Analysis of Hospital Pay for Performance

Spending

Whether or not widespread adoption of hospital P4P programs will affect health care spending depends strongly on program design:

  • Hospital P4P program features that may affect spending include how the financial incentive is structured and funded and what behaviors or actions are rewarded. Read more below
  • Estimates of the effects on spending must also reflect the administrative costs of P4P programs. Read more below
  • Hospital P4P programs could change the distribution of spending across subgroups of hospitals. Read more below
  • How the incentive is funded will affect spending. Only a small number of P4P programs have publicized how their incentives are funded and what they are spending. Read more below

Hospital P4P program features that may affect spending include how the financial incentive is structured and funded and what behaviors or actions are rewarded.

Design features likely to reduce spending include (1) rewards for activities that decrease use of expensive services, such as hospital readmissions and certain diagnostic and therapeutic technologies, and that reduce hospital length of stay; (2) rewards for system investments, process redesign, and better coordination of care delivery that result in efficiency gains or improvements in patient safety (Centers for Medicare & Medicaid Services [CMS] would have to revise diagnosis related group [DRG] payment rates to hospitals to recoup savings accrued through improvements in efficiencies); and (3) a system design that leads to reductions in morbidity and mortality risks, which in turn lead to lower spending (e.g., increased use of medications that prevent a recurrence of a problem that would likely lead to hospitalization).

Design features likely to increase spending include (1) rewards for increasing use of necessary and appropriate services, particularly those that have previously been under-provided or that do not lead to future reductions in health service use, and (2) adding new money to pay for incentives.

Requiring that the program be budget neutral (i.e., the incentive payment is financed by redeploying existing funds in the system) would result in no change in spending.

Estimates of the effects on spending must also reflect the administrative costs of P4P programs.

New infrastructure is frequently required to run P4P programs. Administrative costs include collecting and analyzing data; auditing, developing, and maintaining performance measures; and supporting hospitals with data submission and quality improvement. These ongoing costs are not trivial and would vary with the size and scope of the P4P program. Initial investments in infrastructure could cause P4P programs to increase spending in early years and decrease spending in later years.

Hospital P4P programs could change the distribution of spending across subgroups of hospitals.

P4P programs could redistribute payments across different subgroups of hospitals (e.g., by region, hospital characteristics, patient populations served) depending on the programs' designs. Unpublished work suggests that safety-net hospitals (Werner, 2008) and hospitals serving largely minority populations (Hasnain-Wynia et al., 2008) are less likely to be designated "top performers" in clinical effectiveness measures and thus may be less likely to receive P4P financial incentives. Additionally, hospitals located in the western region tend to perform more poorly on surveys of patients' ratings of their care (i.e., the Medicare HCAHPS survey) (U.S. Department of Health & Human Services, 2008). Creating regional pools of P4P incentive dollars could mitigate payment redistributions that are based on regional differences in performance. Rewarding not only top performance but improvements in performance could also mitigate substantial payment redistributions between subgroups of hospitals.

Weighting different performance domains (e.g., clinical effectiveness, patient experience) in the payment formula will also affect the extent of redistributions across hospitals (Vogeli et al., 2008).

How the incentive is funded will affect spending. Only a small number of P4P programs have publicized how their incentives are funded and what they are spending.

Evidence suggests that spending increases may be minimal in budget neutral programs, but could be substantial if new money is added to reward hospitals above current base payment rates.

CMS implemented the Premier Hospital Quality Incentive Demonstration, which provided financial incentives for improved performance related to underuse of services across five clinical conditions. This program added new money to existing DRG payments, so spending under the demonstration increased. Hospitals in the top 20 percent of the performance distribution (top two performance deciles) were rewarded with additional dollars above the base DRG rate. In year 1, the program paid bonuses of $8.85 million to 123 of 248 hospitals; in year 2, $8.7 million was distributed to 115 of the 248 hospitals; in year 3, $7.0 million was distributed to 112 hospitals, for a total of over $24.5 million during the three years of the demonstration.

