5 Benefits of P4P Initiatives

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December 13th, 2012

p4p initiativesPay-for-Performance (P4P) has provided momentum for improving the quality of care delivered to patients and reducing overall health costs. The PPACA features a wide range of P4P initiatives and pilot programs that are currently underway and showing promising signs.

Pay-for-Performance can be defined as a method of improving efficiency or the quality of care by providing direct financial incentives to physicians and health care provider organizations. This differs from the predominant fee-for-service (FFS) system that incentivizes the volume of healthcare services without regard to the quality or cost of the care delivered. P4P aims to bring incentives for improving the quality of care directly into the payment system and can assist in equalizing quality disparities present in geographic regions of the US.

Performance measures can cover various aspects of care delivery including clinical quality, safety, efficiency, patient experience, use of health information technology and a variety of other specific measures. It is imperative that performance measures be founded on statistical methods that provide valid and reliable comparative assessment across patient populations. Performance awards can also take many forms including bonus payments, enhanced fee schedules and directing enrollees to high-performing providers. Penalties or disincentives can also be used as part of a P4P program. Penalties for hospital readmissions or hospital acquired infections are examples of this.

It is important to note that a massive amount of reliable and practical data is necessary to support performance measurement and the setting of appropriate benchmarks.  Health information technology plays a crucial role in the collection and analysis of data in P4P initiatives. Patient privacy is always an important consideration when collecting data for use in performance measurement. Data collection processes and tools must also integrate seamlessly into the care setting not add to the administrative burden already experienced by physicians and facilities.

Below we highlight 5 potential benefits of P4P initiatives.

1. Reducing Clinical Practice Variation

P4P has the potential to reduce clinical practice variation by encouraging the use of evidence-based medicine. Estimates indicate that currently only about 55% of care is evidence-based.  Many pay-for-performance programs use evidence-based medicine as foundation for measurement. This encourages providers to follow established practice guidelines.

2. Reducing Errors

Studies show that financial incentives and penalties can effectively drive organizational change to reduce medical errors and boost patient safety. Promoting well-developed clinical guidelines and medication safety practices is a step towards reducing readmissions, hospital acquired illnesses, technical errors and medication errors. This results in not only a cost savings, but also an improvement to the overall quality of care provided.

3. Ensuring Appropriate Care Settings

Using clinical measures that assess the appropriate utilization of hospital stays and emergency room visits can be a huge cost savings. This also allows hospitals to prioritize the use of their limited resources for those patients who are truly in need.

4. Increasing Transparency of Provider Performance for Price & Quality Conscious Consumers

When consumers have cost and quality information available to them, they make better choices regarding their healthcare. A successful P4P initiative requires a vast amount of data in order to assess the various performance indicators being measured. Most agree that making this data (or some interpretation of the data) available to patients via online tools is key to promoting value and beneficial for the healthcare system.

5. Flexibility of Incorporation

The Pay-for-Performance payment model is flexible, allowing it to be incorporated into any existing payment models as a supplementary component. P4P can also be used in combination with the fee-for-service model as a transition toward global or bundled payment. Combining P4P with other payment strategies can also result in greater cost containment than could be achieved by implementing the strategy alone.