Menus Subscribe Search

Follow us


X-ray of a skull

Performance Pay Comes to the Hospital

• December 03, 2012 • 4:00 AM

Schools and Wall Street—and now Obamacare—use it, but does pay-for-performance make for better health care?

Goldman Sachs CEO Lloyd Blankfein is into it. So are education secretary Arne Duncan and Gawker editor A.J. Daulerio. Policy wonks champion it, charter school teachers embrace it, and professional athletes cash in on it. In our data-driven age, “performance pay” is the Next Big Thing. The logic is seductive: collect numbers, cut them up six different ways, and let a computer decide who’s worth how much. No favoritism, no bias, no human mess. The winners rise to the top, the losers don’t, and the whole system improves as a result of the competition.

Now, thanks to the Affordable Care Act, performance pay is coming to a hospital near you. Under a system that went into effect in October, the Medicare funds of some 3,500 U.S. hospitals are pegged to a dozen different metrics, including patient experience and outcome. The hospitals will lose a percentage of their usual federal dollars, with the opportunity to earn it back for showing improvement. The top performers can earn back more than they lost—not unlike a Christmas bonus—while the underachievers have to live with the financial hit.

The only question is, when it comes to medicine, does pay-for-performance actually work? Two recent studies, both in the New England Journal of Medicine, go in search of answers and arrive at different conclusions.

The more recent research, from a team of British physicians, looks at performance pay and patient mortality in 24 hospitals across northwest England. Using data from the National Health Service, the authors compared survival rates in the 18 months before a program was implemented with patient outcomes after it went into effect. Would a competitive, pay-for-performance schema encourage doctors to work harder, and smarter, to keep their patients alive?

The researchers found that, when adjusted for risk factors, 30-day mortality in the test hospitals dropped 1.3 percentage points, with significant gains especially among patients with pneumonia (less so among patients with heart failure and cardiac arrest). Over the year-and-a-half study period, these improvements equated to some 900 lives saved. The pay incentives seemed to work.

England’s program was modeled on a 2003 trial, known as the Hospital Quality Incentive Demonstration, conducted in the U.S. by the Centers for Medicare and Medicaid Services. But, as the authors are quick to point out, the British version was both better funded and more amply supported than its American predecessor, which likely had something to do with its success. In England, the hospitals were only rewarded for improvements—not penalized for failures—and administrators at competing care centers sat down regularly to share lessons learned. Bonuses were twice as large as they had been under the American HQID, and twice as many were handed out. In other words, the prizes felt real—and attainable.

The British findings stand in stark contrast to the results of the HQID trial itself, which appeared this spring in the Journal.

Under the six-year HQID, which ran in 252 hospitals across the country, more than six million patients underwent bypass surgery, or were treated for pneumonia, heart failure, or heart attack. Researchers from Harvard’s School of Public Health compared those patients’ outcomes—as evidenced by 30-day mortality—with control data from more than 3,000 non-pay-for-performance hospitals. They found that, between 2003 and 2009, survival rates at performance-pay centers did not differ significantly from standard hospitals. Whatever financial incentives might have done to improve patient experience and clinical care, they didn’t save lives.

The authors called the evidence “sobering” and noted that the performance-pay program mandated by the Affordable Care Act and drawn up the federal government looks an awful lot like HQID.

As of October 1st, of course, the point is moot. Whatever the data say, performance-pay is now a cornerstone of American Health Care 2.0. Don’t expect a cure-all.

Kevin Charles Redmon
Kevin Charles Redmon is a journalist and critic. He lives in Washington, D.C.

More From Kevin Charles Redmon

A weekly roundup of the best of Pacific Standard and PSmag.com, delivered straight to your inbox.

Recent Posts

December 17 • 12:41 PM

Why the College Football Playoff Is Terrible But Better Than Before

The sample size is still embarrassingly small, but at least there’s less room for the availability cascade.


December 17 • 11:06 AM

Canadian Kids Have a Serious Smoking Problem

Bootleg cigarette sales could be leading Canadian teens to more serious drugs, a recent study finds.


December 17 • 10:37 AM

A Public Lynching in Sproul Plaza

When photographs of lynching victims showed up on a hallowed site of democracy in action, a provocation was issued—but to whom, by whom, and why?


December 17 • 8:00 AM

What Was the Job?

This was the year the job broke, the year we accepted a re-interpretation of its fundamental bargain and bought in to the push to get us to all work for ourselves rather than each other.


