Pay for performance is not a new concept.  However, since the implementation of the Affordable Care Act, both Medicare and Medicaid, along with private insurers, are making the practice mandatory

The Patient Protection and Affordable Care Act made participation in Medicare’s Physician Quality Reporting System (PQRS), formerly referred to as PQRI, mandatory beginning in 2015. However, the Centers for Medicare and Medicaid Services (CMS) recently ruled that providers, who are not successfully/satisfactorily participating in PQRS by the 2013 reporting period (Jan. 1 – Dec. 31, 2013) and beyond, will have their Medicare reimbursement decreased by 1.5 percent beginning in 2015. In 2016, the payment decrease will be 2%.

But what, actually does “Pay for Performance” mean, and how is it measured?

The term is basically an “umbrella” covering measures and programs initiated to improve quality of care, control costs and produce better outcomes. The typical pay-for-performance program provides a bonus to health care providers if they meet or exceed agreed-upon quality or performance measures, for example, reductions in hemoglobin A1c in diabetic patients. The programs may also reward improvement in performance over time, such as year-to-year decreases in the rate of avoidable hospital readmissions.

However, as indicated above, Pay-for-performance programs can also impose financial penalties on providers that fail to achieve specified goals or cost savings. For example, the Medicare program no longer pays hospitals to treat patients who acquire certain preventable conditions during their hospital stay, such as pressure sores or urinary tract infections associated with use of catheters.

Another issue for providers is the cost associated with implementing the health information technology needed for data collection and storage.

Quality Measures

The quality measures used in pay-for-performance generally fall into the four categories described below.

Process measures assess the performance of activities that have been demonstrated to contribute to positive health outcomes for patients. Examples include whether or not aspirin was given to heart attack patients or whether patients were counseled to quit smoking.

Outcome measures refer to the effects that care had on patients, for example, whether or not a patient’s diabetes is under control based on laboratory tests. Use of outcome measures is particularly controversial in pay-for-performance because outcomes are often affected by social and clinical factors unrelated to the treatment provided and beyond the provider’s control. For example, providers may follow practice guidelines regarding monitoring blood sugar levels and counseling diabetic patients regarding their diet, but ultimately, the patients’ eating and exercise behaviors will determine control of their diabetes. Increasingly, outcome measures also include cost savings.

Patient experience measures assess patients’ perception of the quality of care they have received and their satisfaction with the care experience. In the inpatient setting, examples include how patients perceived the quality of communication with their doctors and nurses and whether their rooms were clean and quiet.

Structure measures relate to the facilities, personnel, and equipment used in treatment. For example, many pay-for-performance programs offer incentives to providers to adopt health information technology.

Stay tuned for more changes being implemented.  2013 is a big year for reimbursement and revenue program implementation.

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