Health Affairs, 23, no. 2 (2004): 285-286 doi: 10.1377/hlthaff.23.2.285 © 2004 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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Letters

Ineffective Approach

Rhetoric aside, however, the authors are clear about their agenda. "Systematic change" in quality "will not come forth quickly enough unless strong financial incentives are offered to get the attention of managers and governing boards." It’s hard to argue with the idea that we should do everything we can to improve quality as quickly as possible. Some of the steps in that process, particularly in information technologies, indeed will require a considerable investment. But apart from those propositions, the letter’s arguments are almost entirely rhetorical and make little sense.

First, at least in Medicare, quality in some areas is already improving in the absence of explicit financial incentives. Programs begun in the 1990s have produced measurable improvements in outcomes, including reduced mortality.¹ Of course, there are very few longitudinal data about quality, and both the standards and technologies of measurement are evolving rapidly—which, in itself, calls into question the practicality of reimbursement-related incentives. But the expectation that complex, decentralized social change should happen instantaneously is mere political posturing. The real question is whether adding financial incentives to the other forces now promoting quality improvement will accelerate or retard the rate of change. As policymakers make that judgment, providers’ assertions that they can’t move any faster unless they are paid more should be evaluated in the context that providers always claim they can’t do anything different unless they are paid more.

Second, Medicare’s and most other payers’ track record in changing providers’ behavior through explicit reimbursement incentives is decidedly mixed. Introducing case-based prospective payment for hospitals in 1983 led to reduced lengths-of-stay, as expected, although the extent to which Medicare length-of-stay fell below existing secular trends can be debated, especially since length-of-stay fell faster for the privately insured whose care was not being paid for per case. But it also led to reduced admissions, contrary to the system’s incentives. In a very different case, the transition to the Medicare physician fee schedule has shifted considerable dollars from procedural to cognitive services, but not enough to increase the availability of primary care or dampen the trend toward proceduralism. Each layer of refinement added to payment systems—on top of geographical, teaching, rural, and risk adjustments—is incrementally less comprehensible to providers whose behavior it is supposed to affect and more likely to be drowned out by other adjustments.

Providers’ behavior is complex and influenced by a variable set of factors, which payment incentives don’t always counterbalance. Those who run payment programs are used to wrestling with problems of suboptimization, upcoding, managing to the measure, horizontal and vertical equity, and administrative complexity. But such problems are likely to be particularly consequential when quality, and thus human lives, are at stake.

If we could measure quality well enough, it’s not clear that a public program like Medicare should pay anything at all to providers who don’t meet minimum standards. That is already Medicare policy, but the current standards are too low. Raising them directly through accreditation or selective contracting immediately leads to real or claimed problems of access, particularly in smaller communities. Given Medicare’s size, if it only paid providers in the top half of the quality distribution, some beneficiaries would have trouble getting served. Yet if Medicare paid a bonus to those in the top half while permitting the bottom half to remain in the program, it would legitimize the notion that some beneficiaries are entitled to higher-quality services, and would redistribute money in the opposite direction from current policy trends.

The current infatuation with "pay for performance" represents another step in payers’ efforts to extend their sphere of control over providers. As one who initiated efforts (meeting only limited success) to transform Medicare from passive bill payer to aggressive purchaser, I can hardly criticize the general trend. But I think it’s appropriate to raise the question: Is the increasing commodification of health care, especially as embodied in "pay for performance" schemes, consistent with a thoughtful, long-term strategy to maximize quality? A comprehensive quality improvement strategy needs to focus on reinforcing the norms and values of professional responsibility, rather than on undermining them through the exercise of economic muscle. Unless we can continue to assume that most providers and administrators want to do the right thing for most patients most of the time, we are all sunk, and no amount of economic incentives can salvage the situation.

We do need to help hospitals, physicians, and other providers finance quality-related information technologies. There are lots of ways to do that, but "paying for performance" is an obtuse—and likely ineffective—approach.

Bruce C. Vladeck

Mount Sinai School of Medicine New York, New York

NOTE

1. See, for example, S.F. Jencks, E.D. Huff, and T. Cuerdon, "Change in the Quality of Care Delivered to Medicare Beneficiaries, 1998–1999 to 2000–2001," Journal of the American Medical Association 289, no. 3 (2003): 305–312[Abstract/Free Full Text]; and A.R. Sehgal, "Impact of Quality Improvement Efforts on Race and Sex Disparities in Hemodialysis," Journal of the American Medical Association 289, no. 8 (2003): 996–1000.[Abstract/Free Full Text]

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