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What is ‘Real’ Quality in Healthcare? How is it Usually Communicated?
Keywords: PQRS, healthcare quality, quality parameters, MACRA, physician quality incentive
Ben Agar
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Payors (CMS and insurance companies) are increasingly and now incessantly talking about 'rewarding' quality in healthcare. To be able to do so, they are developing 'quality measures' to compare physicians and hospitals. Their definition of quality is different from what has traditionally been considered quality by patients and physicians. The 'quality measures' devised by payors in healthcare are now being aggressively being marketed as true measures of quality. The hospitals and physicians have changed their practice patterns to look good on these new 'quality parameters'. The biggest casualty of this new push for quality has been the 'real' quality in healthcare, which cannot be measured directly and hence is increasingly being neglected. This article discusses what 'real' quality is in healthcare, how it has traditionally been communicated to patients in healthcare marketplace, and why this communication has failed in present day healthcare.

There has been a push to measure, demonstrate and reward physician quality. To that end, the administration has been working hard to promote checklists of 'quality measures' that have to be 'completed' by the healthcare providers especially physicians to demonstrate that they are quality physicians. Though this effort is highly laudable in its intention, it nevertheless raises questions about why such "checklists of quality measures" are required in healthcare, their real value, and why they are not needed/required in other service industries such as law, business, financial services etc. Customers also demand 'quality' in these service industries. To the best of my knowledge, other service providers such as lawyers, financial advisers or business executive do not use or are mandated to use "checklists" to communicate their quality in the marketplace.

Let us start by defining the 'quality' of a service provider in the context of potential clients and then discussing how quality of service providers has traditionally been communicated in the marketplace, and see why credible communication of quality has failed in the healthcare marketplace.

What is Quality?

Consider that you got unlucky and received a couple of speeding tickets. You are looking for a lawyer to help you take care of these tickets. What do you think are attributes of the "high quality lawyer" for your need at this time? Should he have graduated from one of the top schools in the country at the top of his law school class? Does he have to be an eloquent speaker and constitutional expert? Or he could be someone who went to one of the lesser known law schools and was not at the top of his law school class. However his practice focuses largely on taking care of speeding tickets and he can get it done very efficiently as he personally knows most people involved and has mastered the art of dealing with them. Most (I am hoping all) readers would agree that the latter lawyer is the "best lawyer" for your present needs even though he might not appear qualify as "high quality lawyer" if evaluated without the context of our present needs.

The following questions arise in our minds:

  1. What is quality in the context of service providers?
  2. Is there or can there be a uniform definition of quality?
  3. Is it possible to put meaningful criterion/criteria to identify and demonstrate quality?

Now consider there are two neurologists in a town.

  • Dr. A is a nationally recognized neurologist, having won multiple awards from national neurology societies, has authored several research papers and was on the panel that put together national guidelines for evaluation and treatment of chronic headache. He also is considered a really good clinician and can solve often intractable clinical problems that had other physicians completely puzzled. Dr. A is however booked solid for 6 months. He is known to be often brusque and abrupt with his patients. His office takes 48-72 hours to get back after you leave a message. The visits with him are usually short and he does not have time to explain things to patients and their families.
  • Dr. B is generally considered to be a 'nice guy' but is an average clinician. He is easy to access and you can get an appointment to see him in 1-2 days. He is thorough and methodical in his approach and is considered good at taking care of routine neurology problems. He takes time to talk to you and listen to you. His office is very responsive and prompt in returning your calls.

Now let's try to answer the following questions

  1. Would you regard either of them to be high quality physician(s)?
  2. Is any one of these a "better" physician than the other?
  3. How would you rate these physicians overall based on current commonly used quality measures? – Outstanding, good, average or below average?
  4. Would a patient be willing to pay a "quality premium" for either of these physicians?

Consider yourself in the following hypothetical situation. You have been in great health till recently. You have been having this headache that started insidiously about 1 week back. You initially took some over-the-counter pain medications. The pain has however persisted and you are now worried and want to get medical advice.

