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Health Policy Brief: Pay For Performance

October 11th, 2012

A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation analyzes pay-for-performance initiatives, including provisions in the Affordable Care Act, that provide financial incentives to doctors and hospitals for meeting or exceeding specific quality and performance measures. The concept of pay-for-performance is designed to address shortcomings of traditional fee-for-service payment, which inherently incentivizes a greater volume of treatments regardless of patient outcomes. The brief assesses studies done to date on pay-for-performance that show mixed results and discusses needs for further research that could help shape more effective programs in the future.

Topics covered in the brief include the following:

  • What’s the background? The brief details the evolution of pay-for-performance initiatives since they began more than a decade ago. It examines both private-sector initiatives, such as the California Pay for Performance Program, and public-sector demonstrations, including those launched by the Centers for Medicare and Medicaid Services (CMS). Early pay-for-performance experiments tended to focus on quality improvement with relatively less attention on costs. The Affordable Care Act expands the use of pay-for-performance approaches in Medicare in a number of ways, including through accountable care organizations, and encourages experimentation to identify designs and programs that are most effective.
  • What are the concerns? Questions have been raised about the design of pay-for-performance programs, including whether they offer incentives large enough to motivate providers to improve or change their behavior. One study recently published in Health Affairs, for example, found that Medicare’s Hospital Value-Based Purchasing Program will alter payments to almost two-thirds of acute care hospitals by only a fraction of 1 percent—not enough, the authors argued, to motivate providers to change. Other studies and analyses have raised questions about the impact of pay-for-performance approaches on providers serving poor or disadvantaged populations, as these institutions are often already financially challenged and could face problems meeting patient needs if they become subject to financial penalties.
  • What’s next? With implementation of the Affordable Care Act and growing attention in all quarters to the costs and quality of health care, pay-for-performance programs are likely to become more commonplace. The evidence so far shows that more research is needed to determine, for example, what size rewards will bring about the desired changes and how the improvements in performance can be sustained over time. Future evaluations will identify unintended consequences and differing impacts on various health care markets.

About Health Policy Briefs. The Briefs are aimed at policy makers, congressional staffers, and others who need short, jargon-free explanations of health policy basics. The Briefs, which are reviewed by experts in the field, include competing arguments on policy proposals and the relevant research supporting each perspective

Previous policy briefs have addressed:

You can sign up for e-mail alerts about upcoming briefs. The briefs are also available from the RWJF’s Web site. Please feel free to forward to any of your colleagues who are tracking health issues. And after you’ve taken a look, we would welcome your feedback at

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4 Responses to “Health Policy Brief: Pay For Performance”

  1. capahde Says:

    Thank you for your comments. With the rising health care cost the government has implemented a pay-for performance as an incentive for hospitals and physicians to provide quality care. The goal of pay-for-performances is to motivate change among the health care community providing better quality outcomes (Wharam et al., 2011). One form of pay-for-performance is value based purchasing, where reimbursement is tied to quality outcomes (Wharam et al., 2011). The hospital continues to implement evidenced best practice and protocols to ensure patients receive quality care and meet all requirements of the Center for Medicare and Medicaid Services (CMS). It used to be that 92% was great; however, that is no longer the case. With value based purchasing everyone in the country is working towards being 100%, so 92% is no longer great we must be 100%.

  2. mikirowe Says:

    Thank you for your very informative post regarding health policy and pay-for-performance. I serve as a nurse manager in a 14-hospital healthcare system where we are working diligently to improve processes, to exceed patient expectations, and to fulfill Centers for Medicare and Medicaid Services (CMS) requirements associated with reimbursement, or pay-for-performance. CMS Core Measures and initiatives associated with the Affordable Care Act (ACA), such as HCAHPS and value-based purchasing, are first on my organization’s agenda, and go hand in hand with our continued commitment to provide safe, efficient, quality patient care for every patient, every time. Engaging frontline staff, along with the push for all licensed professionals to practice to the fullest extent of their licensure, is vital to the success of pay-for-performance healthcare initiatives (Institute of Medicine [IOM], 2011). One way our organization is recruiting the frontline staff to “buy in” to organizational and governmental initiatives, is through shared governance implementation. Staff nurses are involved with, and coming up with protocols and patient care quality initiatives, which are earning our hospital report card “challenge” scores. We have found that staff commitment and pay-for-performance initiatives go hand in hand.

    Institute of Medicine. (2011). The future of nursing: Leading change, advancing health. Washington, DC: The National Academies Press.

  3. adhmrw Says:

    Working in one of the hospitals, part of a large 14 hospital system, Value Based Purchasing (VBP) has been an important incentive in striving to meet the expectations that fall within the 2 domains of VBP.
    The first domain, clinical outcomes/core measures as determined by CMS and the second domain, quality of patient experience. This has been a component on our monthly scorecards and is a part of our leadership performance evaluations. I believe the statement “the VBP program does not incentivize” to be untrue at our health care system. Due to the uncertainties in healthcare reform, we take every dollar very seriously.
    We have put many initiatives in place to meet all core measures, as we feel anything under 100% in this area is unsatisfactory. They are not just numbers to us, but are patients and we do not want any person leaving our hospital without receiving the best of medical care.
    As far as the patient experience of quality during the hospitalization, we have been on a journey for several years to achieve patient-centered excellence. We want every care experience at our facility to be exceptional. We drill down on all of our patient satisfaction surveys exploring ways to improve these scores. It has been an interesting journey, learning what expectations of care patients have prior to ever entering the hospital. Meeting their expectations has been the challenge. Another interesting component of patient experience is the patient’s perception of quality care. This has presented a challenge. Many patients interpret survey questions differently and there are many patients that would never rate a facility as “Always”. I have spoken with many patients about their experience and they judge care based on the lobby décor or the inability to have fried chicken instead of receiving appropriate medications, tests, and achieving positive clinical outcomes. I definitely agree further research is needed to establish more effective programs to focus on key ideas that will drive quality of patient care from the hospital’s perspective as well as the patients.
    Deborah Hall, Nurse Manager, Baptist Memorial Health Care Corporation


    Incorporating Pay-for-Performance (P4P) as a standard for reimbursement by the government is needed. P4P holds hospitals and healthcare providers accountable in providing quality care to patients while decreasing overall healthcare costs. Currently, I am a pediatric nurse at a children’s hospital and collaborate with the Center for Medicare and Medicaid’s quality improvement project for pediatric asthma. This process involves making sure all patients are discharged on steroids, controller medications, and rescue inhalers. Also, education is provided every time the patient and family returns to the hospital with asthma exacerbations and how to prevent future asthma attacks. If this service is not provided, the hospital goes without reimbursement. By complying with CMS, the hospital is held accountable for providing quality care and hopefully this prevents patients from being readmitted. Hospitals provide the means for patients to be taken care of at home, medications are filled at the outpatient pharmacy, and education is completed. Even when this all occurs, some patients and families continue to come in for noncompliance. So I ask, at what point do we start holding our patients and families accountable and how can this occur?

    Pediatric Asthma-CMS Core Measures

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