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Analysis of Issues Related to Pay for Performance Economic Model

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In trying to go against the general consensus that pay for performance is the gold standard, I’m going to try and point out some issues that can arise from this economic model.

Pay for performance is defined as “A type of incentive to improve clinical performances using the electronic health record that could result in additional reimbursement or eligibility for grants or other subsidies to support further HIT efforts. “ Three possible issues, in my opinion, can cause a detrimental outcome to a patient’s health. Some of these situations may be based on many factors including settings of health facilities, demographics of health facilities, and even supply and demand for certain procedures and illnesses. I will attempt to point out the discrepancies I’ve noticed in my own experiences in healthcare as related to the pay for performance model.

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In inner-city’s, hospitals are more likely to reach capacity than in rural areas I’ve seen administrators push physicians harder to discharge patients who may otherwise still need treatment. This has created a stabilize and ship to out-patient model that doesn’t always translate to the follow-up care needed for certain chronic and life-threatening diseases. Sometime when patients feel better they are less likely to follow up with care or educate themselves with preventive measures that caused them to get sick in the first place. In some disease processes, physicians have mandatory observation periods to ensure patients aren’t rushed home only to return with the same issue later. Even with the penalties set in place for the patient returning with the same issue, the penalties don’t address the people who fall through the cracks. Some people may be reluctant to return to medical providers who have discharged them prematurely.

Demographics play a huge role in issues with the pay for performance model. Hospitals in less affluent areas suffer the most under this model. Less affluent areas usually mean the patient base is less likely to be educated. Given that the majority of this patient base is insured under Medicare and Medicaid, these hospitals end up sort of scraping the bottom of the barrel when it comes to funding. This creates a huge discrepancy in the quality of care one might receive at a hospital that has a more affluent patient population.

More importantly, less educated patients are less likely to be as involved in their own medical care as highly educated patients. This can leave physicians to direct the course of medical treatment without informed consent. Also, affluent hospitals with a broader insurance case mix, usually pioneer medical breakthroughs and innovation. These breakthroughs and innovation slowly make their way to less affluent hospitals creating a trickledown effect that leaves less affluent hospitals unable to compete. Demographics also play a role in employee retention, particularly in highly educated employees. Given the capitalist climate in our country, most highly educated individuals seek the most lucrative employment positions possible. Affluent hospitals have the edge on hiring qualified individuals, given their coffers are much deeper than other hospitals. This creates a schism in care across the board Pay 4 performance can also affect medical facilities by the simple rule of supply and demand. If a hospital does not have a diverse case mix it can suffer through this model. “Just as the presence of health insurance affects a consumer’s demand for medical goods and services, it also may impact a healthcare provider’s willingness to supply goods and services. ”

Certain races, cultures, and demographics are more prone to certain diseases and some disease processes can be more lucrative than others. Many factors affect this issue including the cost of treating certain conditions and staffing and supply cost of certain clinics and facilities within the hospital. The supply and demand model is different in the medical field in the sense that there are three factors instead of the usual 2 in regular business models. The patient, doctor, and insurance companies all affect this model in that the patient demands service of the doctors, the doctors demand service of the insurance companies. All affect each other in a circular loop that doesn’t always benefit the medical facility. In short, if a medical facility has a low rate of cardiac care it would be more expensive to run that cardiac department than a facility with a high rate of cardiac care.

Pay for performance is a very complex economic model. Many factors will affect the overall outcome as this business model. In the attempt of trying to accommodate the patient, doctors (medical facilities), and Insurance providers pay for performance is nowhere near being a perfect solution, but it is closest we have come yet. There are potential issues and risk with any economic models and all sides involved will have to compromise in order to have a pleasing outcome for all parties involved.

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