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Pay-for-performance is proliferating, yet its impact on key stakeholders remains uncertain.
The Society of General Internal Medicine systematically evaluated ethical issues raised by performance-based physician compensation.
We conclude that current arrangements are based on fundamentally acceptable ethical principles, but are guided by an incomplete understanding of health-care quality. Furthermore, their implementation without evidence of safety and efficacy is ethically precarious because of potential risks to stakeholders, especially vulnerable patients.
We propose four major strategies to transition from risky pay-for-performance systems to ethical performance-based physician compensation and high quality care. These include implementing safeguards within current pay-for-performance systems, reaching consensus regarding the obligations of key stakeholders in improving health-care quality, developing valid and comprehensive measures of health-care quality, and utilizing a cautious evaluative approach in creating the next generation of compensation systems that reward genuine quality.
Pay-for-performance systems seek to improve health-care quality by providing bonus dollars to physicians, practice groups, or hospitals whose patients achieve certain health goals.1 These arrangements are proliferating, yet their impact on key stakeholders remains uncertain.2–7 The Society of General Internal Medicine (SGIM), through its Ethics Committee, systematically evaluated ethical issues raised by performance-based physician compensation. Investigations included literature review, in-depth interviews with key informants, focus groups among SGIM members, open forums at national SGIM meetings, and discussions among SGIM committees and leadership. A comprehensive report of the Ethics Committee’s findings and recommendations is available at http://www.sgim.org/index.cfm?pageId=806.8
This position paper begins by examining the fundamental principles of pay-for-performance and setting forth our organization’s definition of health-care quality. Based on this exploration, we present our conclusions regarding the manner of implementation of pay-for-performance and its potential effects on key stakeholders. We propose four major strategies for moving toward more ethical and effective performance-based physician compensation, emphasizing the need to implement immediate safeguards to protect vulnerable populations.
The fundamental principles of pay-for-performance include rewarding quality health care and aligning physicians’ financial incentives with the best interests of patients.9 Although this inherent appeal to physician self-interest might be in tension with professional ideals of altruism and beneficence,10–13 the principles that inform pay-for-performance are not inherently unethical. It seems just, for example, to financially reward physicians who demonstrate outstanding levels of patient-centered and evidence-based care.
Nevertheless, systems intending to improve medical care must be guided by evidence and a precise definition of health-care quality to ensure that they are effective, valid, and fair. We define health-care quality in a manner that prioritizes patient-centered care14 while recognizing the importance of population-level health improvement:15
Health-care quality is the degree to which physicians and health-care institutions fulfill their care obligations to individual patients and the degree to which patients, physicians, and health-care institutions enable these obligations to be fulfilled justly across the population.16
This understanding of health-care quality informs our criticisms of current pay-for-performance arrangements and provides a roadmap to high quality care and ethical performance-based physician compensation.
In light of these principles, we see the following potential ethical problems in the implementation of pay-for-performance systems.
Quantifying health-care quality is notoriously difficult, and basing payment incentives upon inadequate measures and definitions of quality will make consequences difficult to control. Unfortunately, this approach is often used to make judgments about individual practitioners when variability in case mix and patient preferences precludes making valid judgments. For example, in a patient with difficult-to-control diabetes, a decline in hemoglobin A1C from 10.0 to 8.0 might be a remarkable achievement and more validly represent high quality care than a decline from 7.3 to 6.9 in another patient.
Or, consider a patient with a hemoglobin A1C of 7.5 who frequently skips preventive visits but happens to present with back pain. If bonuses are provided for reducing glucose levels, a physician might prefer to discuss diabetes control rather than ruling out life-threatening causes of back pain. Such “treating the measure” might worsen outcomes.
Pre-determined population-centered measures might also induce physicians to avoid patients who are less likely to meet targets. Such patients are often society’s most vulnerable members—those with multiple chronic conditions, the poor, the educationally disadvantaged, those with limited English proficiency, and members of racial minority groups.
Because physicians serving disadvantaged patients might receive lower compensation, less well-off practices would be left with fewer resources to improve care. This could create a vicious cycle of worsening quality for the most vulnerable patients.
Ultimately, insurers could face a backlash by patients and physicians against an effort that might be viewed cynically as another cost-containment attempt, offered disingenuously as quality improvement.
SGIM supports evidence-based, ethical, and comprehensive efforts to improve health-care quality and physician compensation. While carefully designed pay-for-performance systems could be a component of such an approach, current iterations fail to reach acceptable ethical standards for the reasons above. We therefore advocate the following four major strategies to achieve high quality health care and ethical performance-based physician compensation (Tables 1, ,2,2, ,33).