Would you consider either of the two neurologists in town 'best suited' for your present needs? Your insurance plan allows you to see either of the neurologists but because of some insurance quirks you have a higher co-pay of $10 to see Dr. A and $30 for Dr. B. Do you think you would be willing this higher co-pay (essentially a premium over Dr. A) to see Dr. B at this time?

Fast forward, you have been having these headaches for 2 years now. You have seen several physicians besides Dr. B and taken several treatments without success. The pain has gradually worsened and it is affecting your ability to work.

  1. Will any of the two neurologists be 'better suited' for your needs and if so which one?
  2. By now, Dr. A has sold his practice to his hospital and he works for the hospital. The hospital in addition to the co-pay part of the physician's fee now also charges a facility fee for each outpatient visit. As a result you now have to pay $300 from your pocket to see the physician A. Do you think you would be willing to pay this higher amount of money (premium over Dr.B whose copay is still only $30)?

Quality is contextual

The above two examples illustrate that 'different qualities' that define a 'high quality service provider" are valued very differently by consumers based on their unique needs. In fact the same consumer may value the qualities differently under different circumstances. The qualities that are Dr B's strengths – easily accessible, thorough and methodical, good communication skills which were of high value to you at the beginning of your ailment and made Dr B the best option (though agreeably not the perfect option) for your needs. However, when pain had persisted and worsened despite treatment, the perceived value of these qualities diminished considerably so much so that Dr A who rated very poorly on these qualities but rated very highly on clinical excellence became the 'best option' and worthy of a premium.

Who are good physicians?

The question then arises – how do you define a good physician. Is it someone who is 'just above average' in all the attributes that are important to patients or he or she is someone who is extremely strong in a few attributes but might even be miserably lacking in other attributes. (Physicians who rate excellent in all aspects are part of the urban myth and exist on physician rating sites on the internet based largely on 'evaluation' from their 'favorite and really appreciative" patients – also called family members, friends and employees).

Consider for example it there was Dr. C in town who is an above average clinician (and better than Dr. B as a clinician but not as good as Dr. A), he is better than Dr. A in his people skills, availability, accessibility etc. Would you consider Dr. C to be a better physician than Dr. A or Dr. B or both? Can he effectively substitute for Dr. A and Dr. B so that society (and you as a patient) would be better off having all doctors who are like Dr. C? Should Dr. A and Dr. B not be allowed to practice till they become like Dr. C?

Now consider what would happen if all neurologists were like Dr. C. You would go to see him for your headache after the headache had persisted for 1 week. However, instead of getting an appointment to see a neurologist in 1-2 days, you would likely get an appointment in 3-4 weeks. However, when the problem could not be treated adequately despite 2 years of treatment, you could only hope to find another physician just like Dr. C and most likely with his level of clinical skills to review your case and hope that he will be able to treat it (God willing since all physicians have no incentive to excel clinically as the system just expects physicians to be passing grade and does not reward clinical excellence). Which situation sounds better for the patients? - when doctors like Dr. A co-exist with doctors like Dr. B and patients can find them based on their circumstances, or when all doctors are required to be like Dr. C ?

How has quality been measured, demonstrated and rewarded traditionally in the market place?

By definition, markets match a seller willing to sell a service/product at a certain price with a buyer(s) willing to buy it at that price. The quality of the service/product is important in determining its price. After all, we don't buy a car, we buy a Honda or a Cadillac or a Porsche and are willing to pay much different prices for them even though they are all 'cars'. For a customer to decide on a price that he or she is willing to pay, information about the quality of the product or service has to be communicated to him/her by the seller. The ability to measure, demonstrate and communicate quality is essential for the functioning of the markets. In modern times, quality is communicated by advertising and branding. However, markets have existed much before the advent of advertising and before sellers actively 'marketed' their wares. Sellers with no understanding or clue about marketing have been able to communicate quality to customers without any advertising or completing 'quality checklists'.

