Objective: To examine health plan strategies, planning, development, and implementation of pay-for-performance programs (financial incentives for hospitals and physicians tied to quality and efficiency) at the community level, focusing on differences across markets.
Study design: A fifth round of site visits to 12 nationally representative metropolitan areas between January 2005 and June 2005, based on more than 1000 protocol-driven interviews with representatives from health plans, provider organizations, employers, and policy makers.
Methods: In each of 12 communities, we interviewed several executives from 35 health plans, including chief executive officers, marketing executives, and network contracting directors. Additional perspectives were obtained from representatives of employers, large medical groups, and hospital systems.
Results: Growing numbers of health plans are developing and implementing pay-for-performance programs for physicians and hospitals. Although in their early stages, plans' customized programs show substantial design variation within and across markets. This design variation reflects local conditions that include information technology capabilities, data availability, relative leverage of health plans and providers, willingness of providers to participate, and employer influence. The concerns of providers include the administrative burden of health plans' customized programs and the potential for conflicting financial incentives.
Conclusions: Most health plans are committed to pay-for-performance programs. Although providers would prefer health plans in their communities to use a single standardized set of measures and methods, this is unlikely given local market environments. A national effort directed at standardization might significantly reduce the extent of customization but also may limit the opportunities for local collaboration with providers.