Pay-for-Performance: Achieving High Performance in Health Care

As health care purchasers increasingly link reimbursement and the quality of health care, pay-for-performance is becoming the payment method of choice for health care providers wanting to achieve high performance. However, many health care organizations are not prepared for the significant reporting requirements this entails.

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As a general rule, the revenue of health care providers is independent of the quality of the care they provide, with income for hospitals and physicians largely dependent on patient volumes and the complexity of procedures.

However, there is new thinking around how to pay health care providers, with pay-for-performance programs using incentives to promote better outcomes. In other words, there is an attempt to directly link reimbursement with the quality of health care offered. This approach is being driven principally by the purchasers of health care services, who now have increasing access to clinical information technology. This makes it possible for health organizations to gather the clinical data necessary to administer sophisticated pay-for-performance programs.

All of these factors are converging to create a fertile environment for quality-based metrics, clinical information systems and outcomes tracking. By many indications, the health industry is facing a surge in quality reporting and pay-for-performance initiatives.

Although experience with pay-for-performance programs is still somewhat limited, it is already evident that several key components are required for such programs to take hold and succeed:

• A collaborative relationship must exist among payers and providers: They must define measures upon which quality ratings and bonus payments will be based.

• The programs must be able to overcome provider resistance and skepticism: For example, many physicians fear that pay-for-performance is a way to reduce payments over the long term.

• Program participants need to leverage clinical information technology: The majority of health executives believe that the development of an electronic health infrastructure will have the greatest impact on improving the success of pay-for-performance models.

Health organizations need to determine their organizational readiness for pay-for-performance programs, which includes improving their ability to comply with the requirements of such programs.

To support the quality and patient safety requirements of pay-for-performance programs, secure information in data systems will need to be available in standardized electronic formats. Advanced business and clinical intelligence applications must be developed, and health care providers must adopt electronic health records that enable them to collect, access and analyze patients' information at the point of care.

Providers and payers need to move beyond thinking about the administrative burden and immediate financial risk of pay-for-performance, to a discussion of how this progressive payment approach can transform care delivery and outcomes, and contribute to high performance for their organizations.

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