• Congress should ensure that these pools are large enough to create adequate motivation for improved performance on selected measures. Because of unique challenges of physician payment relating to the sustainable growth rate (SGR), investment dollars may be necessary to create adequate resources to effect change.

  • Initial funding should be budget conscious in taking into account the resources needed for both funding the pools and implementing the program.

Because the proposed pools would be created by reducing base payments for all Medicare providers in each setting, all should have the opportunity to participate in the performance reward program. New money may initially be necessary in some provider settings to create adequate resources to influence change. The feasibility of using other funding sources, particularly the generated-savings model, should be tested and evaluated over the next 3–5 years to assess the likely impacts and consequences.

One of the primary goals of new payment incentives should be to stimulate collaboration and shared accountability among providers across care settings for better patient-centered health outcomes. Although the implementation of pay for performance will most likely begin with pools created by setting, CMS should build toward an ultimate vision of aggregating funds for rewards into one integrated pool that would accommodate shared accountability and encourage coordination of care.

Recommendation 3: Congress should give the Secretary of DHHS the authority to aggregate the pools for different care settings into one consolidated pool from which all providers would be rewarded when the development of new performance measures allows for shared accountability and more coordinated care across provider settings.


CMS will have many issues to consider in the distribution of rewards, such as what measures to use in assessing performance and how performance should translate into rewards for individual providers. The magnitude and relative distribution of rewards should depend on program priorities; little evidence exists to guide the distribution of rewards. Continuous monitoring and adjustment will be necessary to ensure that providers are appropriately rewarded for the care they deliver. In the absence of evidence, the committee provides recommendations in two key areas: rewards for specific domains of quality and performance objectives.

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