The Corpus Callosum

Another Critique of Pay for Performance

The concept of Pay for Performance is one of those things that seems
sensible and appealing on the surface.  But if there was ever
a better example of the maxim, “the devil is in the details,” I haven’t
seen that particular devil yet.

The latest critique is in the New England Journal.  This has
already been mentioned at Medviews,
but I want to add some points.

Patterns in Medicare and Their Implications for Pay for Performance

356:1130-1139   March 15, 2007  Number 11


Background Two
assumptions underpin the implementation of pay for performance in
Medicare: that with the use of claims data, patients can be assigned to
a physician or to a practice that will have primary responsibility for
their care, and that a meaningful fraction of the care physicians
deliver is for patients for whom they have primary responsibility.

Methods We analyzed
Medicare claims from 2000 through 2002 for 1.79 million fee-for-service
beneficiaries treated by 8604 respondents to the Community Tracking
Study Physician Survey in 2000 and 2001. In separate analyses, we
assigned each patient to the physician or primary care physician with
whom the patient had had the most visits. We determined the number of
physicians and practices seen annually, the percentage of care received
from the assigned physician or practice, the stability of assignments
over time, and the percentage of physicians’ Medicare patients who were
their assigned patients.

Beneficiaries saw a median of two primary care physicians and five
specialists working in four different practices. A median of 35% of
beneficiaries’ visits each year were with their assigned physicians;
for 33% of beneficiaries, the assigned physician changed from one year
to another. On the basis of all visits to any physician, a primary care
physician’s assigned patients accounted for a median of 39% of the
physician’s Medicare patients and 62% of Medicare visits. For medical
specialists, the respective percentages were 6% and 10%. On the basis
of visits to primary care physicians only, 79% of beneficiaries could
be assigned to a physician, and a median of 31% of beneficiaries’
visits were with that assigned primary care physician.

Conclusions In
fee-for-service Medicare, the dispersion of patients’ care among
multiple physicians will limit the effectiveness of pay-for-performance
initiatives that rely on a single retrospective method of assigning
responsibility for patient care.

The statistical analysis is mind-numbing.  (The devil I was
referring to earlier) Let it suffice to say that there are serious
methodological problems with implementing P4P, because in many cases
the incentives will be small, in comparison to a physicians total
practice. Also, the incentives paid will be determined in large part by
the efforts of other physicians.  This is due to the dispersed
nature of medical practice, and the commonplace situation in which
patients switch from one provider to another.  The average
patient in the study saw seven different MDs in a year, distributed
among four different practices.

Furthermore, simple behavioral psychology indicates that incentives
that are far removed from the desired behaviors tend to have little
effect.  In other words, we could end up spending a lot of
time building up a complex incentive system, then find that it does not
actually have much effect on anyone’s behavior.  

If you devise an incentive system in which the rewards are paid out at
the end of the year, and someone puts in extra effort all year long,
then finds the incentive pay to be rather paltry, it is gong to be more
likely to alienate the provider, rather than providing any real

Not only that, but it is going to have to seem fair.  If the
primary care physician makes a great effort on a particular case, but
the cardiologist misses, say, a serious arrhythmia and the patient has
a bad outcome, it would not be fair to have the PCP take a hit for
that.  If the system is perceived as being unfair, it will not
generate improved behaviors; it will generate only resentment.

I would not entirely give up on the notion of financial incentives for
quality care, but in order for it to work, the reward has to follow
closely the desired behavior, and it is going to have to seem fair.
 Otherwise it will probably just generate more paperwork and
accomplish little.


  1. #1 Greg P
    March 21, 2007

    I think we can expect that this whole thing will be gamed, and in the end no useful measurable difference made. Plus, if everyone comes out like we are from Lake Wobegon and above average, is everyone going to get paid more?

    I get notes from other doctors now that are obsessively complete, and as you scan various notes from these doctors every single note, whether a new patient or a followup, has a complete history, a complete exam, carefully documents how much time was spent discussing various issues with the patient.

    So their paperwork is already textbook perfect for maximum reimbursement purposes. Does anyone think that is what is really going on? Are we going to proceed with the joke of P4P?

New comments have been disabled.