WSJ Article on Provider Payment and Quality Metrics

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Here’s an interesting Wall Street Journal debate on the “Physician Pay for Performance” issue.  One writer favors pay-for-performance incentives, arguing that fee-for-service payment creates improper incentives for providers to over-treat patients. This writer focused on the financial incentives, and measured success based on changes in utilization patterns or costs. The other writer focused on quality-based metrics and measured success based on mortality and changes in patient conditions.

With these differences in focus, it’s no surprise that the conclusions were different. The current fee-for-service payment system certainly provides strong financial incentives to provide more care, some of which may be unnecessary. But the commonly-substituted alternative, which is to pay providers for a large group of services (bundled payments), or a fixed fee for all services provided to a specified group of patients (accountable care organizations or capitation) may incorporate exactly the opposite financial incentive, which is to withhold costly services from patients, even from those to whom those services should be provided. Since the latter situation may cause serious medical conditions to be untreated, quality measures are generally built into the payment system to monitor the clinical effects of under-treatment and to provide financial penalties to providers whose treatment patterns trigger failures in the quality metrics.

This issue is the focus of the second writer, who points out the difficulty in establishing and monitoring quality metrics that effectively measure the quality of care. Many of these metrics deal with the process of providing care rather than its outcomes, can be manipulated by physicians, or haven’t been shown to be effective. This author also points out the "teaching to the test" effect often highlighted in education, where practitioners focus more time on achieving high scores on quality metrics, and less on non-measured activities that are less easily quantified but perhaps more necessary for proper patient care.

From the point of view of the patient, though, these metrics are the only counterbalance to the financial incentives for under-treatment, and therefore their effectiveness should be of critical concern. It will be interesting to see if patient advocacy groups begin to focus on these metrics as more all-encompassing payment systems begin to proliferate. One wonders if the AARP will catch on to this effect, and will begin to highlight the need for greater attention to available quality measures by their members who are included in ACOs and other organizations in which providers have a financial interest in providing less care. Hopefully the professionalism of providers will avoid egregious instances of withholding costly but necessary care, yet it’s also clearly understood that payment drives provider behavior in many cases.

One milestone that we're watching for is the introduction of the metric that measures hospital "non-admissions", which would count patients whose medical conditions warranted admission to a hospital, but who were not admitted to avoid incurring that cost. As potential patients, we would like to see these type of metrics in place, but as healthcare financial analysts we understand that defining such a metric would be practically impossible. It would be these types of metrics, though, that would be necessary to truly assure that the “proper” care was provided, not simply lower-cost care.

All of this goes to show that there’s no “magic bullet” in healthcare provider payment – there’s no change to payment systems that will fix all of the issues in healthcare treatment and cost. There are payment systems that pay providers to provide more care, and payment systems that financially reward providing less care, but there's nothing that always rewards the "proper" care. While quality metrics may improve over time, a comprehensive set of metrics providing all the necessary patient protections from over and underutilization is likely to remain elusive.