Introduction
The quality of the health care system is meant to be improved by the introduction of the pay-for-performance (P4P) system. Likewise, P4P is designed for cost reductions in the health care system and for stabilizing the continuously increased health care services. Quality and cost optimization are, therefore, the main objectives of the P4P system. Nevertheless, other secondary benefits are targeted to be achieved through the implementation of this program. As such, the pay-for-performance system intends to change the behavior of the health care providers, influencing them to become more proactive and increasing their motivation for delivering improved qualitative services at optimized costs. Based on incentive based remuneration for the providers who meet the established performance targets, the pay-for-performance raises concerns regarding the effectiveness and ethics of applying it in the health care providers’ remuneration package. After defining the pay for performance, this essay discusses about the impact of P4P on reimbursement, the impact of cost reductions on the quality and efficiency of health care, the effects of P4P on providers and patients and about P4P’s effects on the future of health care.
Define pay-for-performance
Faced with various challenges specific to globalization and to the changing context of the illness treatment, the healthcare system approached these issues by developing a target based performance measurement for the physicians, nurses and other healthcare providers and staff (Parke, 2007). The healthcare system and clinical practice employ the pay-for-performance concept within their practice as a solution for controlling the costs and for improving the quality of the medical services (Greenwald, 2010). The pay for performance practice is, therefore, focused on achieving previously established goals. However, as practitioners observe, this aspect can lead to competition among healthcare professionals, interested in achieving as many goals as possible, while distracting from actual patient care (Greenwald, 2010).
Under the pay-for-performance practice, the physicians and hospitals that performed better than their counterparts are paid better, according to a reimbursement method that assesses improved outcomes of the patients and of the medical services (Mayes, 2006).
Soal and Kasper (2008) note that one of the objectives of pay-for-performance within the healthcare system is to generate a behavioral change among practitioners, meant to influence them to be more proactive in their duties. The purpose of attaining proactive practitioners is to achieve increased efficiency for medical institutions (Mayes, 2006).
However, according to underpinned studies on pay-for-performance, the incentives generated by this practice are relatively small, insufficient for generating a behavioral change among healthcare practitioners (Greenwald, 2010). Moreover, Mayes (2006) indicates that this is a method solicited by the employers and insurers as a strategy to identify new methods for paying the medical services, with different financial packages, according to the quality and efficiency of the services.
Explain how reimbursement is affected by the pay-for- performance approach
In medical system the reimbursement comes from private or governmental insurers that generally provide a standardized fee-for-service payment model, which allowed the health care providers to increase the number of patient services, for boosting their incomes (Niles, 2011). Applying the pay-for-performance approach implies attaining the specific goals that are set in the treatment of insured patients. Like this, focused on meeting the set goals, health care providers will not have the possibility of increasing their patient services. The fee-for-service focuses on quantity, while the P4P approach embraces quality. This implies that the P4P model affects the reimbursement by reducing the quantity of its fee-for-service. Practically, this implies that the doctors and other health care practitioners are paid with a salary, to which are added potential incentives or bonuses, based on the patient performance (Kluger, 2009).
On the other hand, as the health care providers are reimbursed based on the quality of their work, with pay-for-performance practice some practitioners might actually lose. As such, the P4P process includes financial penalties for those practitioners who fail to achieve the established goals or cost savings in their treatment of patients (“Health Policy Briefs”, 2012). Therefore, the reimbursement of the healthcare professionals is impacted by the pay-for-performance approach, by either rewards for the practitioners who meet or exceed the health goals or penalties for the ones who fall behind the imposed goals. Overall, these practices are aimed at achieving cost reductions in the health care.
Discuss how system cost reductions impact the quality and efficiency of health care
Since the main purpose of the P4P is to achieve cost reductions, against the constantly increasing costs for the healthcare services, this will impact the quality and efficiency of the health care by better optimizing the finances.
Parke’s (2007) research indicates that the pay-for-performance system contributed to achieving visible cost reductions by diminishing the units of service, which will also contribute to an increased physician payment per unit of service. Increased payment for physicians means more motivated professionals, hence, increased healthcare efficiency.
Healthcare costs differ among health care units. The difference is explained by the varied number of specialists, hospital conditions and technology available within different units across states. As a solution for reducing the healthcare costs, the P4P system ideally aims for reducing the geographic variation in terms of volume and medical care provided, in order to standardize the costs (Mayes, 2006). From this point of view, the system cost reduction should generate limited discrepancies in terms of patient outcomes and healthcare service quality.
However, focused on the cost optimization by decreasing the unit costs while setting goals and objectives for the practitioners, the system cost reductions generate increased paperwork. This is costly and it rises up to similar amounts as the bonuses and incentives received by doctors (Greenwald, 2010), generating concerns upon the actual effectiveness of the system cost reductions.
Nevertheless, as P4P is focused on cost reduction, it assures effective care, because unlike the fee-for-service reimbursement model, it reduces the complications and the re-dos of the provided treatment, as recent studies indicate (United Health Center for Health Reform & Modernization, 2012; Health Policy Briefs, 2012).
