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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: Part 1

Stanley Feld M.D.,FACP,MACE

have pointed out the folly of P4P initiatives as a methodology for improving the
quality of medical care
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.

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.

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.

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

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

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


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

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

Care Management For High Cost Beneficiaries

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

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

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.

  • Electronic Medical Records

    I have to agree with you a pay per performance? Give me a break, lets just adjust all our reports and get bonuses to, I mean, are there any stringent checks and balances?

  • Call CareNet

    I have always gone to Call a Nurse for all of my health concerns. Whenever I have a question I call Call a Nurse and they are always very polite and knowledgeable.

  • Rhinoplasty Beverly Hills

    This is quite a comprehensive and interesting posting on the approach to put an end to the system of Pay for Performance Initiatives. This approach may turn out to be effective in the end.

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