Pay for performance (P4P) is being implemented by many healthcare organizations in the United Kingdom and the United States of America. It rewards healthcare workers for good performance and penalizes healthcare systems when medical errors occur or treatment is not satisfactory. This tactic has gained a lot of attention and the US Medicare system is now considering implementing this strategy (“Pay for Performance,” 2013). Pay for performance provides economic incentives to healthcare providers to provide the highest standard of healthcare, but the efficacy of this standard is still not clear. Utilizing the pay-for performance model is revolutionizing healthcare in the US and UK.
Historically, healthcare has been on a “fee for service” basis. If a patient wants treatment, they pay the prescribed rate for such services. Considering human nature and economic incentives, the pay for performance system was introduced. Insurance companies also support this new ideology (“Pay for Performance,” 2013). The fee for service ideology was structured on regulation and feedback. Regulation was the centerpiece of this strategy. A set of rules were enacted to protect patient interests. Negative feedback from patients or patient’s families was often dismissed as ignorance (Lindenauer et al., 2007).
Pay for Fee for Service
Healthcare providers have structured their budgets on a fee for service program. If a patient needs medical services, there is schedule of fees provided to every patient. If they have medical insurance, the insurance company is also provided with this information. The insurance company will approve a procedure based on medical necessity as well as the cost of the proposed procedures. Oftentimes, insurance companies will deny coverage based on the cost of a procedure or treatment. The excessive costs have caused an inordinate rise in the cost of medical insurance in the US. The ideology of pay for service has supported doctors prescribing high cost tests knowing most medical insurance will cover them in part. This is ignoring the cost-share of the patient or the patient’s family. For patients without medical insurance, the costs are borne by the individual or by the government, regardless of the necessity or cost-effectiveness of the treatment prescribed (“Pay for Performance,” 2013).
Hospitals have to ensure there will be no net loss to providing patient care. Many private hospitals also need to exceed this goal and make a profit. The fee for service program ensures these goals. The hospital system in the US is particularly challenged in this regard. Most patients do not realize the inherent costs to maintaining a healthcare facility. A facility availablr twenty four hours a day, seven days a week.
Pay for Performance Service
Healthcare systems have been put under a great amount of stress in recent years. The downturn of the economy has not only affected the capability of the average consumer to afford good healthcare. In this environment, consumers are more likely to complain about the care they are being given. Also, the stringent rules imposed by insurance companies tend to dissuade patients from receiving the proper tests or treatment prescribed by their doctors. Often, a patient’s decision on testing or treatment lies with the cost.
The “Pay-for-performance” program has brought about several positive outcomes. The P4P program has been proposed to increase the quality of care. When a medical care worker or hospital is invested monetarily in the outcome, patients have a more beneficial outcome and patients recover more quickly (Rosenthal and Dudley, 2007). Customers (patients) are assured of quality assurance under this system. A patient will know they are getting the best service available because they know it is a satisfaction-based system. On the downside, human nature would indicate that patients will pay the least they think they can for a service. Or they will overuse a service because it is free or almost free (i.e., the tragedy of the commons). Perception of the value of medical services rendered can dramatically alter the idea of “value” and “performance.”
Lindenauer et al. (2007) conducted a study to ascertain whether pay-for-service increased the quality of healthcare received by patients. An incremental monetary increase of one to two percent improved patient care and safety dramatically. In this study, hospitals engaging in pay-for-performance practices were compared to control hospitals that did not participate in this practice. Another key aspect of this comparison was the participation in reporting. The thesis of the researchers included not only pay-for-service but also the reporting of hospital quality data. Pay-for-performance hospitals excelled in seven of ten metrics tested in this study. Hospitals receiving a one to two percent incentive for providing good service showed and incremental increase in the quality of healthcare received over the two year study period.
It is difficult to separate the effects of including an incentive-based program into a healthcare system. The study done by Lindenauer et al.(2007) illustrated that although there was an incremental increase in the level of patient care and the quality of healthcare received in pay-for-service hospitals, there were a number of potential biases in the experimental design. This study could not separate the effects of reporting from the participation in pay-for-service. The sample of hospitals included in this study were inherently biased as well. Hospitals meeting the criteria for the study were not an average representation of mainstream hospitals. In addition, the study could not discern whether there was any relationship between the amount of incentive given and the resultant quality of care.
Pay-for-performance is revolutionizing the way healthcare is operating in the UK and the US. Patients and insurance companies are finally having a say in the quality of care they are receiving. Instead of waiting for a governmental mandate or customer complaint, the P4P system provides instant feedback about customer satisfaction. Healthcare organizations are also realizing the economic benefits and pay for the service patients receive, like any other consumable product. It is clear that P4P benefits not only the consumer (patient), but also the healthcare provider as well.
Lindenauer, P. K., Remus, D., Roman, S., Rothberg, M. B.,Benjamin, E. M., Ma, A., and Bratzler, D. W. (2007, Feb. 1). Public Reporting and Pay for Performance in Hospital Quality Improvement. N Engl J Med 2007; 356:486-496.
Pay for Performance. (2013, 9 Jan.). In Wikipedia, The Free Encyclopedia. Retrieved from http://en.wikipedia.org/wiki/Pay_for_performance_%28healthcare%29
Rosenthal, M. B. and Dudley, R. A, (2007). Pay-for-Performance: Will the Latest Payment Trend Improve Care? JAMA 2007,297(7):740-744.