I’ll limit my P4P research observations to one regarding the RCT on teachers. I’m just an MBA, but I got my MBA at 40 as a business owner, which I like to think diminishes my “over-entitled” footprint on the world. Even if I’m wrong about that, I would still say that teachers did not enter their career to be paid for performance and it’s likely that they were loath to engage it when it was asked of them. All in all, a unfortunate pairing of incentive to archetype.

Your bits on motivational crowd-out and contract theory is where I’d like to chime in. Again, really eloquent observations, and I think I have, at least implicitly, addressed many of these rational objections. My model seeks to reward compliance rather than a medical outcome (an excellent example of an incomplete (and favorable) contract), explicitly because, as I state in my plan, asking an individual to “sign on” to an outcome requires an irrational amount of medical knowledge and makes the process complex and overly taxing. Further, I dramatically reduce the “size” of the reward to an amount that begins with merely getting one’s investment back (The first 8-weeks reward is an approximate return of the money initially invested) so one cannot participate without having skin in the game. Further, Paying HCS an economically rational amount for an outcome when it alone is at risk for the outcome rather than the beneficiary is a game changer. The moral hazard of high rewards is diminished greatly, and the fact that the payment going to HCS is larger than the payment going to the beneficiary should not enter into it unless HCS adds no value. All I am eager to find out is whether my assertions can survive a few trials. Make no mistake, my model is different, and the arguments asserted in the article address the differences rather effectively.

Moreover, outcomes are affected by myriad social and biological factors that are outside the doctor’s control. Doctors who care for poor, minority and non-compliant patients look bad on P4P outcome measures, regardless of their skill. Finding the needle of performance amidst the haystack of other outcome determinants is well beyond current, or foreseeable, risk adjustment methods.

Risk adjustment of outcomes is a daunting task under the best of circumstances. But when providers have incentives to upcode diagnoses and play other games that will cast their performance in the most flattering light, risk adjustment schemes produce nonsense. A physician who performs echocardiograms on all of her asymptomatic octogenarian patients could label many – even most – of them with the diagnosis of “congestive heart failure”. While this diagnosis would do no good for the patients, it would make the doctor’s panel of patients look very sick, and hence her outcomes look very good indeed. Similarly, incentives to keep patients’ systolic blood pressure below 140 have triggered memos in two practices that we know of instructing staff to round down rather than up when recording blood pressures that are near the line, generating a surge in patients whose blood pressure is “well controlled” at 139.

In sum, P4P based on outcomes won’t improve quality. What it will do is penalize providers caring for vulnerable patients, grossly distort quality data and distract physicians from the arduous work needed for real quality improvement.

Our experience as clinicians conflict’s with Gwanstadt’s view that patients are voracious consumers of care whose appetites must be curbed by making them bear out-of-pocket costs. Other than the rare case of hypochondriasis, people generally view a trip to the doctor as an inconvenience (or worse), hardly akin to a lobster dinner as Gwanstadt suggests. Most people want the amount of care that optimizes their health; no more, no less.

David Himmelstein, M.D.
Steffie Woolhandler, M.D., M.P.H.

This is a good dialogue – anything from Woolhandler and Ariely by way of response to Gwanstadt?

They are also correctly document that injecting financial incentives into the current system is unlikely to make much difference, and do a nice job of documenting this with the data we now have.

However, their conclusion that financial incentive are not likely to work in medicine due to moral hazards, or some other vague concepts of morality or ethics, is not substantiated, and is likely wrong. Globally, many high value health care systems exist!

It is not the fundamental nature of healthcare as a business that is at the heart of our American problem. The source of our trouble simple: our healthcare financial incentives are being driven by the insurance industry. That industry is behaving rationally by maintaining low administrative costs, which evolved a simple bargain between the insurer and provider namely, “Tell us what you did and we will pay you the going rate”. This is easy to administer.

We are currently getting what we have contracted for- a lot of procedures and encounters, but not enough health. The data shows that grafting P4P process measures of quality and cost onto this flawed bargain is not going to do much.

Lack of data does not mean lack of effect. We do not have data about how P4P might perform if incorporated into a more rational bargain for society. The needed experiment: apply P4P to OUTCOMES. That is the combination that will loose the power of the market to provide good health at low cost, and we must get on with it. A system based on aligned patient and provider financial incentive for high health status at low overall cost will dramatically change behaviors of both and the value proposition. The digital transformation of medicine makes such a system quite affordable if outcome measures are included in the design.

An additional twist: The insurance mechanism adds value by protecting us against infrequent catastrophic events, but also adds an administrative burden and encourages overuse- if we had grocery insurance, everyone would want lobster. We have already realized this in medicine and do not cover cosmetic surgery. So, insurance for the lowest value quarter or third of healthcare should probably be proscribed- it has been shown to add little to population health. This will allow unhampered market forces to determine how many choose a year on a respirator, etc.

The big winner will be the high value preventive services and healthy behaviors, which are sadly underutilized in the US. These must be incentivized.

When financial success in medicine means creating healthy patient populations, provider behaviors will change, most doctors will be happier, most patients will be happier, and our nation will be much more competitive, for three reasons: 1) a lower health care “tax” on our goods and services, 2) the increased productive capacity of a healthy population, and 3) the increased consumption capacity of a healthy population.