Blue Cross Blue Shield of Michigan spent $21 million in incentive payments during its four year study of pay-for-performance effects on heart care (Nahra et al., 2006); about 5 percent of this total represented administrative costs. Few details are available regarding the extent to which the funding for the incentive was based on adding new money or withholding a portion of existing payments.

In contrast, the Reporting Hospital Quality Data for Annual Payment Update pay-for-reporting program is financed by setting aside a percentage of the annual payment update for the incentive payments. This program, as structured, is budget neutral, other than the administrative costs associated with managing the program. This budget neutral approach is what CMS proposed in its plan to Congress for implementing a Medicare Hospital Value Based Purchasing Program (U.S. Department of Health & Human Services, 2007). More recently, a discussion draft bill from Senators Baucus and Grassley that outlines a plan for P4P in the hospital setting calls for starting with a 1 percent withhold on the base DRG payment rate in the first year and moving up to a 2 percent withhold by the fifth year of program operation (U.S. Senate, undated). This approach to funding the incentive payment is budget neutral.

References

Hasnain-Wynia R, Kang R, Landrum MB, Vogeli C, Baker DW, Weissman JS, "Disparities Within and Between Hospitals for Inpatient Quality of Care: Targeting Resources to Close the Gap," presentation at AcademyHealth Annual Research Meeting, Washington, D.C., June 8—10, 2008.

Nahra TA, Reiter KL, Hirth RA, Shermer JE, Wheeler JRC, "Cost-Effectiveness of Hospital Pay for Performance Incentives," Medical Care Research and Review, Vol. 63, No.1 Suppl, February 2006, pp. 49S—72S.

U.S. Department of Health & Human Services, Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program, November 21, 2007. As of November 15, 2008: http://www.cms.hhs.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf

U.S. Department of Health & Human Services, "Hospital Compare," Web page, last updated September 17, 2008. As of December 10, 2008: http://www.hospitalcompare.hhs.gov

U.S. Senate, "Medicare Hospital Quality Improvement Act of 2008," Web page, discussion draft, undated. As of December 9, 2008: http://finance.senate.gov/press/Bpress/2008press/prb111908c.pdf

Vogeli C, Hasnain-Wynia R, Kang R, Landrum MB, Weissman JS, "Impact of HQA Composites on Hospital Ranking," presentation at AcademyHealth Annual Research Meeting, Washington, D.C., June 8—10, 2008.

Werner RM, "Changes in Racial Disparities Under Public Reporting and Pay for Performance," presentation at AcademyHealth Annual Research Meeting, Washington, D.C., June 8—10, 2008. As of December 9, 2008: http://finance.senate.gov/press/Bpress/2008press/prb111908c.pdf

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Consumer Financial Risk

Not applicable.

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Waste

No published studies estimate how hospital P4P programs will affect waste.

  • In theory, waste could be reduced by decreasing the overuse of services and improving efficiencies in the delivery of care; however, no published evaluation studies have looked at this issue. Read more below

In theory, waste could be reduced by decreasing the overuse of services and improving efficiencies in the delivery of care; however, no published evaluation studies have looked at this issue.

At this point, few performance measures address overuse, and measures of broader resource use to identify inefficiencies are only beginning to be tested and applied. An example of an overuse measure is reducing unnecessary hospitalizations.

As P4P programs have evolved, program sponsors have signaled a growing desire to include resource use and efficiency measures to address cost pressures in the health system. Although approximately half of currently operating hospital P4P programs include resource use measures (Damberg et al., 2007), no published evaluation studies have looked at the effect of including resource use measures on reducing waste.

