An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. General Descriptive Characteristics of Hospital P4P Programs


  • Length of Time in Operation. Of the 23 P4P programs, a majority were relatively new. Seven had made their first incentive payment to hospitals in 2006 or were about to make a payout early in 2007, five had made their first payout in 2004 or 2005, and 11 had made their first incentive payments starting in 2003 or earlier. Only one program reported making its first payout prior to 2000. Planning efforts for the P4P program typically started two to three years in advance of making the first payout. 
  • Program Sponsorship. Most programs were sponsored by individual commercial health plans and did not involve partnerships with other organizations. Only six of the 23 program sponsors reported partnering with other organizations to develop and operate their programs. 
  • Type of Insurance Products. Eleven of the programs included all commercial product lines in their hospital P4P programs, while the others focused their incentives on a narrower set of products. Of the P4P programs with a narrower focus, six focused on PPO populations, five on HMO populations, five on
  • Program Goals. Nearly all sponsors (21/22) reported that the primary goal of their P4P programs was to improve the quality of care delivered to their members.5 Other program goals mentioned included improving the efficiency with which care is delivered (6/22), improving patient safety (5/22), and rewarding and recognizing top-performing hospitals (4/22). A number of sponsors also noted that they were interested in strengthening hospital quality improvement department/activities, improving patient experience, and improving their relationships and ability to work collaboratively with hospitals.
  • Overall Program Structure. Programs were typically voluntary (17/22). Hospital P4P sponsors reported that they often implemented P4P through contract negotiations (11/22), meaning that the program was rolled out on an individual hospital basis as individual contracts came up for renewal, and that the specific terms may have been customized to the individual hospital. Consequently, this process translated into a slower program rollout compared with programs that shifted to universal adoption of the P4P program in a single contract modification affecting all hospitals at the same point in time. Several sponsors noted that some hospitals have considerable leverage in these contract negotiations as a function of having significant market share or being “the only game in town.” This situation contrasts with the experience of physician-level P4P programs, in which the majority of physicians practice individually or in small practices, which means they have less bargaining strength to negotiate the terms of the P4P contract. Although the programs were voluntary, our discussions with hospitals revealed that most hospitals approached by P4P sponsors agreed to participate, so penetration was high. Sponsors reported that they usually did not include specialty and small and/or Critical Access Hospitals (CAHs) in their P4P programs, primarily because of the challenges of not having enough patient events to score to produce stable performance estimates (i.e., the small-numbers problem). There was an exception; one program sponsor designed a P4P program specifically to enable participation by rural hospitals. 

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