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You Can't Change The Practice Of Medicine With Demand-Side Reforms. Let Us Put An End To Pay For Performance (P4P) Initiatives:

Posted Jan 25 2009 4:32pm

StanleyFeld M.D.,FACP,MACE

I have pointed out the folly of P4P initiatives as a methodology for improving the quality of medical careQuality medical care has not been adequately defined. One definition could be to maintain health at the lowest cost. Physicians have classically been trained to fix things that are broken. The paradigm shift has been to prevent things from becoming broken.

Prevention is a two way street. It is the  patient who needs to prevent disease from occurring. It is the physician who must teach the patient how to prevent disease and its complications.

Punitive measures will not encourage behavior change. The economist, John Goodman, stated: “You can't change the practice of medicine with demand-side reforms.”   I have said repeatedly it can only be changed with innovative and incentive driven education for both patients and physicians. This will lead to behavior change and a true increase in quality of care.

Quality medical care should not be judged on what tests are done for a particular chronic disease in a given year. It should be judged on the basis of maintenance of health of a patient with chronic disease. It should be evaluated as a dual responsibility of both the patient and physician. If there is going to be an increase reimbursement for performance, performance has to be judged correctly and both physician and patient should be rewarded.

Quality medical care should be judged on the maintenance of health and avoidance of the complications of chronic disease. The treatment of the complications of chronic disease utilizes 80% of the healthcare dollar. If complications of chronic disease are avoided the costs to the healthcare system costs would be decreased to manageable levels and Americans would be healthier. 

Several readers have challenged me on the use of the term “socialized medicine”. One reader said “our healthcare system is socialized already. The government through Medicare and Medicaid controls 40% of the expenditures for healthcare.” This is true.

The term “ socialized medicine” has been demonized. I believe most physicians’ and patients’ objection to “socialized medicine” is rooted in experiences they have had. It has restricted access to care and freedom of choice, and it has dictated permissible care of physicians. It has also produced an added layer of inefficient bureaucracy.

Medicare premiums for patients are becoming expensive. The premium is determined by means testing. It can be as high as $14,000 per year. The government subsidizes that amount with an additional $6,600.  Medicare advantage costs the government over $9,000 extra.  Yet there is a decrease in access to care as the costs of the system are spinning out of control. 

The government has its heart in the right place in wanting to provide universal care. Americans should have access to healthcare coverage. A few changes in the tax rules can solve many problems. The self-employed should be able to purchase healthcare insurance with the same pre tax dollars as businesses. They should have the same negotiated price structure large companies have. The self-employed should have the same guaranteed  insurability as those working in a large company without a premium penalty.

The healthcare system’s costs rise each year. The Medicare premiums rise each year and patient’s out of pocket expenses rise each year. Medicare is going to bankrupt the country. It will only be accelerated by putting everyone on Medicare.

In order to reign in expenses someone came up with the idea of pay for performance. It is a reasonable concept if a system could be devised that could evaluate performance accurately and encourage improvement.

In order to test validity of any concept the government subsidizes initiatives at a great expense. These initiatives are costly because of the bureaucratic evaluation of the requests for proposals and the measurement mechanism. 

The list of government initiatives is long. The pilot studies are 3 to 5 years. There have been many cost overruns so that several outsourced study vendors are dropping out of the management of the initiatives. Most initiatives have been unsuccessful in proving cost savings.

The reason for lack of proof of cost saving to the healthcare system is because of errors in design. The wrong questions are being asked and the imposed bureaucracy is punitive to the healthcare entities. Below are initiatives that are presently funded for pay for performance.


“Medicare has various initiatives to encourage improved quality of care in all health care settings where Medicare beneficiaries receive their health care services, including physicians’ offices and ambulatory care facilities, hospitals, nursing homes, home health care agencies and dialysis facilities.”


1. Hospital Quality Initiative   (MMA section 501(b))

2. Premier Hospital Quality Incentive Demonstration


1. Physician Group Practice Demonstration (BIPA 2000)

2. Medicare Care Management Performance Demonstration (MMA section 649)

3. Medicare Health Care Quality Demonstration (MMA section 646)


Chronic Care Improvement Program (MMA section 721)

ESRD Disease Management Demonstration (MMA section 623)

Disease Management Demonstration for Severely Chronically Ill Medicare Beneficiaries (BIPA 2000)

Disease Management Demonstration for Chronically Ill Dual Eligible Beneficiaries

Care Management For High Cost Beneficiaries

So far the chronic disease management initiative have not been proven to save money.

The pilot initiatives are not directed by physician in private practice. Physicians are the stakeholders that will make these initiatives work.  Nine sites selected are either healthcare insurance companies or disease management groups. Disease management groups can be successful facilitators of physician care only if they are extensions of physicians care rather than physician substitutes.

Help desks of the healthcare insurance companies do not work because they are not an extension of the physicians care. Free standing chronic disease management clinics do not work because they are not extensions of physicians care. Many hospitals have tried to set up Diabetes Education Centers only to have them close because physicians do not refer patients to the centers. The center is not reimbursed adequately by the government or private insurers to be profitable. The fees charged in hospitals are at least twice as much as the fees the physicians charges. Once the physician knows the charges he is even more hesitant to send the patients to the centers.

The following are the groups selected for the pilot phase: Humana in South and Central Florida, XLHealth in Tennessee, Aetna in Illinois, LifeMasters in Oklahoma, McKesson in Mississippi, CIGNA in Georgia, Health Dialog in Pennsylvania, American Healthways in Washington, DC and Maryland, and Visiting Nurse Service of NY and United Healthcare in Queens and Brooklyn, New York.

I believe we should give up on trying to produce a pay for performance system that will reduce medical costs. The health policy wonks should concentrate on something that will work.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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