As called for in Section 5001(c) of the Deficit Reduction Act of 2005, Medicare has taken steps to eliminate wasteful payments by no longer making a higher DRG payment to hospitals for preventable, hospital acquired conditions. On July 31, 2008, in the Inpatient Prospective Payment System Fiscal Year 2009 Final Rule, Centers for Medicare & Medicaid Services (CMS) included ten categories of conditions selected for the Hospital Acquired Condition payment provision (CMS, undated).

References

Centers for Medicare & Medicaid Services (CMS), U.S. Department of Health & Human Services, "Hospital-Acquired Conditions," Web page, undated. As of October 31, 2008: http://www.cms.hhs.gov/HospitalAcqCond/06_Hospital-Acquired_Conditions.asp

Damberg CL, Sorbero ME, Mehrotra A, Teleki S, Lovejoy S, Bradley L, An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report, Washington, D.C.: Assistant Secretary for Planning and Evaluation, U.S. Department of Health & Human Services, WR-474-ASPE/CMS, November 2007. As of May 15, 2009: http://aspe.hhs.gov/health/reports/08/payperform/PayPerform07.html

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Reliability

A few studies have found that hospital P4P programs produce improvements in the reliability with which appropriate care is provided.

  • A few studies show positive, but modest improvements in the reliable delivery of appropriate care. Read more below
  • Multiple interventions are occurring simultaneously with P4P programs, making it difficult to determine the discrete effect of P4P. Read more below
  • Hospital P4P may have unintended consequences, depending on program design features. Read more below

A few studies show positive, but modest improvements in the reliable delivery of appropriate care.

A study by Lindenauer et al. (2007) examined the effect of the Centers for Medicare & Medicaid Services (CMS)—Premier Hospital Quality Incentive Demonstration (PHQID) on adherence to ten individual and four composite measures of clinical effectiveness over two years for 613 hospitals. This study contrasted the effect of participation in the PHQID with participation in the CMS national pay-for-reporting (P4R) program, which measured approximately 3,500 Inpatient Prospective Payment System (IPPS) hospitals on the same set of measures and publicly reported the results to consumers. Overall, improvement in hospitals eligible for the financial incentive was 4.3 percentage points greater than that for hospitals that were required to publicly report their performance. This difference was consistent for each of the three clinical conditions assessed—acute myocardial infarction (AMI), community acquired pneumonia (CAP), and congestive heart failure (CHF)—for seven out of ten individual measures and for an appropriate care measure that assessed the percentage of patients receiving all recommended interventions for a given clinical condition.

However, once differences were taken into account between the PHQID P4P intervention hospitals and the P4R hospitals (such as baseline performance prior to the intervention, volume of patients treated by the hospital, teaching status), the differential effect diminished from 4.3 to 2.9 percentage points. The remaining difference may be explained by the fact that hospitals participating in the study did so voluntarily, were already performing better than average hospitals, were committed to quality improvement activities, and had resources available to support their participation. These factors mean that the results might not carry over to hospitals that are mandated to participate in P4P programs.

A further analysis of the results of this study found that the composite scores for each of the five conditions—AMI, CABG, heart failure, pneumonia, and hip/knee surgery—all improved by 7 to 18 percentage points over baseline between years 1 and 3 of the study (Remus, 2007). Patients treated by the 248 hospitals received approximately 150,000 additional recommended services compared with what they would have received had rates remained unchanged from year 1 performance levels.

Another study evaluated the effect of the CMS-PHQID on a very small number of hospitals that were non-randomly selected and were members of the Catholic Healthcare Partners system (Grossbart, 2006). The four participating hospitals and six nonparticipating hospitals showed improvements on the 17 measures examined; however, the improvement was 2.6 percentage points greater among the hospitals participating in CMS-PHQID. The greatest differences were observed for discharge instructions for patients with CHF and for pneumococcal vaccine delivery for patients admitted with pneumonia. This study should be interpreted with caution because the hospitals were not matched on their baseline performance. The authors noted also that other factors likely contributed to the improvements, including

  • implementation of the hospital system's strategic objectives, which focused on quality improvement for these clinical areas
  • participation by all ten hospitals in the Joint Commission's core performance measures for the three clinical target conditions
  • participation in the Hospital Quality Alliance, which was measuring and publicly reporting the results
  • participation in the CMS hospital reporting and public reporting programs.

