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Pay for Performance
Over the past year, hospitals, doctors and health insurers have been meeting to discuss pay-for-performance (P4P), the latest attempt to correct our dysfunctional health-care payment system. The general concept is actually quite simple: Providers of health-care services would be paid more if they achieve certain performance metrics and less if they don't.
Proponents of P4P argue that it's no different than the way the rest of the economy works: The suppliers of 'better' goods and services are paid more by purchasers than those who offer lower-quality products. Why shouldn't health care operate under the same principles? Health-care purchasers ' be they employers, insurers or consumers ' will examine data about provider efficiency and quality, and then adjust payment accordingly.
While most health-care purchasers, providers and consumers would agree in principle that this concept makes sense, it is not surprising to learn that 'the devil is in the details.' Most importantly, in the complex world of medical reimbursement, the key questions are how to define the performance metrics and who gets to decide. In addition, there are numerous implementation issues, including how to standardize performance metrics across health plans, how to determine the type and amount of incentive payments, and how to assure accurate, risk-adjusted public reporting of the results.
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