Pay for Performance in Health Care

Topic: Health Tech
Words: 877 Pages: 3

The healthcare system in the United States is considered one of the most expensive in the world, while the quality of the care delivered to the patients does not always meet the expectations. Thus, the incentive-based pay-for-performance model was introduced into the healthcare system to provide patients with high-quality care and ensure the improvement of health outcomes (Martin et al., 2020). This paper considers the pay-for-performance model and the difficulties associated with its implementation. Specifically, it will address challenges in designing a pay-for-performance program and the impact of the model on provider payment reform, health care providers, and patients.

Pay-for-Performance Programs

Separate healthcare facilities can utilize different pay-for-performance programs depending on their needs and goals. According to Mathes et al. (2019), there are six reimbursement schemes, including pay per procedure, pay per diem, line-item budget, capitation, case-based reimbursement, and global budget. Pay-for-performance can be considered an add-on to these schemes, with its design contingent on their characteristics. As pay-for-performance is aimed at improving the quality of care provided to the patients, the payments through such an add-on program should be linked to quality targets. These might include such objectives as delivering care following clinical practice guidelines, absence of avoidable complications, or further employee training (Mathes et al., 2019). The primary challenge in the design of a pay-for-performance program is balancing the “advantages and disadvantages regarding conflicting objectives (costs and quality) and the interests of the different stakeholders” (Mathes et al., 2019, p. 9). Thus, it is crucial to be aware of the advantages and disadvantages of each reimbursement scheme in order to design a complementary pay-for-performance program.

Pay-for-Performance Impact on Provider Payment Reform

The provider payment reform can be viewed as one of the measures in a catalog of policies aimed at delivering cost-efficient, high-quality care to patients. According to Cattel and Eijkenaar (2019), provider payment reform is paramount in value-based health care as it affects provider behavior and improves healthcare system alignment with value and quality. Pay-for-performance models have a meaningful impact on provider payment reform as they are based on specific and measurable aspects of value (Cattel & Eijkenaar, 2019). In particular, pay-for-performance schemes aim to improve the quality of provided care through monetary incentives offered to healthcare facilities. As pay-for-performance models complement the reimbursement schemes installed through provider payment reform, they can substantially enhance them and the provider experience with them. However, it should be noted that such models concern a relatively small proportion of total healthcare provider payments, indicating that their impact on the payment reform is limited.

Healthcare Providers’ Reaction to Value-Based Purchasing Programs

Pay-for-performance programs are implemented mainly through the Centers for Medicare and Medicaid Services (CMS). The main pay-for-performance programs initiated by CMS are Value Modifier Program, Hospital-Acquired Conditions Reduction Program, Hospital Readmission Reduction Program, End-Stage Renal Disease Quality Incentive Program, and Hospital Value-Based Purchasing Program (CMS, 2020). These value-based programs link financial incentives for providers with their performance. Nevertheless, many healthcare providers have a negative outlook on value-based and pay-for-performance programs. According to LaPointe (2018), the majority of physicians argue that value-based reimbursement programs will negatively impact their practice as well as patient care and experience. Furthermore, many providers reason that value-based care and pay-for-performance models put additional stress on reimbursement rates while creating extra costs to healthcare facilities, including supplementary value data collection, new services, and partnerships (LaPointe, 2018). In addition, as reimbursements fall while costs suffered by healthcare facilities increase, many physicians are forced to consider a healthcare merger (LaPointe, 2018). Fewer healthcare providers see the benefits of value-based and pay-for-performance programs and believe that such programs will improve organizational profitability (LaPointe, 2018). Overall, the reactions of healthcare providers to value-based and pay-for-performance programs are mixed.

Pay-for-Performance Patient Benefits

Pay-for-performance programs can be of substantial benefit to patients seeking medical help. Specifically, they are associated with increased patient satisfaction, improved health outcomes, and reduced costs of services provided (Peckham & Wallace, 2018). Furthermore, pay-for-performance models are associated with enhanced continuity of care, longer appointment times, and the development of a better physician-patient relationship (Peckham & Wallace, 2018). As healthcare providers aim to improve the quality of care as it becomes the central factor considered in reimbursement schemes, the care they offer becomes more patient-centered, resulting in better patient outcomes. Nevertheless, Shakir et al. (2018) suggest that pay-for-performance programs benefit a limited number of patients and contribute to health disparities. Research shows that care for minority patients more often results in poorer quality metrics leading to the risk of financial penalties to healthcare providers and the risk of such patients being refused care (Shakir et al., 2018). Thus, although pay-for-performance programs are associated with significant benefits to patients, the risk exists of some patients not receiving care.


In summary, incentive-based pay-for-performance programs aim to link healthcare provider reimbursement practices with the quality of care they offer to their patients. Such programs supplement healthcare reimbursement schemes and ensure they are based on measurable quality and value targets. Although the impact of pay-for-performance programs on provider payment reform is limited, the provider responses to their implementation are mixed, with the majority of healthcare professionals having a negative outlook on pay-for-performance models utilization. However, such programs present several benefits to patients, including enhanced health outcomes, patient satisfaction, and reduced costs.


Cattel, D., & Eijkenaar, F. (2019). Value-based provider payment initiatives combining global payments with explicit quality incentives: A systematic review. Medical Care Research and Review, 77(6), 511–537. Web.

CMS. (2020). CMS’ value-based programs. Centers for Medicare & Medicaid Services. Web.

LaPointe, J. (2018). 61% of doctors say value-based care will damage their practice. RevCycleIntelligence. Web.

Martin, B., Jones, J., Miller, M., & Johnson-Koenke, R. (2020). Health care professionals’ perceptions of pay-for-Performance in practice: A qualitative Metasynthesis. INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 57, 1–17. Web.

Mathes, T., Pieper, D., Morche, J., Polus, S., Jaschinski, T., & Eikermann, M. (2019). Pay for performance for hospitals (Review). Cochrane Database of Systematic Reviews, (7), 1–107. Web.

Peckham, S., & Wallace, A. (2018). Pay-for-performance schemes in primary care: What have we learnt? In The quality and outcomes framework (pp. 137–146). CRC Press.

Shakir, M., Armstrong, K., & Wasfy, J. H. (2018). Could pay-for-performance worsen health disparities? Journal of General Internal Medicine, 33(4), 567–569. Web.

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