Policy Analysis of Pay per Performance - Research Paper Example

This paper will discuss the efficacy and implication of the policy in addressing the poor quality of health care delivery in the US through pay for performance. This will tackle how the policy intends to change the behavior of medical providers through the new payment scheme. The mix reports about its efficacy and criticism will also be tackled to scrutinize the policy implication of pay per performance. And finally, as a goal of this paper, it is to reconcile the limitation of pay per performance through a policy recommendation on how to better improve the policy implementation of the program. I. Introduction  In a report drafted by the Institute of Medicine, the organization revealed that errors in medical practice and lack of quality in health care are a serious problem in America’s health care system that accounts for as many as 44,000 to 98,000 deaths per year, which is more than the number of people who died from breast cancer, AIDS or motor vehicle accidents (IOM, 2001). These errors were a result of system failures and meant redesigning the existing health care policy and drafting a safer system of care to prevent such errors from occurring again. In the second report of the Committee on Quality of Health Care in America, the “quality gap” of the health care practice was revealed with over 70 studies documenting quality shortcomings. The quality gap was more prominent between the care that people should receive and the care that they do not receive. In response to this burgeoning deterioration of America’s health care system, pay for performance policy was introduced whereby medical providers are compensated by the quality of service provided rather than volume in an effort to induce a behavioral shift among medical providers. II. Importance of pay per performance Pay per performance seeks to address the quality issue of health care in the United States. It is a policy reform that intends to reduce the number of deaths that resulted in errors and lack of quality health care by putting premium on the quality of care rendered rather than the quantity of medical attention given. It intends that by remunerating quality in health care, there will be a behavioral shift among health care providers that will lead to better quality health care service that will ultimately translate to lesser deaths resulting from errors and poor quality of health care. III. Definition of key term: pay per performance in detail  Pay per performance is a policy incentive program that “differentiates payment among providers based on performance of quality and efficiency measures so that desired outcomes occur through changed behavior” (American Medical Association, 2012). The program collaborates with “providers and other stakeholders . . . to ensure that valid quality measures are used, that providers aren’t being pulled in conflicting directions, and that providers have support for achieving actual improvement” (Centers for Medicare and Medicaid Services, 2005). It is a response initiative to the rising health care issues such as “rising medical cost trends, the growth in chronic care conditions, healthcare utilization, consumer directed healthcare and demands by purchasers for improvements in the quality of care” (Baker et al., 2003) and is dictated from the health care quality improvement imperative to make health care delivery more responsive and efficient. The pay for performance works by compensating physicians and medical institutions according to their performance, which would come in the form of a bonus in addition to their standard fee-for-service compensation. IV. Key stakeholders of pay per performance The key stakeholders in pay per performance are: a. Patients – who are the recipient of health care. b. Medical provider – doctors, nurses and other health care practitioner who render medical services for a fee. c. Hospitals and health care institutions – institutions that are being ranked by pay for performance policy on the quality of care given. d. Society in general – the general population who has a natural interest for a more responsive, efficient, quality and cost-effective health care. V. Key policy areas needing analysis and resolution  It is important to stress that the adoption of payment system is intended to improve the quality of health care and reduce its costs. Its efficacy is still equivocal (Long et al., 2008) and difficult to tell whether the increased payment for quality will lead to an improved health care system. VI. Overview of current knowledge  There had been reports that the Pay for Performance policy is effective. In the report of the New England Journal of Medicine, the journal indicated that “many claims have been made for the effectiveness of this approach” (Rosenthal et al., 2006). It is important to note, however, that the reports of other physician organizations indicated skepticism on the validity, accuracy and efficacy of its quality measurement that it might, in fact, steal from the poor and give to the rich because well resourced hospitals tend to have a higher quality of medical care (Werner, 2010). This criticism against pay for performance scheme was