December 17 • 6:00 AM

White Kids Will Be Kids

Even the “good” kids—bound for college, upwardly mobile—sometimes break the law. The difference? They don’t have much to fear. A professor of race and social movements reflects on her teenage years and faces some uncomfortable realities.



December 16 • 4:00 PM

How Fear of Occupy Wall Street Undermined the Red Cross’ Sandy Relief Effort

Red Cross responders say there was a ban on working with the widely praised Occupy Sandy relief group because it was seen as politically unpalatable.


December 16 • 3:30 PM

Murder! Mayhem! And That’s Just the Cartoons!

New research suggests deaths are common features of animated features aimed at children.


December 16 • 1:43 PM

In Tragedy, Empathy Still Dependent on Proximity

In spite of an increasingly connected world, in the face of adversity, a personal touch is most effective.


December 16 • 12:00 PM

The ‘New York Times’ Is Hooked on Drug du Jour Journalism

For the paper of record, addiction is always about this drug or that drug rather than the real causes.


December 16 • 10:00 AM

What Is the Point of Academic Books?

Ultimately, they’re meant to disseminate knowledge. But their narrow appeal makes them expensive to produce and harder to sell.


December 16 • 8:00 AM

Unjust and Unwell: The Racial Issues That Could Be Affecting Your Health Care

Physicians and medical students have the same problems with implicit bias as the rest of us.


December 16 • 6:00 AM

If You Get Confused Just Listen to the Music Play

Healing the brain with the Grateful Dead.


December 16 • 4:00 AM

Another Casualty of the Great Recession: Trust

Research from Britain finds people who were laid off from their jobs expressed lower levels of generalized trust.


December 15 • 4:00 PM

When Charter Schools Are Non-Profit in Name Only

Some charters pass along nearly all their money to for-profit companies hired to manage the schools. It’s an arrangement that’s raising eyebrows.


December 15 • 2:00 PM

No More Space Race

A far cry from the fierce Cold War Space Race between the U.S. and the Soviet Union, exploration in the 21st century is likely to be a much more globally collaborative project.


December 15 • 12:32 PM

The Hidden Psychology of the Home Ref

That old myth of home field bias isn’t a myth at all; it’s a statistical fact.


December 15 • 12:00 PM

Gluttony and Global Warming: We’re Eating Ourselves to a Warmer Planet

Forget your car. Our obsession with beef and dairy has a far more devastating effect on the climate.


December 15 • 10:00 AM

The 2016 Presidential Race Has Already Started

And this is the most exciting part.


December 15 • 8:00 AM

The Second Life of Old iPods

Why is it that old iPods are suddenly cool—and pricey again?


December 15 • 6:00 AM

The Lifelong Consequences of Rape

The long-term psychological and physical effects of the experience are devastating. And they’re likely exacerbated by the shame our culture insists on perpetuating.


December 15 • 4:00 AM

Mating Mindset Interferes With Attempts to Stop Smoking

Taiwanese researchers find photos of attractive women put men in an immediate-gratification state of mind.


December 15 • 2:00 AM

Where Innovation Thrives

Innovation does not require an urban area or a suburban area—it can happen in the city or in a small town. What it requires is open knowledge networks and the movement of people from different places.


December 13 • 9:18 AM

The Damage Done: Can Distance Between a Mother and Daughter Be the Best Solution?

“The devastation kept me away, but the guilt kept bringing me back, ready for another round.”


December 12 • 4:00 PM

The Red Cross Has Been Serially Misleading About Where Donors’ Dollars Are Going

The charity has become closely associated with one remarkable number in recent years: 91. That’s the percentage of donor dollars that goes toward services, according to organization leaders. But it’s unclear where that number comes from.


Follow us


Canadian Kids Have a Serious Smoking Problem

Bootleg cigarette sales could be leading Canadian teens to more serious drugs, a recent study finds.

The Hidden Psychology of the Home Ref

That old myth of home field bias isn’t a myth at all; it’s a statistical fact.

A Word of Caution to the Holiday Deal-Makers

Repeat customers—with higher return rates and real bargain-hunting prowess—can have negative effects on a company’s net earnings.

Crowdfunding Works for Science

Scientists just need to put forth some effort.

There’s More Than One Way to Be Good at Math

Mathematical ability isn’t one single skill set; there are indeed many ways to be “good at math,” research shows.

The Big One

One in two United States senators and two in five House members who left office between 1998 and 2004 became lobbyists. November/December 2014

Copyright © 2014 by Pacific Standard and The Miller-McCune Center for Research, Media, and Public Policy. All Rights Reserved.