This small sample of hospitals may have been more engaged than an average hospital, and thus the results may not generalize to all hospitals.

A third study evaluated the effect on AMI of a targeted quality improvement intervention compared with the CMS-PHQID P4P intervention. The study concluded that there was a small but statistically significant higher rate of improvement for two of six targeted therapies (aspirin at discharge and smoking cessation counseling) at hospitals participating in the P4P intervention (Glickman et al., 2007). This study found no significant difference in overall AMI quality performance among P4P hospitals compared with control hospitals exposed to the targeted AMI intervention and pay for reporting (i.e., public reporting) intervention. However, for both interventions, participation was voluntary, and hospitals that agreed to participate may have differed from those that did not participate, thus influencing the observed results.

A fourth study evaluated a hospital P4P program sponsored by Blue Cross Blue Shield (BCBS) of Michigan. This study found increases in the number of patients receiving reliable care for AMI and CHF. Between 2000 and 2003, an increase was found in the percentage of patients receiving the following appropriate processes of care: aspirin after AMI (87 to 95 percent), beta blocker after AMI (81 to 93 percent), and angiotensin converting enzyme (ACE) inhibitor after CHF (70 to 80 percent) (Nahra et al., 2006). In addition to being exposed to the BCBS of Michigan P4P program, these hospitals participated in the CMS pay-for-reporting program, which targeted the same clinical effectiveness measures.

These studies indicate that improvements were modestly larger for hospitals eligible for P4P than they were for hospitals participating in public reporting and/or quality improvement interventions. However, the effect of P4P on improving the reliability of appropriate care absent other interventions occurring simultaneously (e.g., quality improvement, public reporting) is unknown.

Multiple interventions are occurring simultaneously with P4P programs, making it difficult to determine the discrete effect of P4P.

Many of the measures currently used in hospital P4P programs (i.e., AMI, CAP, and CHF) are part of other quality improvement programs, so disentangling the net effects of P4P incentives is difficult. Many of the measures have been the focus of other targeted improvement efforts since the late 1990s—such as the Joint Commission and CMS's Quality Improvement Organizations—which may partly explain the modest P4P effect. It is not clear how large the P4P effect would have been, absent other quality improvement efforts.

Hospital P4P may have unintended consequences, depending on program design features.

Concerns have been raised about potential unintended consequences from P4P, but not enough research exists to know the extent of these consequences. Unintended consequences are a function of program design; They are more likely to occur when programs do not account for differences in patient mix, have too much money at risk, or promote clinical behavior that is at odds with evidence based practice. Poor program design includes overuse of services, teaching to the test, refusal to treat, and gaming of data, whereby hospitals exclude from analysis patients whose poor health behavior and socioeconomic status might adversely affect their ability to perform well on clinical measures.

One study found no evidence that the CMS-PHQID resulted in decreased performance on quality of care measures not included in the program (Petersen et al., 2006). Ad hoc feedback from hospitals participating in the PHQID program as well as findings from a study by Drake, Cohen, and Cohn (2007) suggest that hospitals overused antibiotics for respiratory conditions. Measuring whether patients with pneumonia received an antibiotic within four hours of arrival at the hospital, the reports concluded that antibiotics were overused because physicians were unable to make a definitive pneumonia diagnosis in the four hour time window thus choosing to prescribe antibiotics to a broad range of patients with respiratory conditions.

References

Drake DE, Cohen A, Cohn J, "National Hospital Antibiotic Timing Measures for Pneumonia and Antibiotic Overuse," Quality Management in Health Care, Vol. 16, No. 2, April/June 2007, pp. 113—122.

