A detailed description and origins of pay for performance Pay-for-performance initiatives are designed to improve the efficiency, quality and general value of health care. Other terms used to refer to pay-for-performance include pay-for-quality, alternative payment, valued-based payment, among others. No matter the nomenclature, the main objective of pay-for-performance is to improve efficiency for optimal outcomes. (Rosenthal et al., 2005)

During the early 1990s, many consumers opted for managed care by paying some cash to the providers for a particular set of services. Such arrangement led to compromised quality and put some strain on patients.

Come 2000, the US was experiencing serious deficiency in health care quality. The Institute of Medicine wrote a detailed report on this. Thus pay-for-performance became a valid option for quality health care. (Vogenberg & Smart, 2018)

Who is affected by pay-for-performance?

A number of studies have been conducted to evaluate adherence to medication versus medication subsidies, but no valid conclusions have yet been made. Medication adherence was shown to improve with higher drug coverage, reduction of cost-sharing and prescription cap. Poor adherence to medication was observed for patients with full medication subsidies. Such non-detailed conclusions show the need for further studies on factors influencing patients’ adherence to medication. (Rosenthal et.al 2005)

According to Barello et.al (2012), chronic illness patients who are required to pay for their medication are more likely to tone down their use of medication. A study conducted in the US revealed that about 25% of older patients ignore their prescribed medicines due to the high costs.

Public insurers such as Medicare have frequently used pay-for-performance in hospitals. Private health care providers have also used more than forty pay-for-performance programs. However, it is still doubtful whether they improve quality. The few studies which attempt to prove improvement in health care quality...

(Barello et.al 2012)
Premier Inc. and CMS are two notable nationwide hospital systems which are undertaking a project to demonstrate the pay-for-performance. The participants get more cash for treating Medicare patients with conditions such as heart failure, coronary artery bypass graft, acute myocardial infarction, pneumonia, and hip and knee replacements. On 31st March, 2018, 414 Premier hospitals were allowed to enroll for the project and 267 of these agreed to participate. (Vogenberg & Smart, 2018)

Rosenthal et.al (2005) states the importance of the lessons from the pay-for-performance project.

Legislation and/or policies related to pay-for-performance

The Affordable Care Act outlines a number of strategies to improve health care quality. Not all these are strictly pay-for-performance. An example is the Hospital Re-admissions Reduction Program by Medicare which kicked off on 1st October, 2012. This reduces hospital payments by 1% in case of extremely high rates of avoidable re-admissions for illnesses such as heart failure, heart attack or pneumonia. (Eijkenaar et.al 2013)

The Accountable Care Organizations (ACOs) are one of the best known groups of providers who accept the role of coordinating health care and hold themselves accountable for the quality of services they render. (Barello et.al 2012)

The Office of Personnel Management was created under the Civil Service Reform Act in 1978. Some of the functions of this office included: Overseeing the human resource management of the Merit Systems Protection Board and prevent abuse of office. (Eijkenaar et.al 2013) The act also had provision for performance appraisal for the employees, merit pay for different levels of employment, and ways to deal with poor performance. In addition, the act specified that employees would get only half of their normal normal salary increase. The other half would be shared among the top performers. Thus some employees benefited with this new system whereas…