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What do Wall Street Bonuses and HCIT Incentives Have in common?

February 4, 2009
by Joe Bormel
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What do Wall Street Bonuses and HCIT incentives have in common?



Does "Pay-for-Performance" send the same wrong signals?








A central piece of healthcare payment reform has been instituting pay-for-performance (P4P) incentive programs. Each of these has specific data reporting requirements, with very explicit implications for many aspects of HCIT systems. And closely related payment reform initiatives such as “Present on Admission” and delineation of negative events ("Never Events") for non-payment represent examples of disincentive programs. A reasonably succinct, well referenced summary can be found

here.




Incentive systems are in many cases extremely important, and unquestionably drive behavior. Numerous drivers of current P4P and D4M (“docking for mediocrity,” an expression from Atul Gawande's 2004

The New Yorker article, “The Bell Curve”) reform initiatives are based on the fact that existing systems

pay for procedures, independent of their value, quality, or appropriateness. Therefore, given this context, a reflexive drive for P4P is completely understandable and perhaps reasonable.




But I was struck today by the potential shortcomings P4P could generate across the healthcare industry while reading Thomas Frank's WSJ article, "

Wall Street Bonuses Are an Outrage - The public sees a self-serving system for what it is." (WSJ, February 4, 2009) In it, he wrote:




According to Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on dysfunctional financial systems, "It is the compensation system that has proved to be the weak point in everything critical that went wrong, that has produced a global [financial] catastrophe."




At each stage of the disaster, Mr. Black told me -- loan officers, real-estate appraisers, accountants, bond ratings agencies -- it was

pay-for-performance systems that "sent them wrong."




This perspective that P4P has its hazards should not be lost by those of us in healthcare delivery, HCIT or by our professional organizations. Here's one example to support my thoughts on the subject:





"

There are a multitude of organizational, technical, legal and ethical challenges to designing and implementing pay for performance programs,

" AAFP




Let's not waste the catastrophic lesson Wall Street has learned as we incentivize reform and further automate healthcare delivery and its payment.






----

Pay-for-Performance Concept Map:


--- source: http://www.loosetooth.com/Viscom/gf/odnc102804.htm











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Good topic Joe. I am strongly in favor of a P4P approach to healthcare, as I am a firm believer in creating strong financial incentives to elicit desired behavior, and also injecting market forces and Darwinian competition into all areas where the government currently holds a monopoly.

A perfect example is the TARP program, which created a huge pool of money for those that met certain criteria, most easily defined as being a bank holding company. While the program was intended to help companies that at the time the program was announced met the criteria, an untended consequence is that companies began embarking on legal metamorphoses to meet the criteria. So alluring was the money that they, in fact, changed their DNA to get at it.

Organizations that converted into bank holding companies to get TARP monies include:

  • American Express Co.
  • Goldman Sachs
  • Morgan Stanley
  • CIT Group
  • Discover Financial Services
  • GMAC

If one had begun with the intention of creating more bank holding companies, for whatever reason, a more effective program could not have been crafted. Create the financial incentive for anything to happen, and it will.

A friend of mine was recently frustrated by the fact that her daughter’s physician had obviously not reviewed the chart — though new test results had come in — since the last time they were in the office (the last reimbursable event). As we all know, the current model does not pay physicians for getting people well, we must rely on their good nature and professionalism for that. If, however, that doctor knew a significant financial incentive rested on the outcome of her patient — however that outcome would be defined — I assure you the physician would have booked fewer appointments, preferring to spend her time reviewing the young girl’s case, among others that required extra attention.

Revamping the healthcare system to rely on anything other than financial self interest is foolish, as expecting doctors to be immune from the less attractive aspects of human nature is naive. P4P is the only way to move forward. The strategy is sound; the tactics need much attention.


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