Emergence of Pay-for-Performance In 2000, the Institute of Medicine (IOM) released the report “To Err is Human: Building a Safer Health System.” The report catalyzed the attention of health care stakeholder groups in the nation (Stafford, 2000). The research provided a comprehensive, detailed account of health care errors and preventable deaths costing billions of unnecessary dollars in a health care system already spiraling out of control. The IOM recommended that Congress create a Center for Patient Safety within the Agency for Health Care Research and Quality for the purpose of designing a safer health care delivery system. Fifteen months after releasing the patient safety report, the IOM released “Crossing the Quality Chasm.” The report framed underlying reform necessary in the current health care delivery system to ensure patient safety. The framework sought to hold providers accountability for the quality of care they deliver. The introduction of the pay for performance (P4P) as opposed to the prior fee for service and prospective reimbursement guidelines induces delivery of care based upon performance measures. Broadly defined pay-for- performance includes any type of performance-based provider payment arrangements, including those that target performance on cost measures (U.S. Department of Health & Human Services, 2006)
Reimbursement
Pay-for-performance, synonymous with quality-based purchasing, bases reimbursement upon quality measures. The historic fee-for-service reimbursement plan enticed providers to maximize treatment to maximize reimbursement without capitation. In 1983, the Centers for Medicare and Medicaid (CMS) introduced the payment system driven by diagnosis-related groups (DRG’s). This payment system projected reimbursement based
