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Pay for performance, the catchall term for policies that purport to pay doctors and hospitals based on quality and cost measures, has been taking a bashing.

Last November, University of Pittsburgh and Harvard researchers published a major study in Annals of Internal Medicine showing that a Medicare pay-for-performance program did not improve quality or reduce cost and, to make matters worse, it actually penalized doctors for caring for the poorest and sickest patients because their “quality scores” suffered. In December, Ankur Gupta and colleagues reported that a Medicare program that rewards and punishes hospitals based on arbitrary limits on the number of hospital admissions of heart failure patients may have increased death rates. On New Year’s Day, the New York Times reported that penalties for “inappropriate care” concocted by Veterans Affairs induced an Oregon hospital to deny acute medical care to its sickest patients, including an 81-year-old “malnourished and dehydrated” vet with skin ulcers and broken ribs.


And just three weeks ago, the Medicare Payment Advisory Commission recommended that Congress repeal a Medicare pay-for-performance program, imposed by Congress in 2015, because the program is costly and ineffective.

This bad news comes on top of a decade of less-publicized research indicting policies intended to reward and penalize doctors based on measures — most of them inaccurate — of their cost and quality. That research demonstrates that penalties against doctors:

Subjecting doctors and hospitals to carrots and sticks hasn’t worked for several reasons. The most fundamental one: Clinician skill is not the only factor that determines the quality of care. Consider one widely used performance measure: the percent of patients diagnosed with high blood pressure whose blood pressure is brought under control. Doctors who treat older, sicker, and poorer patients with high blood pressure will inevitably score worse on this so-called quality measure than doctors who treat healthier and higher-income patients.


This divergence between actual and measured skill will happen — regardless of economic incentives — because of factors outside physicians’ control. These include patients’ health, genes, income, ability and willingness to exercise, access to health insurance, and stressors at home and work. In other words, this “performance” measure is not a measure of quality but a mishmash of many factors, only one of which might be physician skill.

The use of such crude performance measures creates several destructive side effects, most notably harm to patients. This harm is inflicted in two ways. First, doctors who treat a disproportionate share of sicker and poorer patients are the most likely to be hit with penalties and therefore end up with reduced resources with which to treat their patients. Second, the certainty that sicker and poorer patients drag down doctors’ scores causes some doctors to avoid treating these patients, causing serious preventable illness and additional medical costs.

With all the bad news about pay-for-performance programs and their destructive effects, it would be easy to assume that the concept will soon die a well-deserved death. In an editorial accompanying the Annals of Internal Medicine study, Harvard’s Ashish Jha and Boston University’s Austin Frakt, both of whom had previously expressed sympathy for paying bonuses, argued that it was time to abandon pay-for-performance programs. The Annals study “should be the final nail in the coffin of the current generation of P4P [pay-for-performance],” they wrote.

Yet we aren’t celebrating the death of this policy because evidence has never mattered to its proponents. Bonus-and-penalty policies became wildly popular among policymakers and the insurance industry, even though there was no evidence supporting the fad when it took off in the early 2000s. Although research indicting pay for performance has piled up since then, policymakers and academic cheerleaders have either ignored it or argued that pay for performance only needs tweaking.

But their suggested tweaks, such as increasing payments to doctors, don’t work. A nationwide incentive and penalty program in the United Kingdom paid an extra $40,000 per year on average to family doctors and still failed to improve care.

In the early 2000s, pay for performance was endorsed by influential groups and individuals, including the Medicare Payment Advisory Commission and Donald Berwick, who was later to become President Obama’s administrator of the Centers for Medicare and Medicaid Services. These endorsements cited no research. As one review paper put it in 2006, pay-for-performance programs “are being implemented in a near-scientific vacuum.”

Despite the lack of evidence, proponents hyped the costly policy with great confidence. “There’s no question that pay for performance will work,” said Thomas Scully, CMS administrator under President George W. Bush, in 2003. Berwick, who had declared in 1995 that pay-for-performance policies are “toxic,” “naïve,” and “absolutely wrong,” asserted in 2003 that payment for performance should become “a top national priority.” Berwick’s 180-degree reversal illustrates how powerful pay-for-performance folklore had become by the early 2000s, even without a shred of good evidence.

Thanks to the groundless cheerleading by health-policy heavyweights, bonus-and-penalty programs spread like crabgrass through the American health care system. By the late 2000s, objective research on pay for performance began to trickle in. By the early 2010s, there was more than enough evidence to conclude that it does not work and even harms patients. Jha and Frakt concluded that practices that care for lower income or sicker patients received greater penalties, “essentially creating a reverse Robin Hood effect” that may have “exacerbated existing disparities in care.”

The Medicare Payment Advisory Commission and other critics of Medicare’s current pay-for-performance program have adopted a baffling response to this research. They argue that Medicare should terminate its program but that other organizations should continue to use the same crude pay-for-performance schemes that Medicare uses. Jha and Frakt, for example, justify the abandonment of pay for performance on the ground that “alternative payment models,” most notably accountable care organizations, “have exhibited more promising performance than standard P4P programs.”

We disagree. Accountable care organizations have failed just as badly as pay for performance, in large part because they, just like Medicare, dish out rewards and penalties using the same crude “performance” measures.

