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Publication Briefs

Positive Effect of Pay-for-Performance May Not be Long Term

Pay-for-performance has been widely adopted by healthcare payers as an incentive to improve healthcare quality. Moreover, the Affordable Care Act of 2010 establishes a pay-for-performance program for hospitals. This program, which will take effect in 2013, includes all U.S. acute care hospitals and will be similar to an ongoing hospital pay-for-performance demonstration project sponsored by the Centers for Medicare and Medicaid Services (CMS). This study examined the results of the CMS demonstration project in order to inform efforts to implement pay-for-performance across all U.S. hospitals through the Affordable Care Act. Investigators compared 260 hospitals that were part of the CMS pay-for-performance project and 780 hospitals that were not part of the demonstration project between FY04 and FY08. Specifically, investigators compared performance measures for three conditions: acute myocardial infarction (AMI), heart failure (HF), and pneumonia.


  • Although hospital performance improved under the pay-for-performance demonstration project, the effect was short-lived. By the end of the five-year study period, performance in control hospitals matched that in pay-for-performance hospitals.
  • Over the first three years of the pay-for-performance demonstration project, participating hospitals had better average overall performance than hospitals that did not participate for all three conditions (AMI, HF, pneumonia). However, non-pay-for-performance hospitals caught up by the fourth and fifth years of this study. For example, by 2006, 56% of pay-for-performance hospitals had achieved a performance score of at least 90% compared to only 32% of control hospitals. By 2008, that gap had shrunk to 10 percentage points.
  • Performance scores were highest among hospitals that were eligible for larger bonuses, were well-financed, or operated in less competitive markets.


  • This was an observational study of only one program in a Medicare demonstration project and no VA hospitals were included in this study.

Dr. Werner was supported through an HSR&D Career Development Award; she is part of HSR&D’s Center for Health Equity Research and Promotion in Philadelphia, PA.

PubMed Logo Werner R, Kolstad J, Stuart E, and Polsky D. The Effect of Pay-for-Performance in Hospitals: Lessons for Quality Improvement. Health Affairs April 2011;30(4):690-98.

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