Glickman SW, Ou FS, DeLong ER, Roe MT, Lytle BL, Mulgund J, Rumsfeld JS, Gibler WB, Ohman EM, Schulman KA, Peterson ED, "Pay for Performance, Quality of Care, and Outcomes in Acute Myocardial Infarction," Journal of the American Medical Association, Vol. 297, No. 21, June 6, 2007, pp. 2373—2380.

Grossbart SR, "What's the Return? Assessing the Effect of 'Pay-for-Performance' Initiatives on the Quality of Care Delivery," Medical Care Research and Review, Vol. 63, No. 1 Suppl., February 1, 2006, pp. 29S—48S.

Lindenauer PK, Remus D, Roman S, Rothberg MB, Benjamin EM, Ma A, Bratzler DW, "Public Reporting and Pay for Performance in Hospital Quality Improvement," New England Journal of Medicine, Vol. 356, No. 5, February 1, 2007, pp. 486—496.

Nahra TA, Reiter KL, Hirth RA, Shermer JE, Wheeler JRC, "Cost-Effectiveness of Hospital Pay for Performance Incentives," Medical Care Research and Review, Vol. 63, No. 1, Suppl., February 1, 2006, pp. 49S—72S.

Petersen LA, Woodard LD, Urech T, Daw C, Sookanan S, "Does Pay-for-Performance Improve the Quality of Health Care?" Annals of Internal Medicine, Vol. 145, No. 4, August 15, 2006, pp. 265—272.

Remus D, "Financial Incentives Work! Results of the CMS Hospital Quality Incentive Demonstration Project Year One," presentation at AcademyHealth Annual Research Meeting, Orlando, Fla., June 27, 2007.

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Patient Experience

There is minimal evidence about how P4P affects hospitals' performance on measures of patient experience:

  • The only published study on the effect of P4P on patient experience found very small improvements over four years. Read more below
  • The proportion of hospital P4P programs that measure patient experience may change soon with Medicare's recent adoption of the HCAHPS survey tool. Read more below

The only published study on the effect of P4P on patient experience found very small improvements over four years.

Berthiaume et al. (2006) found very small improvements in patient experience as a result of the P4P program, compared with previous results. Overall, patient satisfaction with inpatient care increased from 78 percent to 79 percent, and satisfaction with emergency department care increased from 71 percent to 75 percent. Without a control group, however, it is impossible to know whether the observed improvements were due to the P4P program or other factors.

The proportion of hospital P4P programs that measure patient experience may change soon with Medicare's recent adoption of the HCAHPS survey tool.

Some private sector hospital P4P programs include measures of patient experience, mostly using proprietary hospital satisfaction surveys; however, the proportion including these measures may increase with the emergence of the HCAHPS survey tool and Medicare's adoption of this tool (Damberg et al., 2007).

Beginning in July 2007, hospitals that contract with Medicare to provide services to beneficiaries in the traditional fee-for-service system were required to collect and submit HCAHPS data in order to receive their full annual payment update (APU) for fiscal year 2008 (hcahpsonline.org, not dated). Hospitals that fail to report the required quality measures, which include the HCAHPS survey, received an APU that was reduced by 2.0 percentage points. Performance results are published on the CMS Hospital Compare Web page (U.S. Department of Health & Human Services, 2008).

References

Berthiaume JT, Chung JT, Chung RS, Ryskina KL, Walsh J, Legorreta AP, "Aligning Financial Incentives with Quality of Care in the Hospital Setting," Journal of Healthcare Quality, Vol. 28, No. 2, March/April 2006, pp. 36–44, 51.

