An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Design Lessons


Discussions with program sponsors, hospitals, and data vendors revealed the following lessons about P4P program design and operation:

  • Measures—Hospitals are using an array of performance measures, though the focus at this stage is primarily on measures of clinical effectiveness, and within this category, most of the focus is on measures of underuse (i.e., process-of-care).  Little is happening with respect to measuring efficiency, clinical outcomes, or patient safety.  Sponsors noted there were limitations in the number and type of measures currently available for use in pay for performance and public reporting, and cited a need for additional measure development and testing.  Hospitals expressed concerns about growing data collection and reporting burdens across the various P4P programs and reporting initiatives being developed by an array of sponsors, whose efforts are not fully aligned.  Hospitals expressed a strong desire for measures to be aligned, for reporting efforts to be coordinated, and for use of evidence-based standardized measures to minimize physician pushback. While P4P program sponsors desire to expand the number and types of performance measures to ensure a more comprehensive picture of hospital quality, hospitals stated a desire for a more limited set of measures on which they could focus quality improvement efforts. 

    Payment structures—Existing P4P programs primarily make reward payments on the basis of improving over time or relative performance.  Hospitals universally agreed that payment structures should use absolute thresholds and reward all good performers, rather than providing incentives on a relative-performance basis (such as paying only to the top 10 or 20 percent of hospitals participating in a P4P program).  This was seen as critical when the measures of performance used have scores that “top out,” reflecting little meaningful difference in the performance across most hospitals.  Programs sponsors felt strongly that performance improvement as well as attainment of specific benchmarks should be included as a component of the payment structure, at least in the early years of a P4P program, in order to engage all hospitals. Hospitals also noted the difficulty of getting physicians to change their behavior absent aligned incentives on the physician side, and called for program sponsors to create parallel physician incentives focused on inpatient care for the same conditions used in hospital programs.

  • Data infrastructure—Current validation efforts are weak, and program sponsors and hospitals acknowledged the need to strengthen validation as more money is put at risk in P4P programs.  Hospitals also indicated a need for technical support to comply with P4P program requirements, and cited the important role played by QIOs and data vendors in helping them understand the program requirements, prepare data submissions, and develop tools and interventions to improve performance.  Current information systems hamper the ability of P4P programs to substantially expand their measure sets because hospitals still rely on manual abstraction of hard copy medical records to produce the data required for P4P programs.  Hospitals also expressed a desire that the P4P program data infrastructure be constructed in a way that enables regular, timely feedback to hospitals on their performance, for the purposes of making corrections and for quality improvement work.
  • Public reporting—Hospitals indicate they do pay attention to how their institution looks publicly and that public reporting has forced their boards to more closely monitor quality and provide resources for quality improvement.  Both program sponsors and hospitals cited a need for simplification of the performance information presented on consumer websites, such as the CMS Hospital Compare website, to facilitate consumer understanding and use of the information.
  • Engagement strategies—Program sponsors noted the importance of engaging hospitals in the planning and execution of P4P programs to encourage a more collaborative versus payer-driven approach to implementing this payment reform.  Engagement strategies included involving providers in the measures selection process and program design more broadly, in ongoing planning as the program evolves over time, and structuring aligned incentives on the physician-side, as noted above.

    Absence of Knowing What Works—Because P4P is a newly emerging reform tool and little information is currently available about the impact of P4P or the influence of various design structures on P4P outcomes, P4P programs should incorporate evaluation and ongoing monitoring into their design as a means of building a knowledge base.  Hospitals and P4P program sponsors recommended allowing experimentation, which would create models where learning could occur to inform future design structures. The discussants noted that the results of P4P may differ as a function of the program design features as well as the varying structure of local health care markets, and that much could be gained from examining the experience of these local experiments. Collecting and broadly disseminating this type of information will be critical to future efforts to construct P4P programs so that they can meet their programmatic objectives.  Funding will be necessary to support program evaluation, and the evaluation work needs to be sustained over multiple years to fully assess impact and monitor for unintended consequences. 

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