Pay-for-performance

Definition: “Pay-for-performance (P4P) is an umbrella term for initiatives aimed at improving the quality, efficiency, and overall value of health care.”¹ It is a term involving payment models that tie reimbursement to metric-driven outcomes, practice guidelines, and patient satisfaction to improve the overall quality and value of health care. P4P models can offer financial incentives or disincentives for performance.² There are numerous quality metrics that can be utilized, with the majority spanning across four domains: patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk populations. The metrics used are publicly reported, creating transparency and further incentivizing organizations to protect and strengthen their reputations. Both CMS and commercial payers have created P4P models to contribute to the national transition toward a value-based health care system.

How it relates to ACO/PCMH: In 2012, CMS developed the Medicare Shared Savings Program, enabling health care entities to set up an Accountable Care Organization (ACO). ACOs and Patient-Centered Medical Homes (PCMHs) strive to improve quality and coordination of care for patients. Payment for patient care services in these models has shifted to performance-based payment and away from the traditional fee-for-service model. Providers are held more accountable for providing quality health care while also reducing the unnecessary utilization of resources.

Pharmacists have an important role to play in these models and can help reduce high-cost episodes of care by preventing disease progression and optimizing medication regimens. In collaboration with other care providers, pharmacists deliver patient care services that contribute to the continuation and optimization of patient care plans, including evidence-based medication regimens, appropriate self-care, and patient education. Pharmacists providing care can impact program-identified quality metrics tied to payment for performance. Their services can be facilitated through the creation of collaborative practice agreements with prescribers. These agreements can allow pharmacists to initiate, modify, and discontinue medications as well as order laboratory tests based on the agreement terms and state scope of practice.

Pharmacists can indirectly impact patient care as well. They are well-trained to assist in the creation of proactive protocols and programs with a focus on optimizing adherence to evidence-based guidelines (often referred to as “population health management”). Additionally, pharmacists can reactively address care gaps identified by payors or population health reports.

While P4P in health care can ultimately encourage best clinical practices, it does face some challenges and concerns. This includes the potential negative impact on socioeconomically disadvantaged populations who struggle to afford medications, encounter access barriers to health care providers, and whose social determinants of health may impact their health outcomes.² Because these patients may take longer to meet certain metrics or not reach them at all, it is thought that providers working in P4P models may be disincentivized to treat these patients. This could potentially worsen health disparities and is a significant factor to consider when developing a successful P4P model.

Involved organizations/oversight: CMS, commercial health plans

References

1.  James J. Pay-for-performance incentives. Robert Wood Johnson Foundation. Health Policy Brief: Pay-for-Performance. Health Affairs; October 11, 2012. Available at: https://www.healthaffairs.org/do/10.1377/hpb20121011.90233/
2. NEJM Catalyst. What is pay for performance in healthcare? NEJM Catalyst; March 1, 2018. Available at: https://catalyst.nejm.org/doi/full/10.1056/CAT.18.0245

Contributing authors:

• Emily Horn, PharmD, PGY-1 Resident, Indiana University Health Bloomington Hospital
• Miranda Conard, PharmD, BCACP, BC-ADM, Clinical Pharmacist, IU Health Southern Indiana Physicians

Last Updated 2/1/2024 by Sarah M. Aldrich Renner, PharmD, BCACP