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Measuring, Reporting, and Rewarding Performance in Health Care


In its landmark 2001 report, Crossing the Quality Chasm: A New Health System for the 21st Century, the Institute of Medicine (IOM) declared the U.S. health care system to be in need of fundamental change. "Between the health care we have and the care we could have lies not just a gap, but a chasm," the IOM said. What is needed, the IOM concluded, is a series of actions that, taken together, will create "an environment that fosters and rewards improvement." The IOM said that the U.S. health care system should be improved by making care "safe, effective, patient-centered, timely, efficient, and equitable."

The evidence of quality shortcomings is substantial and growing. The following are a few examples:
  • The National Committee for Quality Assurance (NCQA) has estimated that nearly 80,000 Americans die each year because they do not receive evidence-based care for such conditions as high blood pressure, diabetes, and heart disease.
  • Researchers from the RAND Corporation have found that, on average, Americans receive the care indicated by medical evidence as necessary only 55 percent of the time. Most of these results reflect underuse of necessary care that can lead to needless complications, adding to health care costs and reducing productivity. Some results reflect overuse of unnecessary care that increases costs directly, and if complications occur, can further increase costs and threaten the health of patients.
  • A 1999 IOM report estimated that as many as 98,000 Americans die each year as a result of avoidable patient safety errors, while the Centers for Disease Control and Prevention has estimated that 90,000 Americans die each year due to hospital-based infections. These reflect misuse, another quality problem that leads to preventable deaths and injuries.
  • There also are examples of enormous variation in delivery of care—nationally, regionally, and locally. A report to Congress by the Agency for Healthcare Research and Quality (AHRQ) found that the proportion of elderly patients with pneumonia who received recommended pneumococcal screenings or vaccinations in the highest-performing state was 7.5 times higher than in the lowest-performing state. Researchers at Dartmouth University have shown that Medicare expenditures in Los Angeles were twice as high compared with Sacramento for care given to persons in the last two years of their lives. These results indicate that care for these Medicare beneficiaries was not based on standardized or evidence-based guidelines. Similarly, a recent analysis of data from the Hospital Quality Alliance (HQA), the first initiative to report routinely on hospital performance, showed that the quality of hospital care varies widely, not only by geographic region and hospital type, but also across conditions within individual hospitals.

There is a growing belief that current payment systems not only fail to reward or encourage quality and quality improvement but sometimes actually penalize them. Many payment systems pay for each service rendered on a fee-for-service basis. As a result, if a hospital, physician, or other provider performs fewer or less intensive services by following evidence-based guidelines, the organization or provider receives less money. As the IOM stated in its Quality Chasm report, policymakers must align payment incentives with the drive to improve quality.

To cope with rising costs, employers have shifted more of the cost of insurance to employees and their families and asked them to take a greater role in decisions about their care. This model of consumer-directed health care aims to give patients incentives to make informed decisions and choose necessary, cost-effective care. However, this model assumes that consumers will have sufficient information about the quality, performance, and costs of hospitals, doctors, health plans, and others that deliver care. Consumers report that they do not generally have this kind of information available to them.

Policymakers, purchasers, and the public are struggling with the high cost of care and looking for value. They ask: What are we buying with the billions of dollars we are spending for care? Are we receiving the best care money can buy? Could we buy the same care for less, or possibly even better care for the same or less money? Addressing these questions will require an examination of our ability to 1) measure the care delivered in the United States and 2) devise an incentive system that rewards higher-quality, more efficient care.

Publication Details



R. Sorian, Measuring, Reporting, and Rewarding Performance in Health Care, The Commonwealth Fund, March 2006