Unbiased Analysis of Today's Healthcare Issues

VBP Design Choices

Written By: Jason Shafrin - Nov• 08•10

“Pay-for-performance (P4P) is one of the primary tools used to support healthcare delivery reform. Substantial heterogeneity exists in the development and implementation of P4P in health care and its effects.” Today, I review a paper which summarizes evidence, obtained from studies published between 1990-2009, concerning P4P effects.

Measure Effectiveness

Which types of measures produce the biggest change in physician behavior. The authors’ literature review reveals the following:
The effect of P4P on non-incentivized quality measures varied from none to positive.  However, one study reported a declining trend in improvement rate for non-incentivized measures of asthma and CHD after a performance plateau was reached.

In addition, process measures were more effective in changing physician behavior than outcome measures. Intermediate outcome measure effect of provider behavior was between the process and pure outcome measures. Among these measure types, programs where providers were involved in the VBP implementation lead to larger gains in outcomes. The authors do not mention if this was because of easier-to-game measure selection by providers or if this represented actual improvement. Providers can also game the system by declaring a patient ineligible for certain measures. “Gaming by over exception reporting and over classifying patients was kept minimal, although only three studies measured gaming specifically (e.g., 0.87% of patients exception reported wrongly). Therefore, there is limited evidence that gaming does occur with P4P use, although it is not clear what is the incidence of gaming without P4P use.”

The most important factor may be whether the providers are aware that a P4P program has been put in place. “[S]tudies found positive P4P effects (5 to 20% effect size) with programs that fostered extensive and direct communication with involved providers.”

Payment Size and Type

The authors surprisingly found limited impact of P4P payment size on physician behavior. This may be due to the fact that in markets with payer fragmentation, even large P4P amounts will make up a small share of any one physician’s income. Generally, giving positive rewards produced better outcomes than programs with winners and losers, but the authors claim this finding is far from robust.

Payments targeted to organizations seemed to less effective than those targeted at individual providers, but programs aimed at either tended to produce positive results. “A combination of incentives aimed at different target units was rarely used, but did lead to positive results.”

Access and Equity

The authors found that P4P programs had little affect on access or equity to care. Most of this evidence comes from work from the UK, although none of it comes from randomized controlled trials. In the authors’ words: “In general, P4P did not have negative effects on patients of certain age groups, ethnicity, or socio-economic status, or patients with different comorbid conditions…In fact, throughout these studies a closing gap has been identified for performance differences.”

Patient Satisfaction

Value-based purchasing programs seem to have very little effect on patient satisfaction. Before-and-after studies in Spain and Argentina found no effect of VBP on patient satisfaction whereas a cross sectional study in the U.S. did find some positive impact of P4P.


VBP seems to improve cost effectiveness. This was shown to be the case in the Premier project and other P4P demonstrations.


Which types of providers performed best on P4P measures. “Medical groups were likely to perform better than independent practice associations…In the USA, ownership of the organization by a hospital or health plan was positively related to P4P performance, as compared to individual provider ownership.” Additionally, practices with more providers generally (but not always) perform better. This could be related to economies of scale for larger provider organizations. On the other hand, it could be the case that individual physicians are more attuned to the specific patient’s needs rather than focusing on meeting a specific P4P quota.


Based on this review, Van Herck and co-authors make the following recommendations.

  1. Select and define P4P targets based on baseline room for improvement.
  2. Make use of process and (intermediary) outcome indicators as target measures.
  3. Involve stakeholders and communicate the program thoroughly and directly throughout development, implementation, and evaluation.
  4. Implement a uniform P4P design across payers.
  5. Focus on quality improvement and achievement. A combination of both is most likely to support acceptance and to direct the incentive to both low and high performing providers.
  6. Distribute incentives at the individual level and/or at the team level.
  7. Timely refocus the programs when goals are fulfilled, but keep monitoring scores on old targets.
  8. Provide sufficient incentive sizes.
  9. Provide quality improvement support to participants through staff, infrastructure, team functioning, and use of quality improvement tools.


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  1. logan says:

    Thank you for the comprehensive review! I am involved in a few quality improvement projects and it does seem that providers prefer process measures especially given that outcome measures are so volatile. I think the point on distributing incentives both at individual and facility level is very useful.

  2. Randall says:

    We are actually studying about P4P and I am looking for something like this. This post has helped me a lot in understanding more about it. I agree with the recommendations mentioned specially with “Implement a uniform P4P design across payers.” Implementing differed P4P for each would prove to be chaotic and comparing all of them would then be difficult thus the need for consistent and uniform P$P implementation.

  3. […] summarizes a comprehensive study of one of the hot trends employers are looking at – paying doctors more for delivering higher quality […]

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