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Developing and Expanding Opportunities


We are circling back to cover pay-for-performance, the second stop on the value-based payment continuum. The pay-for-performance (P4P) model gives providers bonuses for hitting quality and efficiency targets. As we continue to focus on whole-person care, the new normal of hybrid payments continues to shift.   According to Health Care Payment Learning & Action Network (LAN), in 2018, 25% of all fee-for-service payments had a link to quality or value, including pay-for-performance models. To understand more of the basics, you can check out our first blog covering P4P

black woman and her nurse

Pay-for-performance is a payment model that attaches financial incentives to provider performance. Incentives can range from small bonuses to large payments, depending on the amount of risk and the metric being set. 

Advantages to P4P

There are some distinct advantages to a pay-for-performance program besides the fact that it puts quality over quantity. First, the basic structures of base payments can stay the same. With all the bonuses coming after metrics have been hit, the current structure can stay in-tact. Second, it’s scalable. Different measures have varying metrics that allow for higher quality of care. This also means that different size providers can have reasonable metrics based on comparable sized facilities. Lastly, P4P is complementary to public reporting making providers more reliable. It also gives power to the consumer who can look up those metrics and go where high-quality care is being offered.

Disadvantages to P4P

With anything, there are some challenges have presented themselves with this type VBP model. First, this model requires a high-level of administrative duties. P4P requires tracking measures, knowledge of the metrics required, and providing accurate medical updates in a timely manner. Second, since we are still learning how this model will work best, there are no standards or best practices to default to. This can cause gaps, mis measurements, and overall frustration. Lastly, it can be challenging to know if the current care is the actual problem. As an example, if an infection starts while they are getting a knee replacement, was it because of the care they received or a prior issue from before they came in? This is something to keep in mind when analyzing P4P in accompanying metrics. 

Pay for Performance Examples

Hospital Reimbursement – The Centers for Medicare and Medicaid Services (CMS) Hospital Readmissions Reduction Program (HRRP), is a VBP program that encourages hospitals to improve communication and care coordination and reduce avoidable readmissions. This program focuses on six conditions and avoiding readmission within 30-days over a 3-year period. The hospital receives a bonus if their numbers are good, or a penalty if they aren’t hitting the metrics set. There have been recent results that show some inaccuracies with this program.

Home Health – CMS Home Health Value Purchasing Model (HHVBP) launched in 2016 in 9 states and offers incentives for higher quality and more efficient care. Recently, it was announced the program will be expanded within the next year by the Center for Medicare & Medicaid Innovation (CMMI).  Others include End-State Renal Disease Quality Incentive Program, Skilled Nursing Facility Value-Based Program, & Hospital-Acquired Condition Reduction Program.

CMS Changes to Home Health

Prior to the COVID-19 pandemic, the Patient Driven Grouping Model (PDGM) for home health agencies (HHAs) that occurred on Jan 1, 2020, was the most significant change to home health reimbursement in two decades.

This model tied payment to an individual’s overall health condition rather than the number of therapy visits. According to CMS, the goal of the program was “to reduce volume-based reimbursement that doesn’t necessarily align with a patient’s condition and for home health agencies to develop closer, more collaborative relationships with hospitals and skilled nursing facilities.”

This was a direct value-based model example of pay-for-performance. Prior to launch, HHAs were worried about what type of impact it would have on its business. However, the results have been positive especially with the COVID-19 pandemic hitting. PDGM helped HHAs prepare for the sudden drop in utilization and reimbursement rates were better than anticipated.


Pay-for-performance is a simple yet dynamic way for healthcare providers to break into VBP. There is still an incredible amount to learn about the pay for performance model and what the best path forward is. As programs are looking to expand their current models to other states there are still concerns about who is setting standards or metrics and the best way to document the data.

Advocate's Perspective

Pay-for-performance offers you, the providers, an incredible potential to create new revenue streams at no-risk while moving your business towards a value-based system. P4P is a necessary step to understanding how you can measure your quality standards. This important development will not only set your business up for the next steps of VBP by making you responsible for reporting but also increase the quality of care for your consumers.

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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.