The Risk in Pay for Performance

The healthcare industry employs “pay for performance” or what is also known as “value-based purchasing” as a payment model for reimbursing hospitals, clinics, physicians, and other healthcare providers for meeting specified performance criteria.  Measuring improved quality of life or a longer life span, what is an appropriate and expected outcome, is a metric that is virtually impossible to measure.  So, what is measured?

Pay for performance evaluates quality and efficiency.  Did the nurse take blood pressure?  Did the physician counsel the patient on smoking cessation?  Did pharmacy effectively determine all of the patient’s home medications upon being admitted to the hospital?

Value-based purchasing is punitive and does not provide incentive; it penalizes poor outcomes, increased cost, and medical errors.  It is a system that does not reward good outcomes but penalizes bad outcomes.


Insurance companies may in attempts to reduce cost, reimburse only for less safe or diminished effective care and in turn, will not pay for medical practices to reduce errors.  Even worse, health care providers are tempted to avoid high-risk patients even though they perhaps are in the greatest need of medical service.  Why?  The risk of unseen improvement, longer than an acceptable hospital stay, and not reimbursing increased costs.

Stewardship, Choosing Service over Self-Interest is a book written by Peter Block; that demonstrates how applying the concept of stewardship will change for the better organizations and how leaders lead.  Block proposes replacing the traditional management tools of control and consistency with partnership and choice to all levels of employees as well as to an organization’s customers, or in the case of healthcare, patients.

“When we try to use money to induce behavior, it backfires.  We all like the money, but we won’t be bought.  There may be some higher economic threshold, where a large enough pay increase might result in more productive actions, but the day-to-day reality is that we do not have enough money to actually purchase behavior from people inside an organization,” writes Peter Block.


Healthcare is facing an issue where medical reimbursements are more of a way to control behavior than as a means of building a medical facility that successfully serves its patients.  Withholding pay is punitive whereas being benevolent with reimbursements is no different than giving a blessing.

Again, Block writes, “Control over another’s income demonstrates power and creates compliance.  If we are serious about stewardship, then we need a philosophy and system of compensation that does not feed dominance and submission, does not deliver punishment and blessing, and does not create isolation and distrust.”