Pay-For-Performance Approach Essay

Pages: 5 (1652 words)  ·  Bibliography Sources: 4  ·  File: .docx  ·  Level: Master's  ·  Topic: Healthcare

Pay for Performance

The United States health care system has experienced several challenges in the recent past that has contributed to discussions on health care reform. These discussions have particularly been fueled by the fact that the country spends more than 17% of its Gross Domestic Product on health care. These health care expenditures are more than the health care costs of any other industrialized country in relation to per capita and total spending. It is actually predicted that the country's health care expenditures will account for 20% of GDP by approximately 20% or nearly $4.3 trillion on an annual basis by 2017. These high expenditures have raised concerns since the country ranks low with regards to various areas of quality. The concerns have contributed to the development of several measures that are geared towards lessening costs and enhancing health care quality such as pay-for-performance.

Overview of Pay-for-Performance

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As previously mentioned, the combination of high spending and poor quality has generated huge concerns in the United States health care system. These factors have generated considerable attention for patients, businesses, and state and federal governments because of their role in making health care sustainable for these various stakeholders. These concerns have contributed to the development of various approaches and strategies that are geared towards addressing the problem. One of the strategies or approaches that have been developed to deal with the issue is value-based purchasing (VBP). This is a concept that emphasizes that buyers should make care providers accountable for costs and quality of health care services.

Essay on Pay-For-Performance Approach Assignment

Pay-for-performance is an example of value-based purchasing (VBP) and is an incentive-based reimbursement system that provides incentives to top performers ("Pay-For-Performance," n.d.). Consequently, pay-for-performance programs are currently available in several health systems and settings including managed care settings and private and group physician offices. The development and increased use of these programs is fueled by the urgent need to reform health care reimbursement models in the United States in order to deal with high costs of health care. This model is increasingly used because it tries to match financial rewards with better outcomes and value instead of the existing system where financial incentives are provided based on the volume and intensity of care delivered. Therefore, pay-for-performance is likely to have considerable effects on the whole health care environment and offer another opportunity for pharmacy to help and also take a leadership role in enhancing the quality and efficiency of health care in the United States.

Impact on Reimbursement

Since pay-for-performance is a model that seeks to reform health care reimbursement models, it has considerable impacts on reimbursement. The major way through which pay-for-performance approach affects reimbursement is through transforming how financial incentives are provided. In the current health system, financial incentives or reimbursement is given to care providers based on the volume and intensity of delivered care services. The increased use of pay-for-performance approach changes this by ensuring that reimbursement is provided based on outcomes and value of care services. In essence, this approach typically offers financial incentives to health care providers if they meet or exceed the established quality and performance measures during the delivery of care services. Moreover, pay-for-performance programs may also reward performance improvements over time (James, 2012). The other through which this approach affects reimbursement is by imposing financial penalties on health care providers who fail to realize established goals or cost savings. This is primarily because the quality measures used in this approach are classified into process, outcome, patient, and structure measures or categories.

Impact of System Cost Reductions on Health Care Quality and Efficiency

The incentive structure embedded into the health care system in the United States has been an issue of major concerns for policy makers for several decades. The current system is predominantly based on fee-for-service model through which health care providers are paid based on the volume and intensity of care delivered or provided. This has in turn resulted in increased costs of health care services since increased intensity of care does not necessarily contribute to enhanced quality of care (James, 2012). Actually, high intensity of care contributes to increased costs because of the procedures and equipments used in care delivery. As evident in recent trends, high intensity of care has not been effective in enhancing the quality and efficiency of health care and has also been harmful in some cases.

Policy makers have increasingly considered reduction of system costs as a means of addressing the problem and subsequently resulting in improved quality and efficiency of health care services. One of the major ways through which system cost reductions impact the quality and efficiency of care is through lessening the health care costs and increasing its affordability and accessibility to people. In this case, the focus of the health care system changes from costs to ensuring that every patient can easily access and afford care services regardless of their location in the country. This in turn improves the efficiency of health care since a huge number of people can be effectively treated for their various medical conditions. The high costs of health care hinder its efficiency since a huge population cannot afford and access these services.

Secondly, system cost reductions improve the quality and efficiency of health care by contributing to reduced clinical errors and focusing on keeping people healthy first. The current system that is characterized by increased costs affects health care quality and efficiency by generating medical errors as a patient moves from one care setting to another and by focusing on caring rather than keeping people healthy. System cost reductions deals with these problems and contribute to delivery of high-quality care while enhancing the efficiency of health care. Third, system cost reductions enhance the quality and efficiency of health care through promoting coordinated care to enhance care services and cost-savings and prevents expensive conditions and complications in delivery of care services.

Impact of Pay-for-Performance on Care Providers and Customers

Pay-for-performance approaches have considerable impacts on health care providers by encouraging behavioral change on physicians and health care facilities to promote increased efficiency. Actually, this reimbursement model has become controversial among health care practitioners because it results in situations where some physicians and hospitals are paid more than others for similar services due to the delivery of high-quality services and improved patient outcomes (Mayes, 2006, p.17). In this case, the reimbursement model affects physicians and health care facilities by encouraging behavioral change towards delivery of high-quality care services and ensuring improved patient outcomes. This impact originates from the fact that pay-for-performance programs provide financial rewards or penalties to care providers based on the quality of care delivered and patient outcomes.

For health care customers, pay-for-performance reimbursement models result in improved quality of the overall care they receive and cost savings. These models help in ensuring health care customers receive the best possible care services based on specific goals and objectives that are agreed upon with the care provider. Since customers pay for these services depending on their quality and efficiency, the model promotes cost-savings because financial incentives are mainly based on performance i.e. quality and efficiency of care as well as patient outcomes. In essence, customers pay medical providers or purchase care services depending on the quality and value of such services.

Impact of Pay-for-Performance on the Future of Health Care

As previously mentioned, pay-for-performance is increasingly used in the current health care system because of its potential benefits as compared to other reimbursement models. This implies that the approach will have significant effects on the future of health care. One of the effects of this approach on the future of heath care is that it will contribute to improvement in the quality and efficiency of health care services. Financial incentives are basically crucial in health care because of its effect on the… [END OF PREVIEW] . . . READ MORE

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How to Cite "Pay-For-Performance Approach" Essay in a Bibliography:

APA Style

Pay-For-Performance Approach.  (2014, December 20).  Retrieved September 26, 2020, from

MLA Format

"Pay-For-Performance Approach."  20 December 2014.  Web.  26 September 2020. <>.

Chicago Style

"Pay-For-Performance Approach."  December 20, 2014.  Accessed September 26, 2020.