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  • Publication # 13-RA005

Pay-for-performance did not spur more rapid quality improvement among low-performing hospitals

Patient Safety and Quality

Hospital pay-for-performance enjoys considerable support from policymakers and payers. Medicare's principal test of pay-for-performance, the Premier Hospital Quality Incentive Demonstration, changed its incentive design in its fourth year to encourage greater quality improvement, particularly among lower-performing hospitals. However, the new incentive did not achieve its goal, concludes a study by researchers at Weill-Cornell Medical College and New York University. In practice, the new incentive design resulted in the strongest incentive for hospitals that had already achieved quality performance ratings just above the median for the entire group of participating hospitals. Yet, during the course of the program, these hospitals improved no more than others.

In phase 1 of the test, the demonstration paid a 2 percent bonus on Medicare reimbursement rates to hospitals performing in the top tenth of demonstration hospitals on a composite quality measure for each clinical diagnosis and procedure incentivized in the demonstration (heart attack, heart failure, pneumonia, bypass surgery, and hip and knee replacement) and a 1 percent bonus for hospitals performing in the second tenth. During phase 2, in addition to an attainment award, hospitals were eligible for a top performer award and an improvement award. The improvement award was given to hospitals with scores above the median of demonstration hospitals in the current year and ranked in the top 20 percent of demonstration hospitals for quality improvement.

The quality of care for heart attack, heart failure, and pneumonia among demonstration hospitals improved more than that of matched comparison hospitals in phase 1. However, the demonstration hospitals experienced a weakening of quality improvement relative to matched comparison hospitals in phase 2. The study evaluated the performance of 250 demonstration hospitals matched with 250 comparison hospitals. In phase 1, the amount of incentive payments averaged $8.2 million per year; by phase 2, the average payment averaged $12 million. This study was supported by the Agency for Healthcare Research and Quality (HS18546).

See "Medicare's flagship test of pay-for-performance did not spur more rapid quality improvement among low-performing hospitals" by Andrew M. Ryan, Ph.D., Jan Blustein, M.D., and Lawrence P. Casalino, M.D. in the April 2012 Health Affairs 31(40) pp. 797-805.


Page last reviewed February 2013
Internet Citation: Pay-for-performance did not spur more rapid quality improvement among low-performing hospitals: Patient Safety and Quality. February 2013. Agency for Healthcare Research and Quality, Rockville, MD.


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