Pay for Quality

22 Pay for Quality KCE Reports 118
• Regular payment increases linked to performance. This is an approach
whereby some or all funding increases are placed at risk, so that future
increases will only be realized depending on the performance level.
• Quality grants/ Financial awards/ Performance funds. In this approach, health
providers receive funding to implement a quality related programme (either a
project, or the infrastructure and means to enable the realisation of such a
project), which is sometimes, but not necessarily done in a competitive way.
In “non-competitive” markets, it may be a tool to introduce some level of
competition and market forces. Quality infrastructure grants also fall within
this category, as far as these are rewards that are directly related to the
achievement of quality targets. 35
Each of these incentive structures has strengths and weaknesses. Custers et al. (2008)
designed a rather practical algorithm that could be of help in deciding which incentive
type to use in which circumstances. 75
3.1.2.3 Other incentive characteristics
Further questions however rise:
What should be the size of the incentive? The size of the incentive is obviously
considered as a key factor influencing the effectiveness of the P4Q programme. Yet,
Rosenthal and Dudley (2007) observe that some pay-for-performance schemes have
paid as little as $2 per patient and had an impact, while others offering bonuses of up to
$10 000 to a practice had no effect. 78 It is important to note that P4Q complements
rather than substitutes existing payment systems. Together with other, more volume of
care related incentive systems like Fee For Service and Capitation, it aligns activities in
the healthcare system with its basic goals and targets. P4Q is therefore a component of
a payment system that serves the quality related goals, next to other components. To
provide sufficient security and a reliable income to providers, as in other sectors, the
majority of the income or revenues are linked to healthcare delivery as such, and only a
minority percentage is distributed according to P4Q principles. In general, an incentive
size of 5% of income or revenues is considered to be a minimal amount to induce an
effect on provider behaviour. Some authors indicate that 10% would be a more
appropriate number above the minimum. This size corresponds fairly well with bonus
sizes used in other sectors (e.g. 5 to 10% based on yearly profit or revenue, or a one
month’s wage as end of year additional income).
1. What will be the formulation of the incentive scheme?
2. As said before, both penalties/ withholds or bonuses can be applied.
3. In general, if bonuses are applied there are four possibilities 78 :
• rewarding only those providers that meet or exceed a single threshold of
performance;
• differentially rewarding providers for achievements along a continuum of
performance thresholds (those who achieve a higher threshold earn more
than the others but the others receive some payment as well);
• rewarding providers that meet or exceed a single threshold of performance
combined with and incentive rewarding of those that improve, regardless of
whether they meet the threshold;
• rewarding providers in a continuous manner in proportion to their
achievement (i.e. solely in function of the improvement).
A problem with the first approach (working with a threshold) is that high-quality
providers may receive bonuses without making any improvements, while low-quality
providers may find the single threshold too difficult to meet and opt not to engage, as
has been shown by Rosenthal et al. (2005) 74 and other authors 98 .
What is the frequency of payments (e.g. yearly, quarterly, monthly)? The answer to this
question has some practical components and a theoretical component. The frequency is
limited by the data processing capacities of the quality measurement system. This often
causes a time lag between measurement, feedback and payment.