articulated by an editorial of Werner asserting that the pay per performance program may, in fact, have a reverse Robin Hood effect of taking away from the poor and giving to the rich. Ill resourced hospitals lacking the necessary resources to invest in quality improvement activities are at a disadvantage compared to those hospitals that could afford, or already have such implements. “In addition, because such hospitals have lower performance at baseline than non–safety-net hospitals, they may be financially penalized under incentive systems that reward the highest performers. This, in turn, could further decrease their quality of care as resources are diverted away from them (Werner, 2010, p. 340). VII. Discussion of Key Issues The report about pay for performance policy is ambiguous. There are reports that the program is working, such as those reported by New England Journal of Medicine, indicating that “many claims have been made for the effectiveness of this approach” (Rosenthal et al., 2006). There are also skeptics about the efficacy of the program. Among those who cited their skepticism is the American Academy of Neurology which raised concern about the pay for performance that the policy has distorted and misaligned incentive reward system and actually brings forth inequity among medical providers instead of improving health care (2007). The pay per performance also is being criticized to bring about unintended inequity among medical providers in the implementation of its criteria in its reward scheme. The current incentive program of giving reward to those who are performers and penalizing those who underperform through disincentive may mean well and seem logical to rationalize payment to health care providers but could actually defeat the intent and purpose of the scheme which is to improve the quality of the delivery of health care in the implementation of the program. To illustrate the potential issue that the program could bring about pay per performance is to compare two medical providers where one begins with the program in a more favorable state because it is well maintained and well kept due to the high availability of its resources and thus provides high quality medical service. The other medical provider does not have the necessary resources and only have enough to keep it running. It would be obvious that the quality of care that these two health care institutions would give to its patients would vary tremendously. The one that has more resources to maintain quality will be able to deliver health care services better and the other, only meeting the minimum standard of care, will deliver a mediocre quality health care due to its apparent lack of resources. With the implementation of the pay for performance, the inequity of health care could widen and could even reinforce the gap of the quality of health care provision because the program will tend to give more incentive to the medical provider who already has huge resources and thus could continue to improve the quality of its health care. On the other hand, the other medical provider, however, who has lesser resources, could have hard time improving its delivery because the scheme would tend to give them less due to the poor quality of their health care delivery. As a result, the already improved medical provider will continue to improve and the lackluster performances of the less resourced medical provider will deteriorate further. In effect, the implementation of the scheme will cement the mediocre performance of certain medical providers because the program will sink them down in the metrics of pay for performance without any hope to improve because the resources needed for them to improve will be made unavailable to them by the reward system of pay for performance (Werner, 2010). Another issue of concern is the criteria that base on the health outcome of the patients and mortality rate of a health care institution. This is well intended and very reasonable because it serves the primary reason why medical providers exist, which is to make its patients better. But again, the implementation of pay per performance could become a factor in widening the chasm in health care delivery by unfairly penalizing those medical providers who are disadvantaged by their circumstances. For example, hospitals that are located in a low income area will have more patients who have chronic diseases due to their lack of attention to personal health, which are common among low income population. On the other hand, hospitals which are located in high income areas will have fewer patients with untreatable disease due to the high preventative health care measures adopted by the population. Comparing these two medical institutions, the hospital located in a high income area will have fewer patients with untreatable diseases to attend compared to the same hospital located in the low income area. By default, the hospitals and physicians in the high income population will naturally score high on the criteria because of their favorable circumstance. The criteria of basing the health outcome of the patients will work against the medical health care providers in the low income areas because they have more patients