In recent years, pay-for-performance (P4P) programs have emerged as a strategy for driving improvements in the quality, safety, and efficiency of delivered health care. In 2005, with passage of the Deficit Reduction Act, Congress mandated that the Secretary of the Department of Health and Human Services (DHHS) develop a plan for value-based purchasing (VBP) for Medicare hospital services. VBP is one strategy for modifying the payment system to incentivize improvements in the quality of care delivered to beneficiaries in the Medicare program. The use of incentives—by paying differentially for performance—is a key component of building a value-driven health care system as called for by the DHHS Secretary’s Four Cornerstones Initiative. To inform the development of the VBP plan for Medicare hospital services, the Assistant Secretary for Planning and Evaluation (ASPE), in collaboration with the Centers for Medicare & Medicaid Services, contracted with the RAND Corporation to conduct an environmental scan of the hospital P4P landscape. This report presents the results from the environmental scan of P4P and pay-for-reporting (P4R) programs; it also includes a review of the empirical evidence about the impact of these programs, a description of program design features, and a summary of lessons learned from currently operating P4P and P4R programs about the structure of these programs and implementation issues.
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