Until researchers develop valid and comprehensive quality measures, pay-for-performance systems must prioritize the protection of vulnerable populations and minimize readily anticipated adverse consequences (Table 3). Pay-for-performance leaders should institute the following safeguards to achieve these aims:
A crucial first step in achieving ethically defensible health-care quality improvement will be for key stakeholders to develop consensus regarding their shared and unique obligations to individual patients and patient populations. For example, to improve blood glucose control among diabetic patients, physicians must recommend evidence-based, patient-centered management strategies, practice groups must provide access to testing facilities, health insurers must facilitate receipt of affordable medications and testing, and patients must adhere to therapeutic plans.
Bringing health insurers, patients, employers, and physicians to the table would highlight opportunities to improve coordination and continuity of care; new paradigms for quality improvement that integrate assessment at the individual physician level and institution level could emerge.
A long-term strategy for quality improvement will be guided by a framework of accountability in which physicians, practice groups, health plans, and public payers are measured based on how well they fulfill well-defined obligations to individual patients and populations.
For example, measures of physician quality should assess multiple domains, such as accessibility, adherence to evidence-based but patient-centered care, and communication skills. Appropriate measures would account for individualized patient-physician goals, be based on the best available evidence, and minimize administrative burden and expense.
Measures of health-care institution quality (e.g., physician groups, hospitals, and public and private payers) should assess domains such as how well these groups foster teamwork, facilitate achievement of patient goals, strengthen the doctor-patient relationship, and improve access, coordination, and continuity of care for individual patients.
Equally important will be development of valid population-level health-care quality measures. In addition to measuring how well physicians and health-care institutions fulfill obligations to individual patients, comprehensive quality measures would assess the degree to which patients, physicians, and health-care institutions maximize health-care resources available to the population, distribute them fairly,60 and fulfill their obligations justly.
Measures should be developed under strict principles of transparency. For example, all persons involved in creating new measures should, at minimum, be required to state potential conflicts of interest.
After developing evidence-based measures of physician, health-care institution, and population-level quality, policy makers should implement carefully planned, small-scale pilot programs that reward physician and health-care institution quality. Benefits and adverse effects should be monitored. Those entities implementing innovations in payment and quality improvement should take the lead in funding these studies.
Even with results from well-designed studies, judgments about the ethics of pay-for-performance will remain challenging. One approach might be to give preferential consideration to outcomes among vulnerable patients.
We base our suggestion to begin with pilot programs upon an ethical principle of precaution. However, efforts should be scaled up if benefits prove sufficient, health disparities are reduced and adverse outcomes are minimized.
In order to aid in the above processes, SGIM is committed to having general internists participate in articulating the quality-related obligations that physicians and health-care institutions have to patients and the population. SGIM encourages its members to take the following actions: (1) help develop measures of physician, health-care institution, and population-level health-care quality, (2) evaluate pay-for-performance measures and programs, and (3) participate in the ongoing monitoring of effects of pay-for-performance on vulnerable populations and physicians. SGIM will continue to develop collaborative alliances with other key national organizations to ensure fair, valid, and comprehensive measures and to promote ethical compensation reform.
Performance-based physician compensation, if carefully guided by a comprehensive understanding of health-care quality and evidence-based evaluations, might improve patient care, narrow health disparities, and promote fair physician compensation while increasing health-care value. If research and monitoring determine that improved payment systems can benefit patients, physicians, and payers while minimizing risks, they could be ethical arrangements. However, until such data are available, widespread expansion of untested pay-for-performance systems poses substantive ethical issues associated with potential harm to patients, clinicians, and organizations.
We would like to thank members of the SGIM Ethics Committee for their thoughtful comments on several versions of this article. We are also grateful to members of the SGIM Council, the Health Policy Committee, the Disparities Task Force, and the Clinical Practice Committee for reviewing and critiquing the manuscript. We especially thank SGIM Presidents Eugene Rich of Creighton University Medical Center and Lisa Rubenstein of the University of California, Los Angeles, for their suggestions and guidance. We are indebted to the SGIM members who volunteered to facilitate focus groups that informed this position paper: Alexia Torke of the University of Chicago, Tom Staiger and Eliza Sutton of the University of Washington, and Louise Walter of the University of California, San Francisco. We are similarly grateful to Ann-Marie Rosland of the University of Michigan and Matthew Frank of the Harvard Divinity School for assistance in analysis of focus group transcripts and Audrey Mertens Tedeman of the Massachusetts General Hospital for assistance with transcription of focus groups. There were no sources of funding for this work, and no financial support was provided to authors or contributors.
Conflict of Interest None disclosed.