An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Advice Offered by Hospitals Regarding P4P Program Designs


The key recommendations that hospitals had for anyone considering designing and implementing a P4P program were as follows: 

  • Reward everyone that does well. Avoid setting up a reward structure that only pays out top deciles when measures are compressed at top end. 
  • Do not pay based on improvement or, if you do, set a minimum threshold of performance and only pay for improvement above that minimum.
  • Provide regular performance feedback for quality improvement purposes. Monthly feedback is most helpful to those on the front line of the organization who are trying to make change. Hospitals expressed a desire to get feedback that shows a particular hospital’s percentile score with the raw score and comparison benchmarks (in real time).
  • Focus on selecting measures for core areas where expenditures and patient volume are high.
  • Provide support and technical assistance, especially to small hospitals and CAHs, since participation requirements can be significant.
  • Involve hospitals directly in planning and implementation (“They know what really happens in a hospital.”). Some hospitals felt that national associations (e.g., AHA, FHA) were adequate representatives for hospitals’ concerns, but small, rural, and CAH hospitals felt that state hospital associations from states with a substantial rural provider population might better represent their particular issues.
  • For small hospitals, limit what is measured to what they do—do not hold them accountable for things they do not do. Allow smaller hospitals to choose from a smaller number of clinical conditions in order to make program participation more manageable for them.
  • Allow hospitals to directly incentivize their physicians and be sure to align physician measures and incentives with hospital measures and incentives. Change restrictions on gain sharing so that hospitals can provide financial incentives to their doctors.
  • Focus hospital measurement on things the hospital has control over (e.g., infection rates, turnaround time on tests and procedures).•Coordinate and align with other programs/hospital reporting requirements.
  • Use evidence-based measures that are standardized and consensus based to reduce hospital pushback (e.g., that are endorsed by NQF and HQA). Educate physicians about measures being evidence based in order to get buy-in, potentially working through such professional journals as the Journal of the American Medical Association (JAMA) and the New England Journal of Medicine (NEJM).
  • Expand measurement beyond the CMS RHQDAPU areas in which hospitals are already doing well to include measures of outcomes, cost/efficiency, transitions in care, medication management, patient experience related to safety, and outpatient hospital services.
  • Pilot new measures prior to payout and reporting.
  • Minimize hospital burden by selecting a “reasonable” number of measures to track and by aligning with other hospital reporting requirements.
  • Support risk adjustment to ensure comparability and to minimize possible unintended consequences of risk selection.
  • Use all-payer data to score hospitals to avoid the small-numbers problem.
  • Validate the data to prevent gaming.
  • Consider the important role that data vendors can play by supporting hospitals with data submissions and validation.
  • Create a standardized program but consider regional approaches to allow experimentation (“[The] right design isn’t known today, and we need to learn as we go”).

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