report that payment is more generous for physicians performing spinal injections for chronic pain than for spending time encouraging patients to undertake specific physical training or other self-management approaches.
More research is needed to identify the set of process-and-outcome measures that could be targeted through pay for performance with the goal of improving not just quality but also efficiency. Savings are certainly possible through better chronic care management in outpatient settings and better practices on the inpatient side in hospitals and clinics. Additional work is also underway to identify a broad set of measures of overuse or inappropriate care that could also be targeted by pay-for-performance programs.
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