Understanding pay for performance.

Dr. McClellan has stated his intention to implement some kind of physician P4P initiative by 2006. Similarly, congressional leaders with jurisdiction over Medicare have said quite plainly that any proposal to reform the physician payment update system will likely be linked to some kind of performance measurement and incentives. What is less clear at this point is the blueprint that will guide the development of physician P4P. The number of individuals and practices involved, combined with the specialized nature of the services each provides and the limited technological and staff resources available to most of them, defies efforts to identify implementation of simple, yet meaningful, across-the-board performance measures of the sort that have been applied to hospitals and nursing homes. For physicians, the picture is further complicated by the sustainable growth rate system and budget neutrality rules that will impose payment reductions on some physicians (even those whose quality is not questioned) in order to offset any incentive payments made to others for whom performance measures have been established. For these reasons, many specialty societies-particularly some surgical specialty societies-are viewing the P4P concept with skepticism. Of course, the lack of specific direction from policymakers also offers opportunities. Essentially, physicians (for the moment) are free to design their own measures and systems. And, given the current price tag of $155 billion over 10 years, which has dampened congressional enthusiasm for eliminating the sustainable growth rate system, P4P could open the door to meaningful Medicare payment changes that are desperately needed.