Measurement of quality in the market place is akin to the "Wisdom of the crowds" as elucidated by James Surowiecki in his bestseller. It has traditionally been communicated by a combination of these three parameters. These parameters are interrelated and interdependent.

  1. Reputation
  2. Popularity or social proof
  3. Price

Reputation: Reputation is an aggregate of what others are saying about a service or product offering. It comprises 1-3 qualities/attributes that majority of people mention when talking about a service. Reputation not only identifies if the service (or service provider) is good, but also identifies its most important attributes (or qualities). Reputations are robust indicator of quality and are not easy to manipulate in the long run. For reputations to be effective and meaningful, free and easy "two-way" communication should be possible between people who can share their experiences and their quality perceptions with each other. It works well, when such is the case. However, reputation as measure and communicator of quality has weakened in recent times due to a variety of factors including a dramatic increase in the size of communities and emergence of "one-way" communication (newspaper, radio, TV) as dominant means of mass communication.

Social proof and Popularity: Services and product that are considered highly desirable are therefore sought after by a larger number of people. In case the price of a service or product is fixed for whatever reasons, then if more consumers are willing to pay the price to buy that service or product (or rush to buy it) this usually indicates to an onlooker that the product is of higher quality compared to a similarly priced competing product with lesser number of customers willing to buy. Popularity as reflected by the number of customers willing to buy a service/product is a powerful quality signal to other potential buyers as it provides social validation/proof of its quality and value. We all gravitate towards busier restaurants with waiting crowds rather than going to similarly priced empty restaurant next door.

Price: In a free market with good information and in the 'long run', price is a reliable measure of quality as it reflects that enough buyers place a value equal to or more than the market price of the service/product. Price of a service is the function of the reputation and credibility of the service provider and desirability of the service. A high quality and highly desirable service from a trustworthy service provider is likely to command a higher price in the free market. A comparison of the prices of the various service offerings by various providers is also a reliable indicator of their relative quality. In the long term, price is least susceptible to manipulation. Price not only measures quality, it also is a great communicator of quality. Someone without the means or time to evaluate quality of each service (e.g. someone located in another town or country) can infer quality of the service/product just be comparing their market prices. Lastly, price is also the reward for quality as in general, higher quality products command a higher price (quality premium) in the market.

How about Branding and advertising?

Branding and advertising attempt to correlate certain qualities and attributes to a product or service in the minds of the consumer. Unlike reputation, which reflects the aggregate of user experiences and perception about the service or a product, branding attempts to insert the association of the service or product with certain qualities or attributes by advertising. Branding through advertising has emerged as the most important means of communicating quality in the marketplace as reputations have become weaker. Branding is the byproduct of growth of one-way communication mediums such as newspapers, radio and television. Branding provides unfair advantage to the rich since they can shape public perception of their service/product offerings by advertising using these one-way communication tools which are out of reach for most people. With the advent and popularity of social media tools which enable two-way communications between community members, it is likely that reputation is likely to regain its importance and supplant branding and advertising for communicating quality.

How do these quality indicators apply to healthcare?

Healthcare marketplace in US is rather unique because of several changes mandated by law which distort the incentive structure of a traditional market place. Let us focus on the market for physician services only and not discuss the market involving hospital charges and other ancillary services. Quality of physicians is the most important determinant of healthcare quality and has been target of most recent quality initiatives in healthcare.

Physician fees as quality indicator: The price of physicians' services is largely set by a semi-government agency (CMS). This price also serves as a reference for the price private insurances plans pay the physician providers for their members. The price of a physician's service is largely based on relative value units (RVUs) that are calculated based on an estimate of the average time required to deliver that service. The determination of price of physician's time or service is not based on market forces but involves 'negotiations' between CMS and various physician organizations. After that price is set, all physicians are paid the same for providing that service to the patients irrespective of their level of experience, skills or quality. Individual physicians cannot command a quality premium for their services in this system. They do not benefit financially by investing more time and effort in improving the quality of their services, thereby removing the incentive for improving quality of their service. Physicians can do better financially by taking care of more patients and providing more "services". Since the price of a service is 'fixed' irrespective of the quality of physician, price cannot serve as a measure of an individual physician's quality. Furthermore, price of a physician's service cannot communicate the quality of individual physician to their potential patients. Lastly, a fixed price for their services means that the physicians have no quality reward or incentive to provide a higher quality service. In fact, a fixed price for physician services effectively serves as a disincentive for providing a higher quality of service since the additional cost and effort required is not recoverable by the physicians.