Damberg CL, Sorbero ME, Mehrotra A, Teleki S, Lovejoy S, Bradley L, An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report, Washington, D.C.: Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, WR-474-ASPE/CMS, November 2007. As of May 15, 2009:
http://aspe.hhs.gov/health/reports/08/payperform/PayPerform07.html.

hcahpsonline.org, Centers for Medicare & Medicaid Services, Baltimore, Md., not dated. As of May 26, 2009:
http://www.hcahpsonline.org/

U.S. Department of Health & Human Services, "Hospital Compare," Web page, last updated September 17, 2008. As of December 10, 2008:
http://www.hospitalcompare.hhs.gov

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Health

Few studies have measured the effect of hospital P4P programs on health:

  • Theory suggests that hospital P4P programs could improve health by increasing the reliability of care delivered. Read more below
  • Few studies have directly assessed how hospital P4P programs affect health. Read more below
  • Most P4P programs do not track effects on health, partly because of the long time horizon necessary to see some of the health gains. Read more below

Theory suggests that hospital P4P programs could improve health by increasing the reliability of care delivered.

Most hospital P4P clinical measures promote the use of practices that have been shown in research studies to improve health outcomes (Shekelle, 2007). If the P4P program includes such measures, thereby increasing evidence based care, the program can theoretically improve health by reducing both morbidity (e.g., risk of other diseases, complications of chronic illness) and mortality. The quality measures likely to have the greatest effect on health outcomes are evidence based measures of clinical processes and intermediate outcomes (e.g., whether patients received appropriate medications, whether their blood pressure or blood sugar is in the normal range), care coordination, and patient safety.

Few studies have directly assessed how hospital P4P programs affect health.

A small number of studies have examined whether hospital P4P programs have increased reliability of care; in some cases, these studies have extrapolated from observed improvements in reliability to estimate the likely health benefits using estimates from controlled studies.

For example, the Blue Cross Blue Shield of Michigan hospital P4P program found increases in the number of patients receiving reliable care for AMI and CHF between 2000 and 2003; the program used data from clinical trials to estimate that the P4P program saved 733 to 1,701 Quality Adjusted Life Years (QALYs) (Nahra et al., 2006). The estimated cost per QALY was between $12,967 and $30,081, a range generally considered to be cost effective (Ubel et al., 2003).

A study of the Hawaii Medical Service Association Hospital Quality Service and Recognition P4P Program found changes in length of stay and complication rates (Berthiaume et al., 2006). Between 2001 and 2004, complication rates for both obstetric and surgical patients declined approximately 2 percentage points, and length of stay for surgical and obstetric patients decreased by 1.2 and 0.4 days, respectively. This study is limited by the fact that the authors did not state whether the observed declines in complication rates and lengths of stay were statistically significant. In addition, the lack of a control group makes it impossible to determine whether the improvements were due to the hospital P4P program or to other factors (Berthiaume et al., 2006).

Premier, Inc., in an unpublished evaluation of the Centers for Medicare & Medicaid Services (CMS)–Premier Hospital Quality Incentive Demonstration (PHQID) examined the relationship between health outcomes (mortality, length of stays, and complications) and the proportion of patients who received all appropriate services for CHF, AMI, pneumonia, hip and knee surgery, and bypass surgery. The researchers found that hospitals that provided a higher proportion of appropriate care had lower mortality, shorter lengths of stays, and fewer complications among patients (Remus, 2007). Premier estimated that the observed reductions in mortality for AMI alone saved 1,284 lives.

Another study examined the effect of the CMS-PHQID on hospitals that were voluntarily participating in another national quality improvement effort focused on AMI (Glickman et al., 2007). The researchers found no overall statistically significant differences in inpatient mortality between the two groups of hospitals; however, this study should be interpreted with caution, because both sets of hospitals were exposed to quality improvement interventions and self-selected into the study. As a result, there may be unobserved factors that account for large improvements in both intervention groups.

Most P4P programs do not track effects on health, partly because of the long time horizon necessary to see some of the health gains.

Although very little literature has been published on the health benefits of hospital P4P programs, the health benefits of the programs could be modeled. The modeling could be based on estimates of reliability improvements and health outcome data from controlled trials that are linked to those improvements.