with untreatable diseases to take care of that no matter what they will do, the patient will have very little chance of improvement and survival, thus scoring low on the metrics of pay per performance due to their circumstances. VIII. Conflicts in the findings of pay per performance In a study of Werner, he reported that while disadvantaged hospitals started at the bottom when they joined the program, the performance gap between a high resourced hospital and disadvantaged hospital actually closed after three years of joining the pay per performance program. The study, albeit many limitations, suggests that the implementation of pay per performance provides a tremendous opportunity for underfunded hospital to improve (Werner, 2010). The experience of disadvantaged hospital indicated that in three years, they were able to close the gap between them and high resourced hospitals, dispelling the anxiety of critics that the policy will further increase the chasm between the haves and have not medical institutions. IX. Implications of Pay per Performance  The incentive program of giving reward to those who are performers and penalizing those who underperform through disincentive may mean well and seem logical. As Meddings and McMahon put it, “linking the incentive dollar with healthcare outcomes seems like a perfect solution. . . [that] we should pay more for better care and less, or not at all, for inferior care” (2008, p. 205). The same study, however, also reported that is neither simple nor logical. It is based on the premise that incentive will change the behavior of the medical providers through incentive that would yield higher quality of medical care. Pay-for-performance programs target several categories of performance measurement: clinical measures ('process' and 'outcome' measures), patient experience, and certain aspects of practice/hospital management. Its process measure evaluates a provider’s behavior according to the guidelines of care “such as the rates of administration of aspirin and ß-adrenoceptor antagonists (ß-blocker) when patients with MI are first evaluated” (Meddings & McMahon, 2008, p. 207). While this process is meant to measure the providers’ behavior, most processes, however, requires an element of patient cooperation and this is where the limitation lies. In sum, Pay per Performance means well but it does not cover all the factors that constitute the delivery of a quality health care. X. Conclusions and recommendations  The intent and purpose of pay per performance is to improve the quality of health care at a lesser cost. It is premised on value based purchasing of health care that has an objective of making health care more affordable by inducing health care providers to deliver “greater effectiveness in caring for covered members and greater efficiency in paying for care services” (Ransom & Nash, 2008, p. 435). The current program, however, may bring forth some unintended consequences of widening the chasm between well provided medical institutions and those that are ill resourced, which could inadvertently defeat the intention of the program. Thus, it is suggested that to make the program more effective, the payment scheme may be structured to include giving incentive for improvement in addition to high quality of care as a basis for incentive (2010). This would not only dispel the criticism about the policy but will also make the program holistic in its approach of improving health care. References: American Medical Association. (2012). Pay for performance. Retrieved from http://www.ama-assn.org/ama/pub/physician-resources/practice-management-center/claims-revenue-cycle/managed-care-contracting/evaluating-payment-options/pay-for-performance.page. Baker, G., Haughton, J. M. S., & Mongroo, P. (2003). Incentive programs in healthcare: market dynamics and business process. Retrieved from http://www.leapfroggroup.org/media/file/Leapfrog-Pay_for_Performance_Briefing.pdf. Centers for Medicare and Medicaid Services. (2005). Medicare "(p4p)" initiatives. Retrieved from http://www.cms.gov/apps/media/press/release.asp?counter=1343. Institute of Medicine (IOM). (2001). Crossing the quality chasm: A new health system for the 21st century. Washington, D.C.: National Academy Press. Long, J. A., Helweg-Larsen, M., & Volpp, K. G. (2008). Patient opinions regarding ‘Pay for performance for patients.’ JGIM: Journal of General Internal Medicine, 23(10), 1647–1652. Meddings J.A., & McMahon, L.F. Jr. (2008). Measuring quality in pay-per-performance programs: From 'one-size-fits-all' measures to individual patient risk-reduction scores. Disease Management & Health Outcomes, 16(4), 205–216. Rosenthal, M. B., Landon, B. E., Normand, S-L. N., Frank, R. G., & Epstein, A. M. (2006). Pay per performance in commercial HMOs. The New England Journal of Medicine. Retrieved from http://www.nejm.org/doi/full/10.1056/NEJMsa063682. Ransom, S., Joshi, M., & Nash, D. (2008). The healthcare quality book: Vision, strategy and tools. Chicago: Health Administration Press. Werner, R. M. (2010). Does pay-for-performance steal from the poor and give to the rich? Annals of Internal Medicine [Ann Intern Med], ISSN: 1539-3704, 153(5), 340–1. PMID: 20820044 Read More