Physician Payment Reform Literature Review
Evidence of effectiveness varies by type of payment model, with understandably more information available for longer established models such as pay for performance and Global payment, and less for newer models such as Shared savings and Supplemental Payments for Medical Homes. Even where there is existing information on effectiveness, however it comes with limitations:
- most Pay-for-performance evaluations assessed “first generation” P4P programs in the late 1990s and early 2000s and do not reflect the newer models in use today;
- evaluations of Global payment assessed “first generation” Global payment programs in the late 1980s and early 1990s and do not reflect the newer models in use today;
- payment arrangements are increasingly incorporating elements of multiple models, and
- it is inherently difficult to distinguish the impact of payment from delivery system reform, since one drives the other, and in fact, this is the very reason for payment reform. To this point, in 1996 Don Berwick, writing about efforts to assess the effects of Capitation (Global payment), said:
“Thus, Capitation as a payment mechanism is never an isolated factor in determining the patterns of care. The effects of Capitation depend on many other factors in the organization of care, such as the form of the delivery system, the risk relation, the cultural norms, and the specific methods used to try to mold physicians’ behavior. Unfortunately, the research literature tends to confound these variables. All studies of capitated payment are, in fact, also studies of other factors in the organization of care.”
This section reviews the research that does exist, and what lessons it provides to employer purchasers
There have been relatively few rigorous evaluations of the effects of P4P programs given the widespread prevalence of such programs.
Evidence of General P4P Effectiveness
There is limited evidence of an association between P4P and improved health care delivery and health outcomes. This evidence, however, is not strong. Analyses suggest that strong design is critical to success, and many evaluated P4P programs have suffered from significant design defects (e.g., financial incentives are too small, no rewards for demonstrating improvement over time).
For more information, see reference (1).
Physician P4P Programs
Studies provide mixed results about the link between physician P4P programs and the delivery of quality of care. Studied P4P programs typically have not included measures and incentives for reduction of waste or cost, leaving it unclear whether P4P programs can have impact in these areas of performance. In addition, P4P programs typically have been implemented with other interventions, making evaluation of the payment reform element difficult.
For more information, see references (2), (3), (4), (5).
Hospital P4P Programs
Evaluations of hospital P4P programs indicate that improvements were modestly larger for hospitals eligible for P4P than they were for hospitals participating in public reporting and/or quality improvement interventions. However, P4P programs are usually implemented in conjunction with other interventions, making it difficult to separately assess the impact of P4P.
Evaluations of three P4P programs aimed at hospitals demonstrate similar variability in the program design and evaluation methods, again making it difficult to draw strong, generalizable conclusions about effects:
For more information, see references (6), (7), (8).
Supplemental payment, as defined within this guide, refers to added payment for non-compensated services. It has been used in recent years primarily with Patient-Centered Medical Home initiatives as a means to support primary care practices in their delivery of primary care in a new fashion. It is difficult to evaluate the impact of these Supplemental Payments because they accompany transformation in primary care delivery and their effect can therefore not be wholly distinguished from the changes in care delivery. Since change in care delivery patterns are the objective of all fee-for-service alternative payment models, however, we consider the existing evaluation information for supplemental payment to Medical Homes.
The research here is thin, in part due to the recent development of the Patient-Centered Medical Home concept as a process to transform primary care delivery for all patients. The early evaluations are a mix of self-reported and contractor-reported evaluations. Many rigorous independent evaluations are underway, but none of them have reported results as of yet.
For a selection of existing evaluations, see references (9), (10), (11).
The Shared savings model has been the least evaluated of all of the alternative payment systems presented within this guide. While many find it conceptually attractive, there is very limited evidence of effectiveness at this point in time.
See reference (12).
While there are a few pilots now under way across the country, there is only one comprehensive evaluation of the Bundled payment concept at this point in time, with a second smaller scale case study also available. See references (13) and (14).
Both evaluated case studies provided encouraging findings, however, Medicare’s Participating Heart Bypass Center Demonstration (1991-1996) selected four hospitals to receive a single payment covering both Part A (hospital) and Part B (physician) services for coronary artery bypass graft surgery. CMS did not permit any outlier payments. The amount of the combined payment was negotiated between 10% and 37% below the then-current payment levels. The hospital and physicians were able to decide how to split the combined payment.
A formal evaluation revealed that the participating providers, patients and Medicare all benefited. Physicians were able to identify ways to reduce length of stay and unnecessary hospital costs, resulting in cost decreases of two to 23% in three of the four hospitals. While the payments did not incorporate post-acute care, those costs also decreased. A subsequent evaluation (Liu, 2001) found that, after controlling for preoperative risk factors and postoperative outcomes, all four hospitals had significant reductions in total direct variable costs (those costs that vary with the number of patients treated) over the entire period of the demonstration. These cost reductions came primarily from the nursing intensive care unit, the routine nursing unit, pharmacy, and catheter lab. Furthermore, this study found that the cost reduction increased over time. See references (15) and (16).
Pennsylvania’s Geisinger Health System implemented ProvenCareSM in 2006, comprised of a Bundled payment system for all non–emergency coronary artery bypass graft (CABG) procedures. The payment included the estimated cost of a typical hospitalization plus half of the average cost of post–acute care for the 90-day period following surgery. More specifically its elements were
- the preoperative evaluation;
- all hospital and professional fees;
- all routine post-discharge care, and
- management of any complications occurring within 90 days of the procedure.
To help manage care, Geisinger adopted a set of best practices to reduce complications among its CABG patients. It also developed and executed a "patient compact" designed to engage patients. A small study (Casle, 2007) compared the 117 patients in the intervention with 137 patients from a year prior to the implementation and found that hospital costs decreased by 5%.
There is extensive research on Global payment, with more evaluations assessing Global payment to HMOs than to physicians. Many of the latter studies have shown that payment approaches involving risk-sharing with providers are associated with lower service use and cost, compared with fee-for-service arrangements. While some studies show increased delivery of primary care or preventive services when providers receive Capitation, others show reduced access to care or reduced patient trust in their physicians. All of this research varies widely in methodologies as well as the populations and practice settings that they studied. In addition, most have focused on the types of Capitation arrangements implemented during the growth of managed care in the early 1990s.
Little research has been done to evaluate Global payment arrangements since that time. In addition, there is little research on how Global payment arrangements affect longer term outcomes such as provider integration or coordination of services across settings.
See references (17)-(24).
 CareFirst’s new Medical Home model contains elements of fee-for-service payment, supplemental payment, Pay-for-performance and Shared savings. See "Medical Home Programs Are Becoming More Prevalent; Cost, Quality Improvements Seen”, Health Plan Week, May 10, 2010.
 Berwick DM. “Part 5: Payment by Capitation and the Quality of Care”, New England Journal of Medicine, Volume 335 Number 16, pp. 1227-1231.
 For example, many health plans and health services researchers today believe that a physician P4P incentive must total 10% or more of annual revenue, a 2006 study found that most physicians average less than a 5% bonus, with maximum incentives averaging 9% of annual revenues.