Using an Enterprise Risk Approach with Pay-for-Performance Programs

Many private insurers have been using pay-for-performance (P4P) models for the past 10 years, but the tipping point for adopting this reimbursement model may have come in 2003, when Congress voted in favor of implementing changes in the current structure of reimbursement for federally funded healthcare. It is no longer a question of if a facility should participate in P4P programs, but how it can participate without losing reimbursements, market share, and the good will of the public if its scores do not fare well against those of competitors.

Because participation in P4P programs exposes facilities to risk across multiple departments—finance, legal, clinical, public relations, information systems, performance improvement, compliance, and utilization departments to name a few—this article discusses how risk managers can use an enterprise risk management (ERM) approach to evaluate and mitigate the risks of participating in P4P programs.

Risk managers attempting to implement an ERM approach must recognize that the debate over the value of P4P models is ongoing. Concerns expressed by healthcare administrators, physicians, and others with a vested interest in the quality of care and cost of healthcare question the ability of a select few indicators to accurately portray the quality of care being administered in healthcare settings. Some claim that facilities with the best ability to capture data (those that already have state-of-the-art computer systems and excel at documentation)—not necessarily those that provide the highest-quality care—will benefit most from the current P4P model.

Others argue that expectations appropriate for suburban community hospitals may not be appropriate for rural or urban hospitals, which face different challenges to delivering high-quality healthcare. Yet others express concern that the time and effort required for implementing P4P programs may...