Skip to contentSkip to navigation

Testing a Health-care Model

A recent study finds no evidence that pay-for-performance improves a patient’s overall care.

(originally published by Booz & Company)

Can You Get What You Pay For? Pay-for-Performance and the Quality of Healthcare Providers

Kathleen J. Mullen, Richard G. Frank, and Meredith B. Rosenthal

RAND Corporation, Working Paper Series No. WR-680

Date Published: 
April 2009 

According to a 2003 study by the RAND Corporation, the average American patient receives only 55 percent of his or her recommended health care. Some policymakers and private insurers believe that instituting a pay-for-performance model would increase the frequency and improve the quality of care by tying it to doctors’ compensation. The model awards bonuses to hospitals, medical groups, and physicians that meet certain quality standards tied to better patient outcomes, ranging from high rates of preventive screenings to regular tests for diabetes and asthma, and in theory would result in patients seeing their physicians more regularly. The authors of this study used data from published performance reports of physician medical groups in a California HMO to compare clinical quality before and after the pay-for-performance system was implemented. They found no evidence that the model boosted the quality of treatment, and suggest that pay-for-performance could result in a “teaching to the test” mentality, with medical staff allocating resources to pay-for-performance programs at the expense of programs that are outside the model.

Bottom Line:
The authors found no evidence that pay-for-performance health-care models improve a patient’s overall care, and urge caution in moving ahead with the system’s widespread implementation.

Get s+b's award-winning newsletter delivered to your inbox. Sign up No, thanks
Illustration of flying birds delivering information
Get the newsletter

Sign up now to get our top insights on business strategy and management trends, delivered straight to your inbox twice a week.