The Affordable Care Act and Pay-for-Performance Schemes

A provision in the Affordable Care Act aims to improve healthcare by shifting healthcare providers’ focus from volume to value. Will it work?


Cost Driving Factors

The main factors responsible for driving per capita healthcare costs are:

  • Health conditions prevalent in the population
  • Care episodes required per condition
  • Healthcare services received during each episode (both type and number)
  • Cost of each individual service provided.


In 2015, the Patient Protection and Affordable Care Act (ACA) was supposed to work towards lowering the cost of healthcare without compromising on quality. Through a provision of the Act, physicians would be paid according to the quality of care they provide, instead of the amount. Providing higher-value care would mean higher payments for physicians providing it compared to physicians who don’t. In other words, providers would have incentive to shift their focus from volume to value.

But the shift raises the question—how do you determine which physicians provide higher
-value care? Making volume to value work requires having objective criteria for evaluating the value and quality of care. At this time, these objective criteria are mostly lacking.

Quality Measures for Pay-for-Performance Services

1     Process

This is a measurement of how activities that contribute to positive health outcomes are performed. An example would be assessing if a heart attack patient was counseled to quit smoking.

2     Result

This will be a measurement of the outcome of the provided care; for instance, if laboratory tests demonstrate that diabetics control their blood sugar levels better after treatment. This is often controversial, since tests may indicate high sugar levels even though they are a result of the patient’s diet rather than the care provided. No amount of counseling can alter behaviors unless the patient wants to.

3     Opinion

This is an assessment of the patient experience and how patients perceive the quality of care. It would include how well the doctor communicated with them, how clean their room was, etc.

4     Treatment Structure

This is an assessment of the personnel, equipment and facilities used in treating the patient.

Challenges of Pay-for-Performance Schemes

The health information technology required to collect and report data is costly. Physicians involved in pay-for-performance schemes will have to bear much of the burden of increased administrative costs. Often, the incentives simply are not large enough to overcome that cost. Experts recommend that provider participation be voluntary, the physicians be allowed to review the performance data and that there be adequate funding for the incentives, if such programs are to succeed.

One of the biggest challenges faced by pay-for-performance schemes is the fact that there is no way to measure the varying healthcare outcomes in different communities.This makes any standardized plan to measure outcomes not only hard to introduce but also to enforce.

For pay-for-performance to work, providers, insurers and the public will need to be on the same page. Insurers have an interest in pay-for-performance, since it helps control their costs.

However, health plan members might push back if pay-for-performance reduces their access to healthcare. For years, people with coverage through a preferred provider organization (PPO) or health maintenance organization (HMO) have been used to having nearly immediate access to office visits, regardless of the severity (or not) of their health complaint. The Affordable Care Act has brought increased access to health insurance; however, schemes such as pay-for-performance could involve tradeoffs in access to care if healthcare spending is to be reined in. Absence of provider and public involvement in the development of these schemes will only result in backlash and policy failure.

Until pay-for-performance becomes a widespread reality, your best bet to control health expenses is to remain healthy, shop for the best health insurance you can afford, and to track your health care spending. If you need help interpreting an EOB (explanation of benefits) statement or any other aspect of your health insurance policy, please contact us.