Public Release: 

Pay-for-performance in healthcare

Can you get the quality you are paying for?

Wiley

BOSTON--Although the idea of pay-for-performance (P4P) is popular among healthcare policy makers and private insurers, the results do not necessarily translate to the patient.

A new study from the RAND Journal of Economics analyzes performance reports from medical groups who worked with a large network HMO which has been compiling quality data since 1993, pre-P4P. Lead researcher Kathleen J. Mullen says, "In the end, we failed to find evidence that a large P4P initiative either resulted in major improvement in quality or notable disruption in care.".

So how did policy makers and medical providers arrive at this miscalculation? A 2003 RAND study by Elizabeth McGlynn and colleagues found that on average American patients receive only fifty-five percent of recommended care. P4P seemed to be the answer to better quality care and effective preventative medicine.

The P4P reimbursement program rewards healthcare providers with bonuses for high marks in areas of preventative medicine (e.g., blood sugar testing for diabetics, cervical and breast cancer screenings for at-risk patients). Recently the Institute of Medicine recommended that Medicare join ranks with the P4P private insurers (over 100) to offer better quality, incentive-based care. However, the research shows that, rather than encouraging providers to shift resources toward quality improvement more generally, P4P may instead only persuade providers to focus on narrow (incentivized) areas.

Although the researchers found that some incentivized measures of quality may have improved in response to P4P, they failed to find evidence of positive spillovers to other related aspects of care. This result casts doubt on the promise of P4P as a transformative mechanism for improving the general quality of the healthcare system, and suggests caution in moving ahead with P4P and in interpreting the results of future studies.

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This study is published in the February 2010 issue of the RAND Journal of Economics. Media wishing to receive a PDF of this article may contact scholarlynews@wiley.com.

To view the abstract for this article please visit http://www3.interscience.wiley.com/journal/123248403/abstract.

Dr. Kathleen Mullen (Ph.D. University of Chicago 2005) is an Associate Economist at RAND. Her research focuses on the economics of healthcare and aging. She joined RAND in 2007 after completing a two-year postdoctoral fellowship at Harvard University, where she completed this research, through the Robert Wood Johnson Scholars in Health Policy Research Program. She can be reached for questions at kmullen@rand.org.

About the Journal: The RAND Journal of Economics publishes theoretical and empirical research on industrial organization and closely related topics, including contracts, organizations, law and economics, and regulation. The RAND Journal of Economics, formerly the Bell Journal of Economics, is published quarterly by The RAND Corporation, in conjunction with Wiley-Blackwell.

About Wiley-Blackwell: Wiley-Blackwell is the international scientific, technical, medical, and scholarly publishing business of John Wiley & Sons, with strengths in every major academic and professional field and partnerships with many of the world's leading societies. Wiley-Blackwell publishes nearly 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols. For more information, please visit www.wileyblackwell.com or www.interscience.wiley.com.

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