An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Principles for Pay-for-Performance Programs


Numerous organizations have developed design principles for P4P programs in the hopes of influencing how CMS and other P4P sponsors structure their P4P programs (see Appendix B). Among these organizations are MedPAC, the Joint Commission, employer coalitions, the American Medical Association (AMA) and other physician groups, the American Hospital Association (AHA), and the Association of American Medical Colleges (AAMC).

The principles cover a wide variety of program design and implementation issues, and at times the recommendations made by the different organizations directly oppose one another. Five major areas of disagreement about P4P design and implementation issues are:

  • Should P4P programs, especially in Medicare, be budget neutral or based on “new money”? 
  • Should P4P programs include negative financial incentives for participating providers? 
  • Should P4P programs include efficiency measures? 
  • Should P4P programs initially include measures of patient outcomes?
  • Should the measures included in the program be stable or be modified over time? 

There was also variation in the topics explicitly included by organizations in their statements. For example, physician organizations frequently include these principles: voluntary participation, no link between rewards and the ranking of physicians relative to one another, reimbursement of physicians for the administrative burden of collecting and reporting data, and physician involvement in program design.

There are, however, areas of consensus. Nine or more organizations endorsed the following principles/recommendations:

  • P4P programs should be based on accepted, evidence-based measures.
  • Risk-adjustment methods should be used to prevent providers from avoiding caring for patients who are more difficult to treat (i.e., are sicker or non-compliant).
  • Incentives should be aligned with the practice of high-quality, safe health care.
  • Programs should include positive incentives for the adoption and utilization of IT.
  • Rewards should be based on improvements in care and exceeding  benchmarks.
  • Data collection for P4P programs should not place an undue burden on providers, or providers should be reimbursed for the costs of collecting and reporting data.

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