Popular demand of physician's service: Most patients are able to appreciate only the customer service aspect of a physician's offering. However though customer service is generally desirable, technical excellence of the physician is a very important aspect of physician quality and is usually the top consideration in choice of physician by patients. Unfortunately, a physician's technical quality may not be obvious to individual patient as it is reflected more in aggregate of outcomes of patients treated by a physician and is difficult to judge from outcomes in any individual patient. Patients infer quality indirectly by the number of patients wanting to see that physician. It usually reflects the aggregate number of patients who are satisfied with the service provided and would like to see the physician again, those who are seeing that physician because their friend or family recommended that physician and also the patients who were referred by their physician to see this physician. A higher number of patients wanting to see a physician usually would communicate a higher quality of physician. It would also be more credible and meaningful than any physician rating website because patients here endorse the physician by actually choosing that physician to take care of their health problems.

This was true and valid till recently. Now hospitals and insurance companies have placed restrictions on the physicians that patients can see for their healthcare needs. Patients who present for medical care through the emergency room (owned by the hospital) or primary care physicians (which are now increasingly employed by or affiliated with specific hospitals) are preferentially directed by the hospitals to the specialists who are directly employed by the hospital or are favored by the hospital administration because of financial or other arrangements between the hospital administration and these physicians. As a results, patients are referred to specialists not based on the quality and level of expertise of a physician, but on whether the physician(s) are directly employed or 'favored' by the hospital administration. Similarly, insurance companies restrict the selection of specialists physicians by patients based on the company's financial interests. As a result, this parameter of physician popularity in the healthcare marketplace is rendered useless and cannot serve as an indicator or communicator of higher quality. Since physicians cannot generate higher volume of business by general recognition of the higher quality of their services, it removes the incentive for them to push the quality of their services to the best of their capabilities.

Reputation of high quality physicians: Reputation was an important mechanism by which physician quality was communicated. Patients preferentially went to good physicians based on advice of their other healthcare providers including primary care physicians. Patients then spread the word about the good physician they were impressed with amongst their friends and family. Physicians preferentially referred their patients to physicians they believed to be high quality specialist physicians based on their reputation amongst peers. The personal incentives for an individual physician to preferentially refer patients to high quality specialist physician were not entirely altruistic. Referring patients to high quality specialist physicians usually made the referring physicians look good as patients were more likely to be satisfied with their recommended physicians. It also established them to be part of a network of "high quality physicians. In addition, it carried a lower litigation risk and obviated the additional effort in taking care of unresolved or inadequately resolved problems or treatment complications resulting from sending the patient to less competent specialist physicians. Physicians were therefore always looking to include highly competent physicians in their referral networks based upon their reputation amongst peers. Patients benefitted because it was in the interest of their treating physician to preferentially refer them to high quality specialists.

In recent times, there has been an effort to minimize the significance of differences in technical excellence amongst individual physicians. The incentives for this push by hospitals to minimize the value of individual physician's quality include the desire to create an 'assembly line' system in healthcare to "reduce costs" by making any individual physician eminently replaceable. With the new set of incentives in healthcare, hospital owned practices actively downplay the value of quality of an individual physician and also dissuade development of reputation by individual physicians. Instead they focus on developing the 'Brand' of the hospital. While marketing the hospital system, the hospitals minimize the value and significance of physician quality and push the quality based on surrogate markers such as wait times in ER, nurse-patient ratio, capital investments in technology and convenience. Patients coming into that hospital system are 'evenly distributed' amongst the various physicians by the administrative staff. Patient referrals to specialists are no longer guided by their reputation for clinical excellence.

