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Study Finds "P4P" Programs Improve Quality

OCTOBER 11, 2005 -- A study billed as the first of its kind to evaluate "pay-for-performance" programs has found they result in significant improvements in quality.

The report, published in Wednesday's edition of the Journal of the American Medical Association, compared clinical quality improvements on Pap smears, mammography, and hemoglobin testing for diabetics for two groups in a large health plan, PacifiCare Health Systems.

PacifiCare's California network, which implemented a quality incentive program (QIP) in 2003, was compared with Pacificare's Pacific Northwest group, which did not participate in a quality incentive program. The California medical groups received bonuses for meeting specific targets in clinical quality scores.

According to a news release from The Commonwealth Fund, a private, nonpartisan foundation that studies health and social issues and funded the report, researchers found that quality scores for cervical cancer screening improved 5.3 percent in the pay-for-performance group, compared with 1.7 percent in the group without pay-for performance. The difference was not significant for either mammography or hemoglobin testing, though both groups did improve.

The study's authors also found that 75 percent of bonus payments went to physician groups whose performance was above the bonus threshold before the quality incentive program was implemented.

On Capitol Hill, lawmakers and health policy experts have said linking Medicare payments to the quality of care provided will improve beneficiary care while lowering cost. For example, Senate Finance Chairman Charles E. Grassley, R-Iowa, and the panel's ranking Democrat, Max Baucus of Montana, are sponsoring legislation (S 1356) that would link Medicare provider payments to quality of care provided.

And in June, Centers for Medicare and Medicaid Services Administrator Mark B. McClellan wrote a letter to House Ways and Means Committee leaders detailing CMS' plan to move forward on pay-for-performance programs for Medicare providers. Separately, the Medicare Payment Advisory Commission (MedPAC) has urged taking about 1 percent to 2 percent of current payments for physicians and other providers and redistributing it to caregivers who improve the quality of their care or meet quality benchmarks.

In a news release, Commonwealth Fund President Karen Davis noted that "there is widespread consensus that existing financial incentives in the U.S. health care system are misaligned and fail to reward high quality . . . We need to move from just paying for services that get rendered to rewarding delivery of the right care."

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