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‘Pay-For-Performance’ Incentives Might Motivate Quality Improvement Efforts by Physician Groups


Physician groups that receive “pay-for-performance” incentives linking some compensation to key quality or process measures are more likely to undertake improvement efforts targeting these measures, according to a study published in the May issue of The American Journal of Managed Care. The study also found that physician group leaders broadly support such performance-based pay, but they believe these incentives must be larger than those currently offered by most commercial health plans to drive quality improvements.

The study, led by Ateev Mehrotra, M.D., assistant professor at the University of Pittsburgh School of Medicine and a policy analyst at RAND Corporation, is believed to be the first to examine the relationship between pay-for-performance, or P4P, programs and the use of quality improvement initiatives by physician groups. With a growing number of commercial insurers and Medicare adopting P4P incentives as a cornerstone for improving quality, it’s important to understand how these programs might affect physician behavior and attitudes.

Previous studies of P4P programs have shown little, if any, improvement in performance on quality outcomes. In this study, “the relationship we found between pay-for-performance incentives and quality initiatives is important because it could indicate these incentives are having the desired effect. Most health plans have created these incentives because they want physicians to devote more resources to quality improvement,” said Dr. Mehrotra. “Though we can’t say definitively that P4P ‘caused’ physician groups to undertake these quality efforts, it is compelling that the majority of physician leaders reported that P4P had a meaningful effect on their groups.”

To understand how providers view P4P and whether they believe that the incentives motivate quality improvement, Mehrotra and his colleagues conducted a survey of physician group leaders in Massachusetts, one of the few states where health plans have widely implemented performance incentives and where publicly available reports on quality are available for all physician groups. The study sample included the 100 physician groups in the state, with interviews conducted between May and September 2005.

With 79 of 100 physician groups interviewed, the researchers found that 89 percent of the groups had a P4P incentive in at least one commercial health plan contract. Most groups had incentives linked to certain preventive care and chronic disease management measures, such as the percentage of eligible patients who received mammography. Seventy-two percent of the physician groups reported at least one ongoing quality improvement initiative focused on these measures.

The most common type of quality improvement initiative was the development of an internal registry and feedback system for physicians about their performance on a given measure. Other efforts included the use of electronic reminders to prompt providers about any missing and appropriate care and group visits for patients with chronic illness.

Among the groups reporting P4P incentives, more than a third reported that the incentives were moderately or very important to the group’s financial performance. But 56 percent reported that the incentive had a moderate or significant effect on the group.

Overall, 77 percent of physician group leaders expressed support for the notion of paying physician groups based on their performance on certain quality measures, and 79 percent reported that P4P would lead to quality improvement during the next three years. However, 91 percent reported that the ideal percentage of revenue tied to P4P incentives should be 5 percent or more. At the time of the study, the percentage of total revenue tied to P4P incentives was 2.2 percent for those groups reporting such data.

“This suggests that larger incentives may be necessary to engage more groups,” said Dr. Mehrotra. But he noted that other factors also may influence the decision to undertake quality improvements, including the cost and effectiveness of a given quality initiative, a physician group’s operating margin, and the size and structure of the group. “We found that larger groups were more likely than smaller groups of independent practitioners to undertake quality improvement initiatives, as were groups that employ a majority of their physicians.”

The study highlighted possibly conflicting views between physician group leaders and practicing physicians. The majority of leaders reported that their groups’ physicians do not view quality as a major problem in health care, despite alarms raised by the Institute of Medicine and other health care experts. In the face of this skepticism, physician group leaders may look to P4P as a way to engage practicing physicians in efforts to improve quality, the researchers concluded.

Co-authors of the study are Steven D. Pearson, M.D., M.Sc., and Ken P. Kleinman, Ph.D., Harvard Medical School; Kathryn L. Coltin, M.P.H., Harvard Pilgrim Health Care; Janice A. Singer, M.P.H., M.A., and Barbra Rabson, M.P.H., Massachusetts Health Quality Partners; and Eric C. Schneider, M.D., M.Sc., Harvard School of Public Health.

The study was supported by the Robert Wood Johnson Foundation through a grant to the Massachusetts Health Quality Partners.


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