data are suspect, and suitable natural experiments are lacking. The negative studies in the health care literature used small rewards and incentives based on performance relative to peers, so physicians had no way to know what performance levels would ensure a bonus. Overall, past studies have yielded no clear guidance on the appropriate magnitude of performance-based compensation.


As noted above, more than 100 pay-for-performance programs have been implemented in the health care sector (Med-Vantage Inc., 2006). These initiatives constitute a rich source of experience regarding the impact of this innovation in health care financing, experience that can help answer questions about what works that are asked by all stakeholders. Concrete data with which to assess the benefits and identify the unintended adverse consequences of the approach are increasingly becoming available; quantification of the impact of pay-for-performance programs is possible, however, only if they are evaluated thoughtfully and systematically. Such evaluation requires careful planning.

Evidence for unintended or unexpected consequences of pay for performance outside of the health care arena, such as gaming in return-to-work and school programs, is relatively well established (Burgess and Ratto, 2003; Courty and Marschke, 2004). In health care, if providers are paid based on performance according to outcome criteria, they may attempt to select healthier patients to maximize net revenues. Other possible negative effects of targeted incentives, such as reductions in various dimensions of quality of care in areas not targeted for financial rewards (which may be a particular concern in primary care because of the broad scope of practice), have not been evaluated empirically. While providers for the most part have the best interests of their patients in mind, such unintended adverse consequences may be a real concern. Table 2-3 is a nonexhaustive listing of some of these potential unintended adverse consequences, each of which is reviewed below. Further experience may identify additional concerns.

Decreased Access

Improved quality of care overall is a highly desirable goal, but it should not be achieved at the expense of decreased access to care. Access to necessary services forms the foundation for high-quality care. A meaningful decrease in access to care resulting from the implementation of a pay-for-performance program constitutes an unacceptable outcome.

In their efforts to reach performance thresholds that will result in augmented payment, providers may exclude patients from their practices who

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