Cover: Does Removing Financial Incentives Lead to Declines in Performance?

Does Removing Financial Incentives Lead to Declines in Performance?

A Controlled Interrupted Time Series Analysis of Medicare Advantage Star Ratings Programme Performance

Published in: BMJ Quality & Safety, Volume 30, Issue 2, pages 167–172 (2021). doi: 10.1136/bmjqs-2019-010253

Posted on Feb 12, 2021

by Rachel O. Reid, Mallika Kommareddi, Susan M. Paddock, Cheryl L. Damberg

Incentive programmes are used in health systems worldwide to spur improvement in quality of care; these include both financial incentives (eg, pay for performance) and non-financial incentives (eg, public reporting). In the USA, the Centers for Medicare & Medicaid Services' (CMS) Star Ratings quality incentive programme for private Medicare insurance plans, or Medicare Advantage plans, incorporates both non-financial and financial incentives. Star Ratings on a 1–5 scale are publicly reported on the Medicare Plan Finder website. Owing to provisions in the March 2010 Affordable Care Act and a demonstration programme, since 2012 Quality Bonus Payments of more than $3 billion annually have been paid directly to plans on the basis of the Star Ratings achieved the year before, which reflects care delivered to the plan's enrollees 1–2 years prior.

The Star Ratings incorporate measures from various sources (eg, Healthcare Effectiveness Data and Information Set (HEDIS), Consumer Assessment of Healthcare Providers and Systems (CAHPS), Health Outcomes Survey (HOS)). CMS has added and removed Star Ratings measures over time; removed measures are still monitored and published on, but no longer contribute to bonus payments to plans and are not publicly reported to consumers on the Medicare Plan Finder website. Thus, both financial and non-financial incentives are removed when measures are removed from the Star Ratings methodology.

Studies of pay-for-performance programmes in the UK and the USA in which incentives paid directly to healthcare providers or facilities were removed have shown mixed results as to whether performance was sustained or declined after removal of incentives. No prior study has assessed performance on measures removed from CMS's Medicare Advantage Star Ratings incentive programme for insurance plans. As policymakers face pressure to reduce measurement burdens on providers, it is important to understand what happens to performance after measures are deincentivised.

Research conducted by

This report is part of the RAND external publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.