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P4P bonuses don’t necessarily improve quality

Yet another study fails to provide evidence that pay-for-performance yields additional quality improvement.

6893230134_b000a3913bPay-for-performance (P4P) continues as one of multiple experimental policies aimed at improving health care quality.  Many studies of varying merit have scrutinized numerous aspects of P4P, but few have drawn strong conclusions about whether financial incentives drive quality improvement.  In 2003 CMS’ Hospital Quality Incentive Demonstration (HQID) pay-for-performance project was initiated to study the effects of financial incentives on the quality of hospital inpatient care.  The demonstration enrolled an estimated 260 primarily urban, not-for-profit hospitals.  During phase 1 of HQID (2003-2006), hospitals received a 1% bonus on Medicare payments for scoring between the 80th and 90th percentiles on a composite quality measure, and a 2% bonus for scoring at the 90th percentile or above.

In phase 2 (2004-2009) incentives were based on benchmark achievement and improvement metrics.  Intervention and control hospitals were evaluated on overall quality for 30 nationally standardized process measures related to acute myocardial infarction (MI), coronary artery bypass graft (CABG), heart failure (HF), pneumonia (PN), and hip and knee replacement (HK).

The authors analyzed data from phase 1 of HQID to determine whether hospital bonus payments were associated with subsequent performance improvement in the following year.  To do so, they used a regression discontinuity design – comparing hospitals with quality scores just above threshold to those just below threshold – to determine the effect of bonus payments during the post-incentive timeframe.  The study focused on process-of-care measures for acute myocardial infarction, heart failure, and pneumonia (leaving out bypass surgery and hip and knee replacement).

Overall, the authors found little evidence that bonus payments led to additional quality improvement.  There were no consistent, statistically significant associations between receipt of a bonus and subsequent quality performance.


What power do financial incentives have in health care?  Their effect on provider behavioral change is poorly documented and studies on P4P, including this one, have not validated financial incentives as a driver of quality improvement.  Positive results are often the result of a myriad of quality improvement processes and infrastructural variables that confound conclusions, leaving those who seek to duplicate success without a roadmap to that enviable destination.

Phase 1 bonuses based on relative benchmarks favor incentives for hospitals already performing at a high level.  It is likely HQID opt-in providers are already heavily invested in the processes and infrastructure necessary to drive quality, if only for measures of interest to the Medicare program.

Additional quality improvement activities – those that will move scores for providers already operating at a high level – become extremely expensive while returns, in the form of revenues and reputation, diminish.  This expense is unlikely to be offset purely by financial incentives.  Incentives, if tracked and used for additional quality improvement, are better spent on movable measures to maximize impact.

Ryan, A, et al. HSR. 2013; Epub ahead of print.


Patrick Fitzgerald, MPH

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