What is P4P? How It Is Affecting Healthcare Overall?

The US government has shown its concerns about healthcare delivery since the beginning. They want to make quality care accessible for every individual. That’s why they have expanded the Medicaid program. Now it covers all those individuals having income not more than 138% of the federal poverty level (FPL). Moreover, the government has supported every single effort to minimize the healthcare cost for all. The Affordable Care Act (2010) is one milestone in healthcare laws that exactly include all these motives.

Likewise, Pay-for-Performance (P4P) is a national healthcare strategy galvanized by ACA. P4P simply binds the reimbursements with metric-driven results.

What’s P4P? What are the major pros and cons of this performance-based payment? Dwell down to further details!

Pay-for-Performance Payment Model (P4P)

The Pay-for-Performance (P4P) also named as Value-based Payment model, working on two designs.

  1. It offers financial incentives to the providers (groups/hospitals/individuals) for the quality of patient care services they perform.
  2. It penalizes providers with financial disincentives if they do not meet the pre-set criteria for quality measures they are covering.

Pay-for-Performance is a rewarding system for the judgment of a provider’s performance as per the service they do. They choose specific measures and CMS then evaluates their performance for a specific duration. It gives healthcare professionals financial incentives to implement the selected measures. They all strive hard to achieve the best patient outcomes and hit certain performance benchmarks.

Typically, P4P evaluates process effectiveness, such as;

  • When evaluating blood pressure in clinical settings, lowering blood pressure
  • When advising individuals to abstain from smoking
  • And much more

However, it can be challenging to track clinical outcomes over time in a variety of ways. The practitioners are also penalized for incorrect medical judgments or higher costs.

Healthcare systems are moving strategically toward the pay-for-performance healthcare approach. Now, healthcare organizations outsource a variety of tasks impacting the P4P model, including;

Why has ACA Spurred P4P over the Traditional FFS Payment Model?

The P4P model is an effective advancement for replacing the traditional fee-for-service model (FFS). Though, FFS is still a major contributor to the provider’s income as a whole. But unfortunately, it does not offer any incentives or disincentives. So, it does not encourage the providers to improve their service quality over time.

What are the Measuring Parameters for the P4P Payment Model?

According to the Donabedian model, we have three major subcategories. These three categories provide the framework for healthcare quality evaluation for P4P. Thus, physicians tailor their reporting activities accordingly. Doing this has been shown to improve patients’ health outcomes.

1. P4P Structural Measurements

We can gauge a healthcare provider’s capability, systems, and operations using structural measurements. For instance:

❖    Whether the healthcare provider uses software for electronic medical records or not.
❖    How many or what percentage of doctors have board certification?
❖    What’s the proportion of patients to providers?

2. P4P Process Measurements

These measures show what a provider does to maintain or boost health whether for individuals with or without a medical issue. The majority of the time, these metrics mirror standard guidelines for clinical practice. For instance:

❖    The proportion of persons who use preventative services (such as mammograms or immunizations).
❖    The proportion of diabetes patients who had regular blood sugar checks and management.

These measures can help to improve health outcomes. These measures brief patients about the medical treatment type they are having for a particular ailment. The bulk of healthcare quality metrics reported to the public are procedural metrics.

3. P4P Outcome Measurements

The “gold standard” for evaluating quality may appear to be outcome metrics. They show how a medical treatment or intervention affected the patient’s health state. For instance:

❖    The proportion of patients who passed away after surgery (surgical mortality rates).
❖    The frequency of postoperative problems or infections acquired in hospitals.

However, a variety of circumstances contribute to an outcome. Many of which are outside the providers’ control. These aspects can be taken into consideration via risk-adjustment techniques. One such technique is checking patient health status.

Pros and Cons of the P4P Payment Model

Pay-for-Performance initiatives intend to raise the standard of care given. To ensure that everyone is aware of what occurs in a doctor’s office, it is crucial to weigh the pros and cons of pay-for-performance healthcare.

Pros of the Pay-for-Performance Program

  • The program rewards clinicians for avoiding frequent patient visits. It also places greater emphasis on the caliber of service.
  • Now, the public has access to reliable data regarding provider performance for the first time. Some pay-for-performance programs keep their outcomes private. Despite this, the majority agree that public reporting is more beneficial.
  • As the P4P program rewards physicians based on performance, it can establish a clear connection between price and quality. For instance, 25% to 40% of participating physicians’ revenue comes from incentive payments.
  • When the clinical course of action is set and widely recognized, the pay-for-performance scheme works effectively for primary care services.
  • Quality, cost, and access objectives may be combined in metrics that include structure, process, and results under a pay-for-performance approach.

Cons of the Pay-for-Performance Program

Certain anomalies are drawing attention to some systemic flaws.

  • There is no unified definition of what signifies exceptional performance. At the same time, shareholders do not agree on how to design and regulate performance compensation.
  • How beneficiaries should be provided feedback on their performance is not agreed upon. The feedback that comes in slowly loses value and is taken less seriously.
  • Because the growth of measurements is not standardized, benchmarking, cross-organizational comparisons, and compensation for performance initiatives are difficult.
  • The majority of hospital information systems aren’t built to enable the type of measurement reporting demanded by pay-for-performance schemes.
  • Pay-for-performance systems classify service providers based on their performance. This implies that a significant number of providers will be labeled as “poor.” The overarching objective of including investors in initiatives to raise the standard of healthcare is not supported by this. Poor performers will suffer consequences, while high performers will be rewarded. Such that, over time, they will have fewer resources available to them to raise the caliber of their services.
  • Healthcare providers might solely focus on the areas covered by the pay-for-performance program. This confers that P4P ignores quality and cost concerns that could be dangerous to the overall success of their business.


To raise the standard of care, combined and methodical program execution will be required. P4P can help high-quality healthcare providers keep costs under control. But consideration must be given to the choice of value-based payment schemes. This is true because the program may be impacted by poor-quality elements. Systems thinking about pay-for-performance healthcare models should evaluate concerns like:

  • Will the clinical measure have specified in the measure lead?
  • Is it beneficial for improving patient outcomes?
  • Exist reliable, appropriate, and, most importantly, practicable metrics for the desired behavior?
  • Do they sufficiently address the causes of non-compliant behavior?
  • Will it solve the money issue?
  • Is there any other way to modify the behavior?
  • Is there any inadvertent negative driving force?

Pay-for-performance is still a potential avenue for examining the improvement of quality and cost when it has been further distilled. Implementation, though, appears less compelling so far.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.