Unbiased Analysis of Today's Healthcare Issues


Written By: Jason Shafrin - Oct• 12•06

Can Pay for Performance (P4P) improve care and slow spending growth in the U.S.?  Joe Paduda is doubtful.  So is John Wennberg of the Dartmouth Medical School.  In his report (“Variation…“) for The Commonwealth Fund, Wennberg says that P4P initiatives can be very effective in creating incentives for physicians to operate under best practices.  For instance, practice guidelines are for diabetics to have an eye examination at least every two years.  We could compensate physicians more whose diabetic patients made visits on average every two years.

The problem Wennberg brings up is that the money spent on procedures where there are clearly defined best practices is small compared to spending in areas where there is no established ‘optimal’ protocol.  Wennberg divides medical procedures into 3 groups.

  • Effective Care: This is where P4P can be effective (e.g.: the diabetic eye exam case).  There are clear best practices established and physicians should follow them.
  • Preference Sensitive Care:  For these procedures, there is no one ‘right’ way to treat the patient.  Wennberg’s report gives a clear example.:

“Preference-sensitive care typically involves significant tradeoffs that affect the patient’s quality or length of life. The surgical options for treating early stage breast cancer, for example, usually include mastectomy (complete removal of the breast) or lumpectomy (a local excision of the tumor), often called “breast-sparing surgery.â€? The consequences for women who choose mastectomy include the loss of the breast and, for some, the use of a prosthesis or the undergoing of reconstructive surgery. For women who choose breastsparing surgery, consequences can include radiation or chemotherapy, or both, and living with the risk of local recurrence, which would require further surgery.”

  • Supply Sensitive Care: Patients with chronic illnesses (e.g.: congestive heart failure, chronic lung disease, cancer) have a choice of how much treatment they seek.  There is no best practice for the number of procedures (physician visits, referrals, tests, etc.) a cancer patient should make.  Many studies show that physicians are over-treating these patients.  Regions which employ a large volume of medical procedures to treat illness often find their patients no better or even worse off than regions applying a less invasive protocol (a  note of caution that one must worry about reverse causation).

Wennberg estimates 50% of all medical spending is for supply sensitive care.  This tends to suggest that P4P should be promoted, but only on a narrow scale and only for procedures with clear best practice guidelines.  P4P may be a step forward but it is not a cure all for the modern medicine’s problems.

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  1. […] saving in the long run, the majority of health care spending is for supply-sensitive costs (see P4P post). A focus on preventative care is good policy, but is unlikely to decrease medical cost […]