Understanding the Pay-for-Performance System and its Consequences

healthcare providers

Pay-for-performance is a healthcare payment system that rewards doctors, hospitals, and other healthcare providers for their efficient services. It is generally discussed in the context of healthcare reform and the federal government has started efforts to implement pay-for-performance in its Medicare program. Though these efforts are still in the early stages and have not provided enough data to find out whether this system is effective in containing healthcare costs or not.

Reasons to Adopt a Pay-for-Performance System

In the present healthcare system, healthcare providers are paid for each medical service performed, thereby giving them a financial incentive to perform as many medical services as possible. Though this might also lead to healthcare provider’s reluctance to expose themselves to potential charges and might also lead to over utilization of healthcare services.

In addition to this, some of the health insurance experts also believe that the current payment system is not updated as it neglects the preventive care role in improving health and reducing healthcare costs. In the current scenario, healthcare providers, who treat a diabetic patient who had suffered a kidney failure got more money compared to doctors who work with a diabetic patient and prevent his kidney failure through better control of blood glucose. This idea doesn’t suit many healthcare reformers.

Meanwhile, to contain the rising healthcare costs, a new payment system is required that reward healthcare provider for increasing the impact of preventive care, and pay-for-performance has been proposed as such a system. This system would reward doctors for rendering healthcare that has been found effective in improving health outcomes and would also encourage them to reduce waste when possible.

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Challenges in Pay for Performance Implementation

Implementing Pay for Performance is the biggest challenge, as it is difficult for everyone to agree on quality standards. Quality standards are measures that determine whether healthcare providers are rendering high-quality care or not. For instance, a quality standard for doctors is to test AIC levels in diabetes patients four times a year. In Pay for Performance system doctors’ meeting, this standard is aptly rewarded.

The drawback is that many healthcare providers who believe that medical practice is an art and a science that brings everything down to checklists and treatment algorithms may do much harm to patients. Besides, healthcare providers, many times disagree on the treatment course in patients with similar medical histories and going through the same diagnosis. Before the full implementation of the pay for performance, these disagreements should be resolved.

Effect of Pay-for-Performance on People

Predicting the impact of pay-for-performance so early is quite difficult, as its real effect will come out in the years to come. Pay for performance is basically related to the manner in which hospitals, physicians, and healthcare providers get paid for their work, and it is not likely to have much effect on patients. However, over a long period of time, it is expected that if pay for performance is completely implemented then patients will surely enjoy better healthcare without having to pay more for it.

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