Healthcare Pay-For-Performance Folly

Hawaii physicians are being offered contracts to join a "clinically integrated physician network" (CIPN) with Queen’s Medical Center through one of the local physician organizations. This is the next phase in implementation of health care payment and delivery system reforms envisioned under the Affordable Care Act.

The Centers for Medicare and Medicaid Services (CMS) is encouraging integrated networks of doctors and hospitals to form organizations that can assume financial risk for the cost of health care through initiatives such as bundled payments, shared savings and capitation.

The rationale for these reforms originated with policy leaders in Washington allied with the health insurance industry, and it is the same rationale used for HMOs two decades ago. The assumption is that U.S. health care costs are so high because we deliver and consume too much health care due to fee-for-service incentives.

When insurance risk is shifted to doctors and hospitals, they will have a financial incentive to deny care, instead of the insurance companies doing that. This creates obvious ethical conflicts for doctors and hospitals, whose traditional ethical responsibility has been to assure care to those who need it. To counter this perverse incentive and discourage arbitrary denial of care, CMS is encouraging pay-for-performance by developing data systems to more closely track the details of health care delivery, with financial rewards and penalties for scoring well or poorly on quality measures.

Never mind that most of health care is too complex to allow meaningful, valid measures of quality for more than about 5 percent of health care. Never mind that payment for narrow measures diverts attention and resources away from the 95 percent of health care that cannot be measured. Never mind that far more cost-effective health care systems than ours pay physicians with fee-for-service and don’t try to micromanage care.

Never mind that pay-for-performance carries an incentive to avoid caring for sicker, more complex patients. Never mind that tying payment to performance measures leads to widespread gaming of documentation, so the measures become disconnected from reality while costs rise. Never mind that the cost of data systems and administration required for pay-for-performance, plus the bonuses for doctors who are already practicing cost-effectively, will exceed any possible savings.

And in Hawaii, never mind that we had a low rate of procedures and the lowest per capita Medicare spending in the country before any of these reforms were introduced, under a fee-for-service payment system, so the rationale for these reforms does not even apply here.

However, Hawaii’s governor and Legislature feel compelled to respond to the incentives in the Affordable Care Act, so we have embarked on a journey of health care transformation. Hawaii’s initiative has so far been funded almost entirely by the health insurance plans and hospitals, and reflects their biases and self-interest.

Unfortunately, our transformation effort is not based on evidence of what works. Evidence-based policy means making the effort to separate ideology, rationalized self-interest, and wishful thinking from the actual outcomes of policies that have been implemented somewhere.

Policy outcomes research tells us that the reforms we are pursuing will result in increased total cost of health care, mixed results on quality with more negative than positive, and deterioration in the care experience for patients, doctors and hospitals. Our early experience so far with reform in Hawaii is confirming these predictions.

What happened to the "Triple Aims" of improved quality of care, improved population health and reduced cost? Apparently they are just empty rhetoric used as a smokescreen while those with money and power take us in the opposite direction.