Performance-based pay may improve the sales of products like dishwashers and computer products. But it is irrelevant to the complexities and professionalism of good doctoring and other human services like education. The research on pay for performance in health care is now conclusive: It’s time to terminate these harmful bonus-and-penalty schemes.

Kip Sullivan, J.D., is a member of the Health Care for All Minnesota Policy Advisory Committee and the legislative strategy committee of the Minnesota Chapter of Physicians for a National Health Program. Stephen Soumerai, Sc.D., is professor of population medicine and founding and former director of the Division of Health Policy and Insurance Research at Harvard Medical School, where he teaches research methods.

  • Last year it was 3% that was withheld from a Dr’s pay and only re distributed back if all the criteria was met, when it was ( by a Few Dr’s) the policy has changed this year its 5% and only redistributed bak to the Dr. if the network of Dr’s as a whole meet the criteria, completely removing the capacity to succeed or fail from individual physicians. is this truly a incentive program or simply a way for someone to rob good physicians of their hard earned wages.

  • Straight ffs doesn’t make sense, the only way to change behaviors in this existing system is to change business models – ie incentives. Explorations so far in pay for performance models have not proven to be a silver bullet – but yesterday’s FFS model is absolutely not the way forward in our current epidemic of preventable chronic disease care. So – talk about ways forward instead of just saying no.

  • Fixing our broken healthcare system requires getting the incentives right, aligned to the right goals and objectives. But what exactly are our goals as a nation? And what’s the objective of healthcare policy? Is it to shift the burden of who pays for care, or is it to extend lifespan and dramatically lower costs through wellness and innovation?

    I write often about the potential of saving over $1.5 trillion/year in healthcare costs, but the total economic impact of good health is far greater than that. Imagine the impact on absenteeism, productivity, profits, wages, GDP, and global competitiveness, not to mention happiness and trust in government. That world view can extend beyond healthcare policy and prompt similar changes focused on poverty, the food supply, the environment and more, all of which affect health and the need for medical care.

    So, it all comes down to getting the incentives right — matched to the right objectives.
    As I write in, Why American Healthcare is So Expensive, the fact that incentives are misaligned with goals is one of 13 reasons listed. (See

    • Sometimes I cynically think the “goal” of the politicians and others who “invent” these systems is to make a dent in the nation’s “poverty” problem by killing off the poor. If we include the elderly then my cynical view includes if we kill them that helps “solve” the social security “problem”.

      Clearly those folks have not read the article (Harvard Business Review) “The folly of rewarding A while expecting B”.

    • According to the 4-part HBO documentary, The Weight of the Nation, poverty plays a big role, and public health officials have seen differences in longevity of as much as 20 years between poor and affluent neighborhoods on opposite sides of the same city.

      Contributing factors includes access to healthcare, nutritious food, safe places to play & exercise, and more. But of course, it’s easy to just blame them for their condition without accepting some blame ourselves.

    • That’s because the only people left paying dues are liberal wonks that believe in more government. I’ve never paid the AMA money bc don’t believe in their policies. They represent 10% of the Physicians.

  • This article does everything it can to avoid the truth. Obamacare and it’s policies have been an utter failure. Pointing back to George W. Bush was a nice touch. The system is broken and should be turned back over to an innovative and de-regulated free market. It’s our only hope.

    • Don’t the laws of Supply & Demand encourage innovation and create vibrant competition? Well, NO — not in healthcare. Patients don’t behave like consumers in other industries. When they’re afraid, in severe pain, or unconscious, they are in no position to comparison-shop or negotiate prices. When they face endless suffering or death, they will pay anything for relief, so it’s easy to take advantage of them. That’s why governments in other advanced nations negotiate for them and impose strict restrictions on the cost of drugs and services. We don’t do that but should.

      Politics also get in the way. There’s no such thing as Free Market Capitalism without rules governing Property, Monopoly, Contracts, and Bankruptcy. And who makes those rules? Unfortunately, it has become those wealthy enough to buy influence and elections.

  • Wholeheartedly agree that “Pay for Performance” (PFP) is inappropriate in the evaluation of good medical practice. To reduce overall healthcare costs, and keep the quality of physician practice optimal, lobbying Congress for a “no fault medical malpractice policy” (like worker’s comp) with a lay panel to determine both awards to patients, and penalties for “bad medicine” would go a long way in reducing “defensive medicine” and the enormous costs of malpractice insurance comprising over 30 plus % of current costs of healthcare in this country. Both parties have not included any provision for such a plan, secondary to the lobbying efforts and campaign contributions by the American Trial Lawyers, who, like their Congressional “colleagues” reap the benefits of this kind of system.

    • According to the film, “Escape Fire: The Fight to Rescue America’s Healthcare,”, 30,000 medical care recipients die each year from medical errors, or care they don’t need, making it the 3rd leading cause of death. That’s the equivalent of a jumbo jet airliner crashing each week. If the aviation industry killed that many people, we’d be up in arms. So clearly we have a medical errors problem, not a frivolous lawsuit problem. (See

  • An Obama era policy that involves more governmental regulations failing? Ask CMS about how well their sepsis core measures is reducing costs and saving lives? As a physician, we now up code severe sepsis and admit more patients for “severe sepsis” and they don’t even have classic sepsis.

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