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Home / News & IndustryManaged Care Insight and Analysis
Updated: February 16, 2010
Intelligent Design Of P4P Programs Could Save Money

Program design is emerging as a key component in determining whether adoption of physician P4P programs will positively impact healthcare spending.

That’s the conclusion of RAND Health after the think tank identified nine performance dimensions against which it measured P4P.

P4P design features that may affect spending include the financial incentive structure and funding and the behaviors or actions rewarded.

Design features are a double-edged sword. Some can increase spending and some can reduce spending, RAND found.

Those features more likely to reduce spending include:

  • Rewards for activities that decrease use of expensive services;
  • Rewards for system investments and better coordination of care delivery; and
  • A system design that leads to reductions in morbidity and mortality risks.

Design features likely to increase spending include rewards for increasing the use of necessary and appropriate services or adding new money to pay for incentives.

The CMS Web site provides some data on the experience of 10 physician groups participating in the CMS Physician Group Practice Demonstration. Four physician groups experienced favorable financial performance under the demonstration’s performance payment methodology that rewarded the groups through a gain-sharing arrangement if they demonstrated reductions in spending.

The four successful physician groups – Dartmouth-Hitchcock Clinic, The Everett Clinic, Marshfield Clinic and the University of Michigan Faculty Group Practice — in 2008 earned a total of $13.8 million in performance payments as their share of $17.4 million in Medicare savings for improving the quality and cost efficiency of care. This compares to two physician groups that earned $7.3 million in performance payments under the first year of the demonstration in 2007.

RAND Health is a division of the RAND Corp. and is the nation’s largest independent health policy research program.

Address: RAND Health, 1776 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138; (310) 393-0411, ext. 7775,

  This article was taken from:
Pay-For-Performance Reporter

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