RWJF Content Alert - Pay-for-Performance: Closing the Performance Gap in Hospitals?

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New Report Examines the Effect of Financial Incentives on Hospitals that Serve Poor Patients

Provisions around “pay-for-performance”—a quality improvement method using financial incentives to shift the focus from the quantity of care to the quality of care—received widespread attention in discussions of health reform. While pay-for-performance methods have many supporters, critics worry these programs may have a detrimental effect on “safety net” hospitals that serve the poor.

A paper in the latest issue of Annals of Internal Medicine examines the effect that pay-for-performance measures have on safety net hospitals. The study analyzed data from CMS’ pay-for-performance program, Premier Hospital Quality Incentive Demonstration, to measure how safety net hospitals fared in relation to non safety net hospitals when offered financial incentives. The authors found that although initial quality of care was lower, safety net hospitals made significant improvements in quality when they received financial incentives. After three years, safety net hospitals receiving financial incentives caught up to hospitals with fewer poor patients, whereas similar hospitals that did not receive the incentives continued to lag behind. The study was funded by Changes in Health Care Financing and Organization (HCFO), a Robert Wood Johnson Foundation grantee.

The issue also includes an editorial titled, “Does Pay-for-Performance Steal From the Poor and Give to the Rich?” which provides insight and commentary on the data and conclusions drawn from the HCFO report.

Read the report and editorial.