CONTEXT:

The adoption of pay-for-performance mechanisms for quality improvement is growing rapidly. Although there is intense interest in and optimism about pay-for-performance programs, there is little published research on pay-for-performance in health care.

OBJECTIVE:

To evaluate the impact of a prototypical physician pay-for-performance program on quality of care.

DESIGN, SETTING, AND PARTICIPANTS:

We evaluated a natural experiment with pay-for-performance using administrative reports of physician group quality from a large health plan for an intervention group (California physician groups) and a contemporaneous comparison group (Pacific Northwest physician groups). Quality improvement reports were included from October 2001 through April 2004 issued to approximately 300 large physician organizations.

MAIN OUTCOME MEASURES:

Three process measures of clinical quality: cervical cancer screening, mammography, and hemoglobin A1c testing.

RESULTS:

Improvements in clinical quality scores were as follows: for cervical cancer screening, 5.3% for California vs 1.7% for Pacific Northwest; for mammography, 1.9% vs 0.2%; and for hemoglobin A1c, 2.1% vs 2.1%. Compared with physician groups in the Pacific Northwest, the California network demonstrated greater quality improvement after the pay-for-performance intervention only in cervical cancer screening (a 3.6% difference in improvement [P = .02]). In total, the plan awarded 3.4 million dollars (27% of the amount set aside) in bonus payments between July 2003 and April 2004, the first year of the program. For all 3 measures, physician groups with baseline performance at or above the performance threshold for receipt of a bonus improved the least but garnered the largest share of the bonus payments.

CONCLUSION:

Paying clinicians to reach a common, fixed performance target may produce little gain in quality for the money spent and will largely reward those with higher performance at baseline.