Paying for Value: Momentum Surges while Evidence Lags

November 2014
By HCFO Staff

Pay-for-performance (P4P), value-based purchasing, and incentive-based payment are approaches to reward high-value care while constraining costs. In a recent Health Affairs Blog post, Suzanne Delbanco described the findings from the Catalyst for Payment Reform’s 2014 National Scorecard on Payment Reform, which tracks the status of the private sector’s progress from volume to value-oriented payment. The 2014 Scorecard documented a dramatic increase in the percent of commercial sector payments that were value-based: up to 40 percent in 2014 from 11 percent 2013. This surge suggests significant momentum behind the movement toward value-based payment. Yet, evidence to date on the effectiveness of these payment models is mixed. Delbanco reflected on many of the challenges to the success of value-based payment, including: small financial incentives, limited shared-risk arrangements with providers, and uneven implementation across health care professionals and specialties. She stated that more research is needed to understand when, where, and how these new value-based payment models are effective.

Recent and ongoing HCFO-funded work provides insights into the challenges and opportunities of value-based payment arrangements. Douglas A. Conrad, Ph.D., University of Washington School of Public Health and Community Medicine, and colleagues examined the effects of a large-scale P4P program implemented by a leading health insurer in Washington State between 2003 and 2007 on clinical quality performance. Specifically, the researchers assessed the joint effects of quality-based financial incentives and a publicly-reported quality scorecard on physicians’ clinical quality, patient satisfaction, and efficiency. They found that neither the scorecard and reporting alone nor the financial incentives had a positive effect on quality. In fact, the addition of the financial incentive program was associated with a reduction in quality for most of the quality metrics compared to the use of a scorecard and reporting alone. Given the findings of the 2014 National Scorecard on Payment Reform that 40 percent of commercial payments are now tied to value, Conrad’s study highlights the need to better understand payment incentives to ensure they are achieving the desired effect as well as to explore other means of controlling costs and increasing quality. Additional information about Conrad’s study is available here.

In an ongoing HCFO study, Timothy Hoff, Ph.D., and Gary Young, Ph.D., Northeastern University, are conducting an in-depth, qualitative study of physician practices in the New England Quality of Care Alliance in Massachusetts regarding their experiences with incentive-based payment approaches. Given that value-based payment approaches have produced inconsistent results, Hoff and Young seek to describe how and why physicians and their support staff respond to incentive-based payment arrangements to better predict, design, and implement payment reform. Through in-depth interviews with physicians and support staff at practices that vary along practice-level and financial dimensions, the researchers will capture the cognitive and behavioral adaptations occurring among primary care providers and develop a preliminary typology of such adaptations that could inform broad implementation of these models. Additional information about Hoff and Young’s study is available here.