Performance Pay Comes to the Hospital
Goldman Sachs CEO Lloyd Blankfein is into it. So are education secretary Arne Duncan and Gawker editor A.J. Daulerio. Policy wonks champion it, charter school teachers embrace it, and professional athletes cash in on it. In our data-driven age, “performance pay” is the Next Big Thing. The logic is seductive: collect numbers, cut them up six different ways, and let a computer decide who’s worth how much. No favoritism, no bias, no human mess. The winners rise to the top, the losers don’t, and the whole system improves as a result of the competition.
Now, thanks to the Affordable Care Act, performance pay is coming to a hospital near you. Under a system that went into effect in October, the Medicare funds of some 3,500 U.S. hospitals are pegged to a dozen different metrics, including patient experience and outcome. The hospitals will lose a percentage of their usual federal dollars, with the opportunity to earn it back for showing improvement. The top performers can earn back more than they lost—not unlike a Christmas bonus—while the underachievers have to live with the financial hit.
The only question is, when it comes to medicine, does pay-for-performance actually work? Two recent studies, both in the New England Journal of Medicine, go in search of answers and arrive at different conclusions.