References

Berthiaume JT, Chung RS, Ryskina KL, Walsh J, Legorreta AP, "Aligning Financial Incentives with Quality of Care in the Hospital Setting," Journal of Healthcare Quality, Vol. 28, No. 2, March/April 2006, pp. 36–44, 51.

Glickman SW, Ou FS, DeLong ER, Roe MT, Lytle BL, Mulgund J, Rumsfeld JS, Gibler WB, Ohman EM, Schulman KA, Peterson ED, "Pay for Performance, Quality of Care, and Outcomes in Acute Myocardial Infarction," Journal of the American Medical Association, Vol. 297, No. 21, June 6, 2007, pp. 2373–2380.

Nahra TA, Reiter KL, Hirth RA, Shermer JE, Wheeler JRC, "Cost-Effectiveness of Hospital Pay for Performance Incentives," Medical Care Research and Review, Vol. 63, No. 1, Suppl., February 1, 2006, pp. 49S–72S.

Remus D, "Financial Incentives Work! Results of the CMS Hospital Quality Incentive Demonstration Project Year One," Presented at AcademyHealth Annual Research Meeting, Orlando, Fla., June 27, 2007.

Shekelle P, "Medicare's Hospital Compare Performance Measures and Mortality Rates," Journal of the American Medical Association, Vol. 297, No. 13, April 4, 2007, pp. 1430–1431; author reply, p. 1431.

Ubel PA, Hirth RA, Chernew ME, Fendrick AM, "What Is the Price of Life and Why Doesn't It Increase at the Rate of Inflation?" Archives of Internal Medicine, Vol. 163, No. 14, July 28, 2003, pp. 1637–1641.

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Coverage

Not applicable.

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Capacity

Not applicable.

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Operational Feasibility

Broad implementation of hospital P4P is technically feasible but will require infrastructure and resources to support implementation and ongoing operations:

  • Hospital P4P programs are operationally feasible, and the quantity of resources necessary to support the program varies according to program design. Read more below
  • Hospital P4P programs require significant infrastructure to collect and analyze data, manage appeals, provide performance feedback, educate providers, and calculate and administer payouts. Read more below
  • Investments are necessary, not only for the program sponsor but also for those whose performance is being assessed. Read more below

Hospital P4P programs are operationally feasible, and the quantity of resources necessary to support the program varies according to program design.

A large federal demonstration of P4P in the hospital setting (CMS-PHQID), the national hospital quality pay-for-reporting (P4R) program for Medicare hospitals (RHQDAPU) , and more than 40 private sector hospital P4P programs demonstrate that it is feasible to operate such programs.

Hospital P4P programs require significant infrastructure to collect and analyze data, manage appeals, provide performance feedback, educate providers, and calculate and administer payouts (Damberg et al., 2007).

The amount of resources required for operations will depend on the size and scope of the program, as well as on the types of measures and data used to construct performance measures. P4P programs have not measured or published the level of resources required for operations.

Investments are necessary, not only for the program sponsor but also for those whose performance is being assessed.

For both the PHQID program and the RHQDAPU pay-for-reporting program, hospitals reported having to invest more resources in data capture and tracking, and in quality improvement efforts (Damberg et al., 2007). Undercapitalized hospitals, which tend to serve minority populations, may not be as able to invest in the infrastructure necessary to implement quality improvements and benefit from a P4P program (based on unpublished RAND Corporation research by Ateev Mehrotra).

References

Damberg CL, Sorbero ME, Mehrotra A, Teleki S, Lovejoy S, Bradley L, An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report, Washington, D.C.: Assistant Secretary for Planning and Evaluation, U.S. Department of Health & Human Services, WR-474-ASPE/CMS, November 2007. As of May 15, 2009: http://aspe.hhs.gov/health/reports/08/payperform/PayPerform07.html

Mehrotra A, "Impact of Value-Based Purchasing on Disparities," Santa Monica, Calif.: RAND Corporation, unpublished RAND research.

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