Branding and advertising by physicians: Most physicians, even those who are part of large groups, are unable to afford the expense that brand creation and advertising entails. As a result, branding and advertising are used largely by hospitals and insurance companies to model public perceptions. This makes physicians even more vulnerable to misuse by hospitals and insurance companies. Lately, more and more hospitals are indulging in aggressive branding and advertising campaigns. Unfortunately, hospitals create perception of quality based on "commonsense" surrogate markers which have not been validated to measure or communicate quality of healthcare service. Moreover, their quality claims cannot be verified independently nor do they offer any meaningful data to support their claims. As a result, the healthcare marketplace is full of tall claims of 'quality' from hospitals with deep pockets. Such branding and marketing efforts by hospital also serve to downplay and minimize the value of physician quality in the delivery of high quality healthcare. This is likely to harm healthcare quality, since as in other professions such as law, finance and business, the most important determinant of quality is the individual excellence. Just like all lawyers are not of same quality and not all MBA's are equally good, similarly not all physicians are of same quality. To suggest that quality of individual physicians does not matter serves to dissuade physicians from making efforts to deliver high quality and in the long run will dissuade talented young men and women driven towards excellence from getting into healthcare where all physicians would be rewarded equally regardless of quality.

Recent quality initiatives in healthcare: 'Best thing to happen to healthcare' or 'Much ado about nothing'

Use of checklists to demonstrate quality: Various national societies have been encouraged by the government regulators and insurance companies to put together checklists of 'quality measures' to identify and reward high quality physicians. Unfortunately, as illustrated in the beginning of this article, quality is contextual and is difficult to measure without an appreciation of the details of the individual case. The checklists of quality parameters are therefore not successful in communicating quality of a physician. At best, they might measure diligence on the part of the physician. They cannot distinguish a physician just out of training from an experienced and skilled physician. For example, the quality of gastroenterologists is measured using adenoma detection rate during colonoscopy. Any physician just out of training can take a lot of biopsies of diminutive polyps commonly found in the colon in the hope that some of them will be adenomatous and the physician's rating will look good. An experienced physician who uses his judgment in taking biopsies from only those polyps that appear remarkable and clinically significant will look worse than someone who takes biopsies indiscriminately. Another marker of quality is counseling to stop smoking after colonoscopy. Though this counseling is desirable and beneficial, it does not reflect on the quality of the physician in terms of their ability to perform a high quality colonoscopy and interpret the findings. It is akin to judging a divorce lawyer for quality based on whether they counsel their clients to renew their car registration on time. Nevertheless these checklists of "quality measures" are being pushed hard by the regulators and payers to demonstrate their push for quality in healthcare. For physicians it has created an additional burden of documentation whose cost the 1-2% 'quality bonus' does not even cover. In essence the incentive for demonstrating quality by completing these checklists becomes an economic disincentive. In addition, having to complete these checklists removes the focus from dealing with the real problems which brought the patient to medical attention. In the present era where the allotted time for each patient appointment is becoming shorter and shorter, adding these "quality checklists" decreases the time physician has to solve the problem that the patient sought medical care for and is likely to actually lower the quality of service delivered to the patients.

Self-reporting of quality parameters: Several physician groups and hospitals have initiated self-reporting of 'quality measures' to communicate quality to payers to be able to get more favorable payment terms. However, as would be expected these measures are designed to make them look good and that is exactly what they do. Those parameters that make the physicians look good are selectively reported/advertised to the public. Furthermore, as is expected of most self-reporting initiatives which are not verified independently, the real market value of these quality parameters is dubious and at best they can be regarded as marketing stunts.

