Should physicians who perform superior work receive a higher reimbursement rate from the state? How does money in health care affect quality? Maine soon will know the answers to these questions as “pay for performance” expands across the state. It is a trend worth watching.

Some background comes from Princeton Economist Uwe E. Reinhardt who recently described pay for performance (P4P) at a conference sponsored by Taiwan’s Bureau of National Health Insurance. Professor Reinhardt looked at three studies in particular: One noticed a wide disparity on per-enrollee 1996 Medicare spending – from $3,400 in Wisconsin to more than $9,000 in Texas without evidence of improved quality at the higher end. The second compared 2000-01 Medicare spending to quality outcomes and found, surprisingly, an inverse relation between the two: The more that was spent, the worse the quality of care. Maine, in that study, fell among the lower-cost, higher-quality states. Third, he finds in data compiled by Seltzer Rees that the resources used by physicians within the same hospital can vary widely for the same diagnostic-related group.

He makes two important conclusions based on these studies. “The relationship between health spending and the quality of health care is not the positive, linear relationship that seems so often assumed by the providers of health care when they plead for higher fees and larger budgets, all in the name of higher quality of care,”

Professor Reinhardt said.

Second, gathering data on cost and quality “would allow payers to reward relatively efficient physicians with bonuses based on their cost savings relative to the mean, an idea sometimes referred to as ‘gain-sharing.'” He adds that having a computer system able to handle this information is “fundamental” – Maine is currently struggling to persuade its Medicaid computers to accept claims, so it has a way to go, although its hospitals can compile excellent data.

Various versions of paying for performance have been around for several years, sometimes in a more cost-driven form. In Maine, Anthem has begun including optionally in its contracts a quality incentive program that will pay up to a 6 percent bonus to primary-care facilities that follow accepted protocols for treatment, and it has begun a similar program for hospitals. Similarly, the Centers for Medicare & Medicaid Services is said to be considering similar programs based on its indicators.

The added money won’t necessarily provide sufficient incentive for physicians to alter behavior, but if enough payers participate, the bonuses would cover the added cost of tracking and monitoring the protocols. The long-term outcome should be better care and lower health care costs.