Second Opinion: ‘Pay for Performance?’ Thanks, I’ll Pass.

March 1, 2007

Ready for pay-for-performance? This West Virginia internist says, “No thanks.”


The economics of healthcare have changed dramatically over the past several decades; today, physicians are paid less for doing more while the CEOs of large insurance companies make millions.

Medicare, meanwhile, is ailing. Its costs are projected to more than double over the next decade. This despite hundreds of pages of regulations that create price controls known as the “physician fee schedule,” coding initiatives that criminalize physicians for normal business behavior, and annual physician pay cuts.

Medicare’s finances are so bad that in 2006, for the first time, the government simply refused to pay both hospital and physician bills from September 22 through September 30 until the next fiscal year.

One Medicare cost-control scheme is “pay for performance,” often called P4P. In December 2005, the AMA cut a deal with congressional leaders to develop “performance measures” for the P4P program. The program will redistribute funding to those who best subordinate their medical judgment to the mandated protocols and guidelines. Pilot programs are already in place in nearly every state, and the second annual National Pay for Performance Summit was held in February. The AMA is advising physicians to “begin to learn how to do this in your practice.”

Medicare’s program is based on so-called evidence-based medicine and “clinical practice guidelines,” none of which have been tested or validated to show that they do in fact improve patient care. No randomized controlled trials are ongoing.

Medicare’s P4P program requires compliance with arbitrary rules. But the goals of compliance and those of excellent patient care are entirely different. Patients with multiple diseases who must take a number of different drugs require the creative insight of an experienced physician, not a technician following guidelines.

Other American businesses have experimented with P4P-like programs, and they have subsequently rejected them. For example, Hewlett-Packard adopted a P4P program in the early 1990s but dropped it within three years. A big frustration for the employees was that factors outside of their control affected their pay. The same thing will happen with Medicare’s P4P: Patient noncompliance is a major factor in determining outcomes, and that is largely out of doctors’ hands.

P4P will be expensive. The British National Health Service instituted P4P in 2004, but it led to unprecedented costs. Using “incentives” to rig the system has failed to cap increasing costs.

Many physicians see P4P as a pretense for economic credentialing, and they suspect it will lead to increased paperwork, higher expenses, less revenue, less time for patient care, and a broken patient-physician relationship. Like the HP employees, they fear being rated and paid for measures and outcomes over which they have no control. In addition, P4P places physicians at financial and legal risk for treating the very sick, so they will have an incentive to game the system to avoid sicker patients - the very ones who have the greatest need for their care.

As one observer notes, the whole point of P4P seems to be getting patients and physicians out of the business of making medical decisions. It’s not a new idea. Former Secretary of Health, Education, and Welfare Joseph A. Califano remarked in 1988 that “medicine is too important to be left to doctors and politicians.” Jane Orient, MD, of the Association of American Physicians and Surgeons, suggests that the ultimate end of P4P appears to be not the life of the patient but the death of medicine.

Will all this really benefit our patients?

Dr. Arnett is a practicing internist who lives in Helvetia, West Virginia. His comments are his own and do not necessarily reflect the views of Physicians Practice.

This article originally appeared in the March 2007 issue of Physicians Practice.