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H H S Department of Health and Human Services
U.S. Department of Health and Human Services
Health Information Technology and Quality

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What is pay-for-performance?

In a pay-for-performance system, providers are compensated by payers for meeting certain pre-established measures for quality and efficiency. Pay-for performance-programs have been implemented by both Medicare and private insurers. The Center for Medicare and Medicaid Services (CMS) has numerous demonstration projects underway to pilot these programs in a range of care settings, from primary care clinics to hospitals.

Pay-for-performance can be seen as a means of attaching financial incentives to clinical care objectives. Using quantitative metrics, a percentage of physician compensation can be tied to achieving specific clinical benchmarks in the care they provide.

The key difficulty in establishing a pay-for-performance program is in choosing appropriate benchmarks. In general, stressing adherence to evidence-based guidelines for care (e.g., ordering of pneumonia vaccines for all patients over the age of 65) should be preferred over patient outcomes (e.g., number of diabetic patients with a HbA1c less than 7.0%), because the latter often depends on factors outside of the provider’s control. The goal of pay-for-performance is to improve the transparency and accountability of the QI process as a complement to other incentives used to generate buy-in.

Related Resources:

Performance-Based Measures: The Early Results Are In go to exit disclaimer- Journal of Managed Care Pharmacy
Principles for Pay-for-Performance Programs go to exit disclaimer– American Medical Association
Paying For Performance, A Call for Quality Health Care go to exit disclaimer- Deloitte Center for Health Solutions
Medicare Pay-for-Performance Initiatives – Centers for Medicare and Medicaid Services

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