Pay-for-performance programs are gaining in prevalence — nowhere more so than among HMOs. More than half of 252 HMOs surveyed said they implement P4P programs in contracts with physicians and hospitals. Of the 126 HMOs with P4P programs, nearly 90 percent had programs for physicians and 38 percent had programs for hospitals, according to the survey published in the New England Journal of Medicine.

These arrangements tend to be associated with HMOs that use primary care physicians as gatekeepers to specialty care, use capitation arrangements, or are themselves rewarded by performance-based incentives.

Researchers surveyed insurers that offered commercial HMOs in 41 U.S. cities. Of 113 HMOs that used P4P programs for physicians, 13 percent focused on the individual physician as the unit of payment. That is, doctors' performance was rated and rewarded based on their individual ratings rather than that of the medical group to which they belong. In one third of the programs, only the top-rated physicians or physician groups were rewarded. Nearly two thirds offered rewards for reaching a performance threshold. The bonus potential for physicians in these programs was generally equal to 5 percent of payments from the plan.

These findings have implications beyond the commercial HMO arena. If the Centers for Medicaid & Medicare Services incorporates P4P into Medicare Advantage plans, incentives may eventually flow downstream to providers.

Prevalence of P4P programs, according to HMO characteristics

Source: Rosenthal MB, et al. Pay for performance in commercial HMOs. N Engl J Med. 2006:355:1895–1902.