Discuss how pay-for-performance affects health care providers and their customers
With the pay-for-performance system implementation, the health care providers are determined to achieve the goals set for them, in order to achieve bonuses and incentives and to avoid penalties if goals are not met. This goal-focus approach leads to shaping new behaviors, according to which the health care providers develop an organizational, bureaucratic behavior, concerned with filling documents and reports, useful for the results evaluation against the set goals. Practitioners have identified this weakness of the pay for profit system, referring to the goal setting practice as an imperfect and irrelevant grading system (Greenwald, 2010).
Moreover, the pay-for-performance approach is likely to increase competition among practitioners, in order to obtain better results than their counterparts and to obtain like this their bonuses (Greenwald, 2010). Such a situation influences doctors and other health care providers to mainly focus on the patients with whom they will succeed on meeting the established goals. On the other hand, following mainly the cases whose objectives can be easily attained implies paying less attention to patients who have multiple diseases, or who do not possess insurance, because such conditions hamper the achievement of the goals (Greenwald, 2010).
This implies that under the pay-for-performance system the insured patients receive improved medical services and their satisfaction is bigger. On the other hand, there are the uninsured or multiple diseases patients, (whose cases are not integrated in the pay-for-performance system) who receive less medical attention, hence, are less satisfied.
Health care providers express their concerns about emphasis placed on the goal of P4P system which is likely to hinder them from providing effective and equal patient care, while concentrating upon the cost containment objective (“Health Policy Briefs”, 2012).
Discuss the effects pay-for-performance will have on the future of health care
Because pay-for-performance system rewards the health care providers who meet the established goals and punish those who fail to meet them (by paying them less or not at all) (Mayes, 2006), this system generates financial inequalities between providers (“The Impact of Pay-for-Performance”, n.d.).
This financial aspect, which on the long term can generate frustrations among the doctors who do not reach the performance targets, can generate tensions between providers and work related stress, resulting into an ineffective performance of the practitioners. Sloan and Kasper (2008) find that low-performing health care suppliers might be discouraged by their results under the pay-for-performance approach, so that they might not desire to attempt to improve, dragging down their practice.
Moreover, as providers will tend to focus on the cases with incentive potential, they will neglect the other cases, which are unlikely to meet the target performance and may even cause them to fall behind the established qualitative goals. This situation leads to increasing the existing health care inequalities (“The Impact of Pay-for-Performance”, n.d.).
However, on a more positive track, the pay-for-performance system is considered likely to change motivation and behavior of health care suppliers, knowing that if they meet the performance targets they will receive incentives (Sloan & Kasper, 2008). Nevertheless, since the performance target focus from the physicians’ side is likely to generate increased health care inequalities, scholars consider that the health care system needs to identify an alternative to pay-for-performance discourse (Sloan & Kasper, 2008). Otherwise the health care system will become biased, jeopardizing the health and treatment of the uninsured patients. Moreover, the pay-for-performance approach can generate judicious complaints upon the providers’ practice, threatening the ethical behavior of physicians, oriented on obtaining incentives and not on treating their patients in an unbiased manner.
Conclusion
This essay discussed about pay-for-performance in the healthcare, presenting the effects of this compensation program upon the reimbursement, the health care providers, patients, and upon the future of health care. While P4P is intended to improve the quality of the health care services and to reduce the costs, it nevertheless includes a biased approach, influencing the health care providers to focus on patients who have incentive remuneration, while neglecting the others. This raises ethical discussions and even judicious concerns about the effectiveness of P4P.
References
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Kluger, J. (2009) Is there a better way to pay doctors? Time Magazine. Retrieved from http://content.time.com/time/magazine/article/0,9171,1930501,00.html.
Mayes, R. (2006) “The origins of and economic momentum behind ‘pay for performance’ reimbursement”. Health Law Review. Vol. 15, no. 2, pp. 17-22.
Niles, N., J. (2011) Basics of the U.S. health care system. London: Jones and Bartlett Publishers, LLC.
Parke, D., W. (2007) “Impact of a pay-for-performance intervention: financial analysis of a pilot program and implications for ophthalmology (an American Ophthalmological Society Thesis)”. Transactions of the American Ophthalmological Society. Vol, 105, pp. 448-460.
Sloan, F., A. & Kasper, H. (2008) Incentives and choice in health care. Cambridge: MIT Press.
“The impact of pay-for-performance on health care inequalities” (n.d.) The Commonwealth Fund 20XX-20XX Harkness Fellowships in Health Care Policy and Practice Application Form. Retrieved from http://www.commonwealthfund.org/~/media/Files/Fellowships/Harkness/Harkness%20Sample%20Proposal%20III.pdf.
United Health Center for Health Reform & Modernization (2012) Farewell to fee-for-service? A “real world” strategy for health care payment reform. Minnetonka: United Health Center for Health Reform & Modernization.
