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MassHealth’s P4P Program Fails to Produce

Conflicting with evidence from other studies, an evaluation of MassHealth’s Medicaid Pay-for-Performance plan failed to show a significant effect on quality improvement measures despite spending $2.6 million for incentives.

Pay for Performance (P4P) is the concept of using financial incentives to drive healthcare quality improvement.  P4P programs continue to  spread; they are present in most HMOs, Medicare demonstrations, and also Medicaid pilot projects.  Massachusetts’ P4P program (MassHealth)  is one such Medicaid pilot.

A study of the MassHealth program utilized a pre and post-intervention design. The technique used a longitudinal sequence of cross-sectional observations to compare composite quality scores for pneumonia and surgical infection prevention.  Relying on publicly reported data for U.S. hospitals from Hospital Compare – Medicare’s public quality reporting program – and data collected by MassHealth the study compared 62 MassHealth hospitals against those from other states (N=3,676).  Hospital performance data was collected between 2004 and 2008 (before program intervention) and from 2008 to 2009 (post implementation) to estimate trends in composite quality for pneumonia and surgical infection prevention.

Under the MassHealth P4P program, hospitals receive incentive payments for quality delivered to a subset of patients.   To account for potential confounding factors, the study matched P4P hospitals with those of similar characteristics, tested the program effect across various hospital characteristics, and excluded comparison hospitals participating in other P4P programs. Massachusetts hospitals were more likely to be not-for-profit, have over 400 beds, have a medical school affiliation, be a member of the Council of Teaching Hospitals, to be located in urban areas, to have lower proportions of Medicaid patients, and have higher average composite performance scores for pneumonia and surgical infection prevention.

Despite baseline advantages and incentive payments totaling 2.6 million dollars (average $40,000 per hospital), performance trends from 2004 to 2009 for the incentivized pneumonia and surgical infection prevention composite quality measures showed no significant improvement.  For pneumonia, Massachusetts and other state hospitals had similar initial quality, which improved at approximately the same rate over time. For surgical infection prevention, Massachusetts hospitals had composite quality initially 12 percentage points higher, but narrowed to near equivalence with comparison hospitals by 2009.  Furthermore, there was no evidence that MassHealth hospitals improved pneumonia and surgical infection prevention quality scores after initiation of P4P.   The effect of P4P did not vary because of hospital teaching status, number of beds, ownership status, urban location, or proportion of Medicaid patients. Hospitals with a higher proportion of Medicaid patients did not show any greater quality improvement.


The MassHealth pilot study suggests that P4P does not influence quality improvement. The are yet too large, and the concepts too vague, to determine which operational models and incentives will produce success in process or outcome improvements.  While pilot studies are by definition still in their infancy, they consistently yield similar questions regarding the relationship of financial incentives and quality improvement.

P4P programs need time for system adaptation, stakeholder buy-in, and resource allocation in order to eliminate hidden variables that adversely affect their success.  The devil is in the details.  What organizational changes do financial incentives inspire?  Do hospitals participating in P4P programs invest in infrastructure to support system-wide quality improvement or simply reward individuals for exceptional performance?  Since both intervention and control hospitals demonstrated quality improvement in the MassHealth study, future research should identify common details associated with said improvements.

The greatest question remains; is the United States health care system as a whole ready for pay for performance?  In a system with a multitude of payers vying for the attention of hospitals and providers, multiple physician groups serving a variety of hospitals, and the dawn of infrastructural and system changes that include electronic medical records, evidence-based medicine, patient-centered medical homes, accountable care organizations, health savings accounts, and the like, are we as a system ready for pay for performance?

Ryan, AM and Blustein, J. The Effect of the MassHealth Hospital Pay-for-Performance Program on Quality. Health Services Research. 2011; 46 (3): 712-728.


Patrick Fitzgerald, MPH


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Patrick Fitzgerald, MPH
About Patrick Fitzgerald, MPH

Mr. Fitzgerald currently works as an analyst for UCare, a Managed Care Organization serving Medicaid and Medicare recipients in Minnesota and western Wisconsin. Contact: Facebook | More Posts

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