Observation Deck: Pay reform is a work in process

In February 2012, JHC reported in “Observation Deck” on a Congressional Budget Office report (http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf) that showed that three of four valued-based payment systems studied produced little or no savings for Medicare. “The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients,” said CBO. The report seemed to suggest that we have a long way to go in fixing the financial problems facing our healthcare delivery system.

More recently, in April, the New England Journal of Medicine dropped another bomb in the form of a study that questioned whether pay-for-performance reimbursement systems actually lead to better patient outcomes. “The policy of tying financial incentives to the quality of performance has strong face validity – that is, paying for better care should promote improvements in quality and, ideally, lead to better patient outcomes,” wrote researchers. “Whether pay for performance will lead to better patient outcomes, however, is unclear.”

Researchers used six years of data from the Premier Hospital Quality Incentive Demonstration (HQID) to track the impact of pay-for-performance reimbursement. They found that while the systems did result in “modest improvements in the processes of care,” they didn’t affect mortality rates, at least in the three medical conditions and two surgical procedures monitored: acute myocardial infarction, congestive heart failure, pneumonia, coronary artery bypass grafting and total knee/hip replacement.

Granted, the study had limitations. Most important, researchers admitted that the Premier HQID incentives were focused more on processes of care (that is, encouraging actions providers take with certain patients) than with mortality. (Example: Giving heart attack patients a beta-blocker upon arrival and discharge.) And they cautioned against throwing out the baby with the bath water. “The Premier HQID is only one model of pay for performance, and the results may not be generalizable to all pay-for-performance programs,” they wrote. “Alternative models that incorporate larger incentives and are focused on outcomes may be more effective.”

Put all the disclaimers aside, and what do we have? Well, it seems that incentivizing people to take certain actions (the beta-blocker example) might not necessarily result in better outcomes. That could be true for a number of reasons. First of all, you can’t give people too many “right things” to do. How can they keep all those directives straight? And second, there’s always the risk that caregivers will do the “easier” right things than the more difficult (but potentially more important) ones.

“At the end of the day, you are going to ask people to make improvements and you want them to focus on what’s important,” Ashish Jha, an associate professor at the Harvard School of Public Health and lead author of the study, was quoted as saying in the Miami Herald article. “And if you give them 18 different metrics and some are easy but not that important, and some are hard but important, people are going to naturally gravitate toward what’s easy, and you’re not going to have meaningful impact.

“Pay for performance is really important,” he said. “This [study] says to me that we haven’t figured out the pay part or the performance part.”
It’s a safe bet that pay-for-performance will be a permanent part of the healthcare landscape. It will, to some extent, guide supply chain professionals’ purchasing decisions. But it’s also clear we haven’t figured this thing out yet.

About the Author

Mark Thill
Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master's degree in journalism from Northwestern University in Evanston, Ill.
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