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By John Talbot, Ph.D.

Saturday, December 11, 2010

At this year’s Institute for Behavioral Healthcare Informatics one session, “The Decision Supports Tools Needed To Succeed In Pay-For-Performance Arrangements,” focused on pay-for-performance (P4P) arrangements that are emerging in health and human services. We’ve focused on performance-based contracting issues in a number of OPEN MINDS publications:

One particular element of the discussion that caught my attention was Niels Eskelsen’s presentation on pay-for performance. Mr. Eskelsen, OPEN MINDS Senior Consultant and former CFO and Director of Operations for Piedmont Behavioral Health, discussed the keys to making pay-for-performance financing arrangements that work. He had five key questions to keep in mind when developing these new arrangements:

1. What is the Pay for Performance agreement designed to accomplish?

2. If the goals are accomplished, will the intent of the agreement be realized?

3. Are the outcomes measureable by all parties?

4. Are the outcomes achievable and/or realistic?

5. Are the outcomes cost effective?

From there, the discussion moved from the design of P4P arrangements, to the implementation. With fees in the balance, P4P arrangements make real-time performance measurement a critical skill for contractors.

The first first step for contractors is to clearly define the data needed. This will vary with the type of P4P arrangement, so how the information in tracked and gathered will need to be customized. After defining data needs, the next step is actually getting the data. There should be a clear process for extracting the needed data. And then that data needs to be organized into management team-friendly formats – think of easy-to-read dashboards, trend analyses, and operating unit-specific metrics.

Last, but not least, is the hardest part – acting on the data you have gathered. To make pay-for-performance arrangements work, the key is to actually alter your organization’s performance based on your data.

If you have experiences in increasing the “informatics IQ” of your management team, I would like to hear from you at


John F. Talbot, Ph.D.
Executive Vice President,



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To read more from the OPEN MINDS team about pay for performance, see: When It Comes to Performance, We Have to Start Somewhere all members 

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