Goals, Principles, and Issues for Improved Payment Systems
The following is a selection of published and unpublished papers and presentations describing goals, principles, and issues for improving healthcare payment systems. If you have papers or presentations that you think should be included here, please email them (or links to them) to us.
"Aligning Payment Policies With Quality Improvement," in Crossing
the Quality Chasm: A New Health System for the 21st Century, Institute of Medicine, 2001.
"...certain principles should guide the development of payment policies to reward quality,
regardless of the specific payment method used for any given transaction. The aim of these principles
is to guide payment policy reforms that can support care that is more patient-centered,
evidence-based, and systems-based. Payment arrangements should facilitate alignment of the units of
patient care delivered (including consistency with best practice) with the needs of consumers and
patients, the unit of payment, and the level at which information is collected and shared. To achieve
alignment that can reward quality care, payment methods should: (1) Provide fair payment for good
clinical management of the types of patients seen. Clinicians should be adequately compensated for
taking good care of all types of patients, neither gaining nor losing financially for caring for
sicker patients or those with more complicated conditions. The risk of random incidence of disease in
the population should reside with a larger risk pool, whether that be large groups of providers,
health plans, or insurance companies. (2) Provide an opportunity for providers to share in the
benefits of quality improvement. Rewards should be located close to the level at which the
reengineering and process redesign needed to improve quality are likely to take place. (3) Provide
the opportunity for consumers and purchasers to recognize quality differences in health care and
direct their decisions accordingly. In particular, consumers need to have good information on
quality and the ability to use that information as they see fit to meet their needs. (4) Align
financial incentives with the implementation of care processes based on best practices and the
achievement of better patient outcomes. Substantial improvements in quality are most likely to be
obtained when providers are highly motivated and rewarded for carefully designing and fine-tuning
care processes to achieve increasingly higher levels of safety, effectiveness, patient-centeredness,
timeliness, efficiency, and equity. (5) Reduce fragmentation of care. Payment methods should not pose
a barrier to providers’ ability to coordinate care for patients across settings and over time."
"Pay for Performance," by the Vermont Program for Quality in Health Care, 2005.
This
paper describes a set of guiding principles for pay-for-performance systems and the areas of agreement
and disagreement about them identified by a workgroup convened in November, 2005 by VPQHC.
"Issues Paper: Medicare Hospital Value-Based Purchasing Plan Development," CMS Hospital Pay-for-
Performance Workgroup, January 17, 2007.
"CMS is inviting comments and input from affected
stakeholders on design issues to prepare the DRA-mandated plan for Medicare Hospital Value-Based
Purchasing. The paper describes the key design issues on which CMS is requesting input. The questions
are organized into sections that address the four required issue areas: Measures, Data infrastructure
and validation, Incentive structure, and Public reporting."
"Paying for Performance - Risks and Recommendations," by Elliott S. Fisher,
New England Journal of Medicine 355:18, pp. 1845-1847.
"Unfortunately, much of the
current work in performance measurement and pay for performance seems to ignore one or more of the
commonsense principles outlined by the Institute of Medicine (IOM) in its report called 'Rewarding
Provider Performance: Aligning Incentives in Medicare.' The technical quality measures still reflect
a tiny segment of clinical practice. The efficiency measures used or under discussion target discrete
diagnoses and episodes (which can make fragmented care by multiple providers appear "efficient"),
rather than the longitudinal costs and outcomes of care (which would reward comprehensive,
coordinated care by single providers). Much of the focus appears to remain on the measurement of
individual performance of physicians — a daunting technical and administrative challenge if implemented
nationally. And little attention is being devoted to designing or building a comprehensive evaluation
framework that would allow us to learn from our inevitable mistakes."
"Strategic Choices in Pay-for-Performance Programs," by James C. Robinson, presented at the February 6, 2006 Pay for Performance Summit
"Conceptual Issues in the Design and Implementation of Pay-for-Quality Programs," by
Gary J. Young, Bert White, James F. Burgess, Jr., Dan Berlowitz, Mark Meterko, Matthew R. Guldin,
and Barbara G. Bokhour, American Journal of Medical Quality 2005:20, May/June 2005, pp. 144-150.
"This article identifies and discusses key conceptual issues in designing and implementing
pay-for-quality programs. Such programs offer financial incentives to providers for achieving
predefined quality targets. The purpose of the article is to provide health care professionals
with a framework for designing, implementing, and evaluating pay-for-quality programs. Examples are
drawn from the Rewarding Results demonstration project for which the authors serve as the national
evaluation team."
"Theory and
Practice in the Design of Physician Incentives," by James C. Robinson, Milbank Quarterly,
79:2, June 2001.
"This paper analyzes the changing landscape of physician payment, combining
the economic literature on incentive contracting with examples of how physicians are paid by
insurers and their own medical groups. It begins with a brief summary of agency theory and the
principles of performance incentives in the context of imperfect information, risk aversion,
multiple interrelated tasks, and team production efficiencies. The discussion then focuses on the
specific goals of physician payment, and on the flawed performance of fee-for-service and capitation
in motivating physicians to strive for and achieve those goals. The subsequent section evaluates
innovations that blend elements of fee-for-service, capitation, and case rates to preserve the
advantages and attenuate the disadvantages of each. These include primary care capitation with
fee-for-service carve-outs, specialty department capitation with individual fee-for-service or "contact"
capitation, and case rates for defined episodes of illness. The discussion then expands to the
context within which payment incentives are designed and implemented, including nonprice
mechanisms and organizational structures. The concluding sections highlight implications of the
analysis for health services research and public policy, respectively"
"Moving Beyond Round Pegs and Square Holes: Restructuring Medicare to Improve Chronic Care," by
Jennifer L. Wolff and Chad Boult, Annals of Internal Medicine, 143:6, pp. 439-445, September 2005.
"Chronic disease is common in Medicare beneficiaries, yet Medicare's benefit structure and reimbursement
mechanisms do not encourage high-quality chronic disease care. This paper describes state-of-the-art
innovations in such care, discusses how the Centers for Medicare & Medicaid Services is trying to
improve chronic disease care through changes in benefit structure and provider reimbursement, and
suggests opportunities to accelerate progress."
Linking Payment to Long-Term Care Quality: Can Direct Staffing Measures Build the Foundation?", by Debra J. Lipson, Institute for the Future of Aging Services, April 2005. This paper discusses the creation of payment incentives for long-term care providers based on workforce-rated measures. Also see "North Carolina Demonstration Project Profile: NC New Organizational Vision Award," Better Jobs Better Care, June 2006, and "North Carolina New Organizational Vision Award Pilot Project Information Manual," March 2005.