The Challenges in Achieving Successful P4P Programs

March 2014

Health care payment reform is becoming one of the most important issues debated by health care policymakers, payers, providers, and purchasers. Architects of new payment models point out that the traditional fee-for-service model encourages the use of unnecessary medications and procedures while capitation promotes stinting on care and poses financial challenges to smaller provider groups.

During the late 1990s and early 2000s, pay-for-performance (P4P) programs grew in popularity. By design, P4P incorporates rewards for providing guideline-based services that mitigate the tendency toward underuse inherent in capitation while simultaneously discouraging fee-for-service-type overuse of expensive services—for example, through incentives for generic drug prescribing, appropriate use of antibiotics and asthma controller medications.

In a HCFO-funded study, Douglas A. Conrad, Ph.D., of the University of Washington School of Public Health and Community Medicine, and colleagues examined a unique quasi-experiment, measuring the effects of a large-scale P4P program implemented by a leading health insurer in Washington State during 2003-2007. In its phased experiment, the plan recruited medical group practices and restricted the program to commercial preferred provider organization plan products. The researchers examined the clinical quality performance of three sets of medical groups: (1) those participating only in a quality scorecard (QSC) and public reporting program, (2) those participating in a quality incentives program (QIP), comprised of P4P payments in addition to the quality scorecard and reporting, and (3) a “control” group of roughly comparable practice organizations not participating in either the QSC or QIP program.