Quality of Services and Information

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Program Evolution

Measures. Looking forward, many sponsors (11/20) plan to expand and/or modify the measure sets they are currently using. They anticipated including more measures in one or more of the following areas:

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Hospital Assistance and Engagement

Engagement. The majority of sponsors consulted with hospitals about overall program design (15/22), typically through in-person or telephone meetings during which they discussed ways to structure the P4P program. These sponsors strongly felt that such engagement was and continues to be critical to the success of their programs. In addition, the

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Public Reporting

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Payment Structure

Payout Method. The sponsors with whom we spoke tended to use one of two performance-based rewards. About half (10/22) pay a lump-sum bonus, usually annually. The other half (9/22) pay the reward on a continuous basis (e.g., an ongoing “bump up” to per diem or DRG payments) and use past performance to determine the future year’s payment in

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Data Collection and Validation

Data Collection .

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

Measure Set Determination . We identified two general approaches used by sponsors to determine the measure set for their hospital P4P programs. The first is a standardized, “one-size-fits-all” approach in which the measures applied to hospitals in the program do not vary.

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 report

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Findings from Discussions with Program Sponsors

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Methodological Approach

We used several sources to identify candidate private- and public-hospital P4P programs to construct the universe of hospital P4P programs:

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. III. Summary of Discussions with Pay-for-Performance Program Sponsors

Given the scarcity of empirical data showing the effects of P4R and P4P programs on improving quality, safety, or efficiency and showing the effects of design elements that may influence provider behavior, RAND held discussions with a broad cross-section of P4P programs to gather information on the current state-of-the-art of P4P program design an

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

Together, the economic and management theories that we reviewed suggest that the way in which P4P incentives are structured, or framed, may influence whether they achieve the desired behavioral response. Incentives that are framed as withholdings, paid out in small and frequent payments, and paid out close to the time that care is delivered might

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Intrinsic Versus Extrinsic Motivation

Empirical meta-analyses of studies that examined incentive programs show that such programs have a mixed response; some studies show an impact, and many others show little or even a negative impact (Rothe, 1970; Deci, Koestner, and Ryan, 1999; Cameron, Banko, and Pierce, 2001). Researchers have tried to reconcile the mixed results by theorizing th

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Multidimensional Output

Multidimensional output, or multitasking, refers to situations in which the responsibilities of an individual encompass multiple activities or outputs that may require different types of skills to accomplish (Holmstrom and Milgrom, 1991). A hospital’s output includes many different components, such as managing a patient’s chronic illness, the

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Limitations in Using Economic Theories to Predict Behavioral Response

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. A Series of Tiered Absolute Thresholds May Be Better Than One Absolute Threshold

An individual’s motivation and effort when faced with a goal greatly depend on that individual’s baseline performance. Economists and psychologists have described this phenomenon as a “goal gradient” (Heath, Larrick, and Wu, 1999). If baseline performance is far away from goal performance, the individual exerts little effort, because the g

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Reducing the Time Lags Between Performance and Receipt of Incentive Can Help to Achieve Maximum Response

In economics, the principle of discounting is based on the fact that individuals value having a sum of money now more than sometime in the future, even after accounting for inflation. The concept of discounting and the use of a discount rate are well accepted in both accounting and economics. Studies have found, however, that individuals discount

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Uncertainty May Reduce the Behavioral Response

When given a choice, most people are risk averse; they will choose an option with 100 percent certainty over an option involving an uncertain but likely more valuable outcome. This principle of risk aversion is illustrated in a study in which subjects were given a choice between a one-week vacation that was certain or a three-week vacation they ha

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. A Series of Small Incentives Might Lead to More Quality Improvement Than Would One Large Incentive

Why do people go across town to save $10 on a clock radio but not to save $10 on a large-screen TV? After all, the same amount of money can be saved in both cases.

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Withholds May Have More of an Impact Than Bonuses

One aspect of prospect theory is the principle of “loss aversion,” which finds that individuals are more sensitive to incentives when they perceive they are losing as opposed to gaining something. This effect has also been described as “losses loom larger than gains.” This behavioral effect has been demonstrated in a series of experiments

An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Prospect Theory and the Role of Framing in Decisionmaking

P4P incentives are designed to change the behavior of providers and the systems in which they operate in ways that will improve quality or efficiency. Various factors, such as the size of the incentive, are likely to influence a hospital and its physicians’ behavioral responses to a P4P program. For example, a large incentive would likely lead t

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