Will Pay-for-Performance Improve Quality?

In October 2012 Medicare’s Value-Based Purchasing program will begin.  Institutions will be paid based on their scores for the patient satisfaction HCAHPS survey and the core measures for clinical care in certain DRG’s.  This method of payment is meant to positively influence healthcare quality and service levels.  It is a critical phase in our healthcare reform journey.  The impact of this reimbursement method is causing a lot of angst among the healthcare financial community. 

The interesting thing is that there is no proven model to obtain optimum scores.  Everyone is scurrying to figure out the best way to achieve success in each of the HCAHPS subcategories and all of the core measures.  A couple of studies have shown that incentive programs have nominal impact on quality.  A pay for performance project in California showed no improvement in the quality measures after three years.  The CMS demonstration project had some early success with half of the hospitals showing improved quality measures with the incentive program, but it fell apart by the five-year mark.  The hospitals had all reverted back to their original levels.  This shows that there was early enthusiasm for the program, but the gains could not be sustained.  These disappointing results make healthcare administrators skeptical about their own prospects for success with the pay for performance program. 

There are many studies that describe the influence that monetary incentives have on employee performance.  It can be a strong motivator for change, but for large institutions like hospitals this concept gets lost.  There doesn’t seem to be a correlation between the amount of the financial incentive and the amount of attributable improvements.  Small incentives yield the same performance improvements as larger ones. 

The changes needed to impact the scores will take time, but the deadline is approaching.  Large hospitals have had trouble translating the necessity for improved quality measures into processes that actually deliver.  Hospital leaders and staff are aware of the connection between quality scores and the amount of financial incentive, but the steps and workflow changes that must be implemented to improve the scores is mired in bureaucracy and the complexity of the care process.  Smaller hospitals will probably have less difficulty with the change process; large integrated networks will struggle.  Hospitals that already have quality improvement programs embedded in their culture will be able to adjust more quickly.  In hospitals with weak process improvement programs, this will be difficult.  At my hospital we have invested a lot of effort into improving the patient satisfaction HCAHPS scores.  It has been more of a struggle than improving the clinical measures that had already been an integral part of the quality assurance program.  The important point is that we are taking action before the pay for performance program is fully implemented so that we can make improvements ahead of the implementation.