Pay-for-performance benefits are unproven, panel says

Washington -- Those who trumpet the future of pay-for-performance as a way to improve care while lowering costs don't yet have the evidence to prove their case, according to a new report commissioned by Congress.

The Congressional Research Service, an arm of the Library of Congress that conducts studies for lawmakers, recently looked into the concept of paying physicians and other health care professionals based on how well they meet quality standards, rather than just on how much care they provide.

Scores of pay-for-performance initiatives, also known as "value-based purchasing" programs, exist in the public and private health care sectors, and their numbers are growing. But whether they are working as intended remains unclear, CRS said. The reason is that few objective studies have looked into whether the incentives to doctors and other health professionals result in better care for patients and lower costs for those paying the bills.

"Initial studies suggest that pay-for-performance programs can change performance on quality measures that are used for the basis of bonus payments, but claims that pay-for-performance programs are cost saving in the long run are largely unsubstantiated," writes lead author Jim Hahn, a CRS health economist.

Getting to the bottom of the quality and savings questions could be tough. Determining whether a certain health care practice produces good results usually requires conducting randomized, controlled studies -- something that rarely would be possible for a social policy such as pay-for-performance, Hahn states.

"Considered simply, quality improvement involves doing the wrong things less often and/or doing the right things more frequently. In practice, quality can improve by reducing or eliminating overuse or misuse, while increasing underuse," the report says. "The difficulty comes in translating these generally innocuous concepts into identifiable actions and activities in health care."

Physician groups, including the American Medical Association, have warned against implementing pay-for-performance plans that focus solely on cost cutting, rather than on improving the quality of care. While adherence to quality measures could save money over the long run by reducing complications and hospital visits, an increased focus on preventive medicine likely will result in greater health care spending in the short term, according to the AMA.

The report is now in the hands of lawmakers, some of whom have expressed an eagerness to introduce pay-for-performance to Medicare physician payment as a way to boost quality and slash costs.

Move forward, but with caution

Despite the concerns, some policy experts speaking at a recent event at the Cato Institute in Washington, D.C., said the change is needed.

Medicare must take the lead in launching pay-for-performance initiatives because of the sheer size of the program and the influential effect it has on the rest of the health care system, said David Cutler, PhD, a professor at Harvard University and a former economic adviser to President Clinton. Medicare could provide large enough financial incentives for physicians to want to participate and could demonstrate the results to other players that are interested in adopting it.

"You've got to get the big gorilla involved. You've got to get a lot of money involved if you're going to overcome [physicians'] fixed costs," he said. "An enormous part of the money is in the public sector -- Medicare and Medicaid -- so leaving Medicare outside of a pay-for-performance system strikes me as just a recipe for finding that, by and large, it's not as successful as it could be."

But federal officials need to take care that they do not harm certain physicians by creating financial incentives and quality measures that are more difficult for some types of doctors to reach, said Sandra Gadson, MD, a nephrologist in Indiana and immediate past president of the National Medical Assn. Minority physicians, for instance, often work in solo or small practices and see more patients with multiple chronic conditions -- characteristics that she said could get in the way of the doctors meeting their quality targets.

Physicians wouldn't be the only ones who would suffer if pay-for-performance incentives are not developed properly, said Michael F. Cannon, director of health policy studies at the Cato Institute, a Libertarian think tank. Medicare patients who are sicker and more difficult to treat may run into trouble finding doctors who will take them at the risk of missing federal quality requirements and therefore not getting full payments, he said.

The AMA has said it will support a pay-for-performance program only if it preserves the doctor-patient relationship by letting physicians exercise their sound clinical judgment and by preventing patients from running into barriers to care.

Hahn, the CRS economist, stressed the need for Medicare or any other pay-for-performance sponsor to consider the demands of the stakeholders.

"For the pay-for-performance program to be successful, there needs to be agreement and buy-in among those being evaluated that the objectives are fair and the measures appropriate, that performance is accurately measured, and that the incentives make the effort worthwhile," the report states. "Possible shortcomings and unintended consequences of a pay-for-performance program include having inappropriate measures and objectives, competing or uncoordinated efforts, insufficient or inappropriate incentives, and placing excessive focus on the reward."

The Congressional Research Service plans to follow public and private pay-for-performance developments and keep lawmakers apprised as they consider value-based purchasing ideas.