A Prescription for Better Health Care?

Adjunct Prof. Kristiana Raube finds pay-for-performance stimulates modest change among physicians

Although financial incentives in health care have grown rapidly in recent years as a way to improve the quality of care, there is little research about how well they work – until now.

Kristiana Raube, executive director of the Haas School’s Graduate Program in Health Management, co-authored an article in the March/April edition of the journal Health Affairs that evaluated the nation’s largest pay-for-performance program -- a statewide program launched by the California Integrated Healthcare Association in 2003. The initiative includes seven major California health plans and 225 physician groups, which employ 35,000 physicians and care for 6.2 million people.

Raube’s conclusion: California doctors given financial incentives to improve the quality of medical care have begun to embrace an array of changes important to advancing quality. However, pay-for-performance incentives failed to achieve their stated goal of breakthrough quality improvements.

“The lessons from this study should be considered by policy makers, such as those from the Centers for Medicare and Medicaid Services, as they design value-based purchasing initiatives,” says Raube, also a Haas School adjunct professor. Raube co-authored the study with RAND Corp. researchers Cheryl Damberg, Stephanie Teleki, and Erin de la Cruz.

Between 2003 and 2007, the participating health plans paid $203 million in incentives to physician groups if they met certain performance guidelines, such as increasing the number of patients with diabetes who receive blood tests.

In response to pay-for-performance incentives, medical groups sped up adoption of information technology, more closely tracked the improvement of physician performance, and sharpened their focus on quality, the researchers found.

But most of the medical groups suggested that the program’s financial incentives -- generally about $1,500 to $2,000 annually per physician -- were too small to stimulate significant change.

More than two-thirds of the medical groups reported that the pay-forperformance program resulted in more positives than negatives. However, the plans rated the success of the program as 2.5 on a scale of 1 to 5 (1 – not successful, 5 – very successful), with one plan commenting, “P4P is an appendage, not a new way of doing business or managing care.”