Assessment of quality based on actual results of their treatments: Several economists believe that the quality of a physician or hospital can be measured by comparing success rate, complication rate or rate of post-operative infections, hospital re-admission rates and so on, after matching the reference and comparison patient groups. However, as a physician scientist, I have learnt that the only way to create identical (or near identical) patient groups for comparison is by randomization from a common cohort. When trying to compare the quality of physician or hospitals, such randomization is not possible. Patient cohort(s) treated by different physicians or hospitals are influenced by multitude of selection biases which are impossible to characterize or measure, and therefore cannot be eliminated, controlled or matched between patient groups to be compared. It is impossible to prevent or account for favorable patient selection (healthier patients with less co-morbidities) or technically simpler surgeries (the same procedure, say coronary bypass, can have different levels of technical difficulty again based on several patient factors). Not all complications are of equal severity and even equally severe infections are not of equal significance. Infection rates cannot be attributed entirely to a physician but involve multiple factors. Therefore, comparing quality of physicians or hospitals by comparing the above-mentioned outcomes by creating nearly identical patient cohorts is practically impossible. If it was indeed possible to determine quality from analysis of data, someone would have done it by now as all the ingredients needed for the purpose are readily available- huge amount of physician data, computing power, economic utility of such data and most importantly a potential financial windfall for whoever manages to do so. The fact that everyone has been talking about it for a long time but it has not been accomplished so far, argues strongly against the feasibility of such an approach.

Is a 2%(current) – 9% (planned for 2022) quality incentive, a meaningful bonus for physicians to improve and become higher quality physicians? To answer this question, let's consider the quality premium that is prevalent in the marketplace outside of the healthcare market. The earnings of high quality experienced MBAs can easily be up to 10 fold more than their less distinguished counterparts. The top 10 percentile high quality experienced lawyers can similarly command fees that are 2-5 times higher than their average or below average counterparts. High quality IT professionals have similar quality premiums and so on ......

Is the quality premium for the above service providers excessive? Delivering high quality requires much more than ticking the right boxes in the checklist. Besides talent and hard work, it requires unpaid time spent in learning and practicing, in addition to additional resources and provider time to actually deliver higher quality. It would require analysis of the additional costs required to deliver higher quality and understanding what incentives/rewards are meaningful for motivating providers to deliver the highest quality possible. In order to push the quality to the highest level, marginal benefit from providing a higher quality should be much more than the marginal cost in increasing the quality further. Since the marginal cost of increasing quality does not increase in a linear fashion but logarithmically particularly at the high end, the reward curve for high quality should not be linear but logarithmic. A 'fixed' 2% bonus for quality does not even cover the incremental cost of delivering higher quality care much less serve as an incentive to provide the highest quality care possible. Consider what would happen to quality if the "good lawyers" were paid 2% more than 'bad lawyers', or 'good MBAs' were paid 2% more money than 'bad MBAs', 'good athletes' were paid 2% more than bad athletes ......

Potential criticisms

"Some measures of physician quality are better than no measures"

I am not suggesting that efforts should not be made to measure, communicate and reward quality in healthcare. I am a huge believer in measuring, communicating and rewarding quality in the marketplace including in healthcare. My major concern is that the quality agenda in healthcare is being diluted and trivialized by use of untested surrogate markers which might measure diligence in best case scenario but definitely do not measure quality. By themselves, these markers may potentially be desirable additions to what we would like our healthcare providers to do. However to claim these to be 'direct" quality parameters takes the focus and attention away from the "real quality", whose measurement is much more nuanced and reflected indirectly by the reputation, popularity and price.

It is quite tempting to develop and use "quality markers" that can measure and communicate quality with a quick glance. However desirable, such quality parameters do not exist in any service industry, especially in highly customized services (such as for lawyer, MBAs, financial advisers, etc.) Even if we consider tangible and material goods as television sets, the highest quality and premium priced televisions are not the always the ones which are "superior" to their competitors in picture resolution, power consumption, contrast ratio etc. which can easily be measured and compared. Apple products are not superior to their competitor's products in technical specifications but still command a significant 'quality premium' in the market. In fact, most people who buy these products do not even look for or compare these specifications when making their choice. Even in the restaurant industry, quality and desirability of a restaurant is communicated based on reputation, popularity and price and not by any surrogate marker(s) with one-to-one correlation with restaurant quality.

