Rewarding Provider Performance: Aligning Incentives in Medicare

In this third report in a series, the Institute of Medicine (IOM) Committee on Redesigning Health Insurance Performance Measures, Payment, and Performance Improvement Programs explored the design and implementation of payment rewards for performance in Medicare. The IOM makes recommendations for steps to implement a pay-for-performance (P4P) approach within Medicare. The implications of moving toward P4P are considered as a long-term, multi-payer project.

This study is the third in the IOM's Pathways to Quality Health Care series, which offers tools for implementing the vision of improved health care delineated in the "Quality Chasm" report. The first report in the Pathways series, "Performance Measurement: Accelerating Improvement," recommended a strategy for developing and implementing a comprehensive performance measurement system, including creation of a national board to coordinate that effort. The second report, "Medicare's Quality Improvement Organization Program: Maximizing Potential," recommended an emphasis on technical assistance to providers for quality improvement. The present report builds on those studies and offers an operational plan for introducing into Medicare payment incentives that would encourage and reward high-quality care. While alignment can occur in many areas, this report is limited to examining the link between payment incentives and provider performance.