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Pay-For-Performance for Medical Groups Stimulates Changes in Practice


A large group of California physicians given financial incentives to improve the quality of medical care have begun to embrace an array of changes important to advancing quality, according to a RAND Corporation study issued today.

Measures adopted by medical groups include speeding up adoption of information technology such as electronic medical records, more closely tracking the improvement of physician performance and sharpening institutional focus on quality, according to findings published in the March/April edition of the journal Health Affairs. The project was supported by a grant from the California HealthCare Foundation.

“Physician groups are responding to pay-for-performance programs by making practice changes and altering how they compensate physicians to reward quality, but health plans and purchasers say that those investments are not yet translating into substantial gains in quality,” said Cheryl Damberg, the study’s lead author and a senior policy researcher at RAND, a nonprofit research organization.

“The true benefits of these programs may take more time to be realized and it is likely that investments in other quality efforts will be needed in addition to performance-based pay,” Damberg said.

The RAND Health study found that medical groups are providing some payments to individual physicians based on quality measures and physicians in the program are receiving more feedback about whether they are attaining quality goals.

Pay-for-performance programs in health care have grown rapidly in recent years as a way to improve the quality of care delivered by doctors, hospitals and other health care providers. Despite the rapid adoption of these programs, there is little research about how well they work and what types of strategies work best.

RAND researchers are evaluating a statewide pay-for-performance program launched by the California Integrated Healthcare Association in 2003. The initiative includes seven major California health plans and 225 physician groups. The groups employ 35,000 physicians who care for 6.2 million people enrolled in commercial health maintenance organizations and point-of-service plans.

Under the program, physician groups receive financial bonuses if they meet certain performance guidelines such as increasing the number of patients with diabetes who receive recommended blood tests. Other performance measures include improving patient experience with getting care and adopting health information technology capabilities. Between 2003 and 2007, the participating health plans paid $203 million in incentives to participating physician groups.

The RAND study reports findings gathered from surveys of 35 medical groups, the seven health plans and representatives from two employers that are involved in the pay-for-performance experiment.

Most of the medical groups surveyed suggested that the program’s financial incentives -- generally about $1,500 to $2,000 annually per physician -- were too small to stimulate significant change among most doctors. They suggested the incentives needed to be two to five times higher in order to achieve quality improvements.

Health plans thought increasing the incentives was a low priority because of the relatively small quality improvements attained thus far and questions about whether other types of investments might produce greater quality gains, according to the study.

Although there is some concern that pay-for-performance might cause physicians to drop patients who decline to follow recommendations, few reports of such events were received. More than two-thirds of the medical groups reported that the pay-for-performance program resulted in more positives than negatives.

Most physician organizations said they collected more bonus payments than they had spent to comply with the program, although six said it was barely enough to cover their costs. Twenty of the medical groups surveyed said the program had affected the behavior of their individual physicians, prompting them to embrace quality efforts such as performing more-intensive outreach to patients.

Support from the California HealthCare Foundation was made through its Rewarding Results Initiative. Other authors of the study are Kristiana Raube of the Haas School of Business at the University of California, Berkeley, and Stephanie Teleki and Erin dela Cruz of RAND.

RAND Health, a division of the RAND Corporation, is the nation’s largest independent health policy research program, with a broad research portfolio that focuses on quality, costs and health services delivery, among other topics. RAND Health is the creator of COMPARE (Comprehensive Assessment of Reform Efforts), a one-of-a-kind online resource that provides object analysis about national health care reform proposals. Visit to learn more.

The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world.


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