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Pay-for-performance arrangements

Compliance Monitor, November 3, 2006

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Q: We are a multi-specialty group practice that has been asked to participate in a pay-for-performance program by a major third-party payor. Should we be aware of any issues with this arrangement?

A: There are two primary issues with this arrangement. The first issue facing any physician practice that desires to participate in a pay-for-performance program is to ensure that the measures the payor is proposing are relevant to the type of medical practice (or array of practices) the group engages in. Payors often want to use a cluster of easy-to-administer performance requirements. However, if these requirements are not relevant to the practice, the practice may end up showing a poor performance in comparison to other practices simply because the measures are inappropriate. This process is more complicated for a multi-specialty group practice because different performance measures are appropriate for different aspects of the practice.

Ensure that appropriate comparisons are going to be made, whether they be with other multi-specialty practices or with specialized practices that provide services similar to those provided by members of your group.

The second issue to consider is to make sure that the performance standards can be measured consistently and accurately. A consistent requirement is established only if the same performance is measured in the same way over time, which is often difficult to accomplish.

Accuracy of measurement has to do with the nature of the performance standard. To the extent possible, subjective performance standards should be avoided. One of the best ways to avoid this problem is to establish agreed upon protocols of care, where the performance standards for those protocols:

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