rewarded under a pay-for-performance program. Next it examines various design elements, such as how to measure performance and what basis to use for the distribution of rewards. The chapter then looks at how to operationalize these design elements, describing various models for assigning and distributing rewards to providers. There are many nuances involved in the design of any pay-for-performance program. The discussion in this chapter is intended to illustrate the challenges designers will face.


Identifying Domains of Care

Pay for performance should provide incentives for delivering higher-quality care to achieve all six aims for health care identified in the Institute of Medicine’s (IOM’s) Quality Chasm report: safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity (IOM, 2001). Many physicians and health care organizations are skeptical that reliable and valid performance measures can be developed for complex clinical processes. They are equally doubtful that payment incentives can be put in place that will reward performance in ways that affect what truly matters: improving the health of patients. Another major challenge facing designers of pay-for-performance programs is guarding against the possibility that efforts to improve one domain of care may adversely affect other domains. For example, many purchasers are concerned that performance measures emphasizing enhanced clinical quality will lead to an unrestrained growth in costs and a minimal effort to reduce current waste and inefficiencies.

Any pay-for-performance program must address these concerns by clarifying the goals and objectives of new payment mechanisms. In considering how to do so, the committee drew on the vision set forth in the Quality Chasm report, in particular the six aims cited above. Current performance measurement approaches are focused heavily on clinical effectiveness. While this domain is crucial to improving the overall quality of health care, an overemphasis on clinical effectiveness risks defining good care too narrowly by failing to consider the perspectives of patients, their families, and society as a whole, as well as limitations in resource availability. Pay for performance should be based on performance measures that are aligned with long-term goals for improving all aspects of quality that foster improved patient outcomes within an environment of limited resources. In its consideration of initial measures that would ensure high quality and improve the value of health care investments, the committee found it convenient to consolidate the six aims of the Quality Chasm report into three broader domains that should serve as the foundation for new payment incentives: clinical quality, patient-centered care, and efficiency.

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