When it is difficult to come up with simple and reliable measures of quality for tangible and durable products as televisions, personal computers and services such as restaurants where the "quality" can directly be appreciated by the customer, I suspect that establishing simple and reliable metrics to measure quality in service industries like healthcare, law, or finance is likely to be a gargantuan task if not entirely impossible. By developing and implementing the new 'quality metrics' in healthcare without the requisite planning, discussion and testing carries the risk of further 'trivializing' the importance of quality in healthcare. That the situation is already grim was pointed out to me by a colleague who said that some patients are now choosing physicians based on whether that physician's office has free parking. I am sure none of us will choose our lawyer or financial advisor that way but instead research their professional strengths. Though information about the quality of lawyers and financial advisors is still not as freely available and accurate as most of us would desire, still potential clients chose their lawyers and financial advisors etc. based on the information that is available to them. That patients would even consider choosing physicians based on availability of free parking space highlights the abysmal situation where patients have no meaningful and reliable information about physicians to make their selection.

The solution to measuring, communicating and rewarding quality lies in understanding how quality has traditionally been communicated in the marketplace, making sure these mechanisms are not compromised and, if possible, by removing any impediments in their effectiveness. The incentive structure and laws in healthcare have rendered reputation, popularity and price completely ineffective in measuring, communicating and rewarding quality. The recent quality initiatives can at best be characterized as "Wrong step in the Right direction".

Physicians are already making so much money. How much more money do they want?

Most physicians are paid well. This article is not a covert attempt at suggesting that physician earnings should increase further. There is also a huge spread between physicians' earning in the lowest and the highest deciles. This spread in the incomes of the physicians in not based on 'quality' but based on 'other' factors such as "doing more". The 'fee for service' system rewards 'hard work' based on number of services delivered, not on the quality of those service delivered. As a result, physicians preferentially spend their time and resources in doing more, through squeezing more patients in their clinic schedule with smaller time slots, doing more procedures, performing more "lucrative" (highly paid) services, etc. Investing time and resources in improving the quality of patient care is not reimbursed and therefore gets compromised especially when physician practices are in financial duress from increasing administrative costs and lower reimbursements. It is tempting to get physicians to see more patients by rewarding 'doing more' and by preventing them from lowering the quality 'by bringing in laws which punish bad quality'. However, since quality is difficult to measure objectively, it gradually will drift lower in the long run despite the laws to prevent it. These same incentives result in "creation of more work" to allow physicians to continue to "do more" to continue receiving the associated financial rewards. Rewarding quality in a meaningful way would shift the focus of physicians towards increasing quality and in the long run result in sustained and meaningful improvements in healthcare quality. The reward for 'higher quality' should be much more than that for 'harder work' to effectively incentivize physicians to direct their time and resources towards improving quality. This is not unlike in real life where say a 25% improvement in quality is rewarded much more than 25% more work and as a result, most of us focus on trying to improve quality.

In summary, the recent focus on improving the quality of healthcare by making physicians 'demonstrate higher quality' by use of checklists and incentivizing them to do so with a generous 2% bonus is laudable in its intent. However, careful analysis of these incentives and comparison of incentives and mechanisms that promote quality in markets for other services (professions) suggests these recent incentives in healthcare are seriously flawed. They paradoxically serve to nullify the usual market mechanisms by which quality is measured, communicated to potential consumers, and rewarded. Efforts to improve quality in healthcare should focus on correcting these market distortions which will provide physicians genuine and meaningful incentives to deliver the highest quality care possible to succeed in the healthcare marketplace.


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Again, in policy making, how can you reward something that you cannot measure directly. For price, popularity and reputation to be effective, you need a free market. Unfortunately the reality is that we don't have a free market in healthcare.

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Cool analysis. I like it. Price, popularity and reputation are definitely more reliable and meaningful than the quality criteria being "pushed" under PQRS and MACRA.

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But price is so unreliable. Anyone can jack up their price and manipulate. I agree with the rest of it though.

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