An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Hospital Experiences with the Medicare RHQDAPU P4R Program


In our discussions with hospitals about the Medicare RHQDAPU program, which as of 2007 held 2 percent of a hospital’s APU at risk for reporting, there was widespread sentiment that they would publicly report on these measures absent the RHQDAPU effort. The historical evidence suggests the contrary, however. Prior to tying reporting of performance measures to the APU, only a small number of hospitals (400 out of approximately 3,800 PPO hospitals) voluntarily reported performance data under the National Voluntary Hospital Reporting Initiative (NVHRI).

 Helping the Hospitals Prepare for P4P. Most hospitals were fairly positive about their experience to date with the RHQDAPU program. Hospitals accepted the measures and agreed that the measures addressed important areas; they also felt that hospitals should be held accountable for these indicators of care. There was a unanimous belief among hospitals that P4P was inevitable, with a number observing that “P4P is going to be a way of life in the future.” Hospitals viewed the RHQDAPU program as a means to help them gain experience with data collection, submission, and validation and to make quality improvements before P4P starts. A number of hospitals commented, “We want to be prepared.” Hospitals indicated they were “OK” with shifting from RHQDAPU directly to P4P. Several hospitals expressed a desire to structure an incentive program with two payment components: a P4R component to allow all hospitals to receive funds to recoup their data collection costs and a P4P component to reward differential performance.

Challenges in Engaging Physicians. Hospitals stated that they were not currently financially incentivizing physicians on the performance measures for which they were being held accountable. Most observed that physician engagement was challenging and that, moving forward, it would be important to align physician incentives to ensure the right behavior occurred. A majority of hospitals, particularly large hospitals, indicated they could not do much to influence physician behavior and struggled with ways to ensure compliance on the performance measures. Frequently, the hospital CEOs with whom we spoke noted that “doctor’s don’t like to practice cookbook medicine” and “don’t like to be told what to do.” The problem of physician engagement was compounded occasionally when the performance measures on which the hospital was being asked to report were not in synch with current evidence-based medicine (i.e., as the evidence changes, reporting requirements frequently lag). A number of hospitals expressed the need to change gain-sharing laws so that hospitals could structure financial incentives internally for physicians, and that this would allow physicians to see “what’s in it for them.”

P4R and P4P Are Generating the Engagement of Hospital Leadership. Hospitals were in widespread agreement that the P4R program had caused important changes in their organizations, noting that it has resulted in a more proactive focus on quality improvement and attention on performance at all levels of the organization. A common sentiment expressed was, “Without P4R, the quality improvement effort would have been smaller and slower.” This sentiment was also indicated by hospitals exposed to P4P programs. Hospitals noted that their hospital boards and leadership were now much more focused on quality, and that typically there was a monthly review of progress on the performance indicators during the hospital board meetings, something that had not occurred prior to the P4R program. Hospitals stated that their leadership and boards frequently reviewed the Hospital Compare website to see where their hospital stood relative to others in their community and nationally; they also noted, “We don’t want to be in the bottom quartile.”

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