Post-Adjustment of Payments by Patient and Provider Categories to Reduce Payment Disparities Under Pay-for-Performance Schemes
*Cheryl Damberg, RAND Corporation
Keywords: Pay for performance, value-based purchasing, financial incentives, quality
Providers who care for disproportionate numbers of disadvantaged patients tend to perform less well than other providers on quality measures commonly used in pay-for-performance (P4P) programs. This can lead to the undesired effect of redistributing resources away from providers who most need them to improve care and make providers more likely to avoid caring for challenging patients. We present a new P4P scheme that retains the motivational aspects of standard incentive designs while avoiding undesired effects. We tested an alternative incentive approach that started with a standard incentive payment allocation and “post-adjusted” provider payments using predefined patient and provider characteristics. We evaluated whether such an approach would mitigate the negative effects of redistributions of payments across providers with disparate patient populations. Post-adjustment nearly doubled payments to disadvantaged providers and greatly reduced payment differentials across providers according to patients’ income and race/ethnicity. Post-adjustment of payments could be a useful supplement to paying for improvement, aligning the goals of disparity reduction and quality improvement.