We’re starting to pay for performance. But can we continue?

Steve Pearlstein had a great column over the weekend looking at optimistic trends in the health-care sector. The big one, of course, is pay-for-performance, which is sweeping through both Medicare and the private-insurance sector.

Here’s the thing about pay-for-performance: It’s really about not paying — or at least paying less — for poor performance. And that strikes most people as a good idea. As Pearlstein writes, “While medical providers have developed elaborate rationalizations for why health spending rises so much, they know they cannot offer any excuses for inferior quality — the public wouldn’t stand for it.”

This makes pay-for-performance a potential answer to a very tough political question. Telling people they can’t have treatments they need is cruel. Telling doctors we’re not going to pay them enough to deliver treatments is counterproductive. But telling everyone that we’re going to pay less for medicine that doesn’t appear to work? We already do that. No insurer will pay for an appendectomy just because you have a headache. That’s an easy example, of course, but pay-for-performance is about gathering the data needed for the hard examples: back surgery versus physical therapy, for instance.

For the past couple of years, Medicare has been gathering that data. Or, more precisely, it’s been asking hospitals to gather that data themselves. You can pick through it here. As of October, writes Pearlstein, an Affordable Care Act provision will kick in and “Medicare will launch a program it calls ‘value-based purchasing’ in which hospitals can see that their reimbursement rates will rise or fall by one percentage point based on how they do on their quality measures, both in absolute terms and relative to their score the year before. In 2017, the stakes will double, with a two-percentage-point variation allowed in each direction. And because of the way the incentives are structured, there will be a competitive dynamic that drives the benchmarks higher every year — a ‘race to the top’ in hospital quality.”

Or so goes the hope. Private insurers are attempting something similar. “This year WellPoint took all of this one step further by announcing that its contracts will not allow for any increase for any hospital that fails to reach an agreed-upon set of quality benchmarks, with bonuses for hospitals that exceed them. Given that annual rate increases have averaged 8 percent, we’re talking real money here.”

So why don’t providers scream bloody murder? Well, some of them try. But a lot of them think they’ll come out ahead. Who’s the doctor, after all, who thinks he’s clearly worse than most of his peers? And even if you find that doctor, is he really going to try and make that argument publicly? As for quibbling with the metrics, it’s worth a try, but it’s not working out that well for the teaching profession, which has wedged itself into a tough political spot because its perceived opposition to measurement has been taken as an admission of poor quality.

And quality matters to people. It even matters to the uninsured. And the hope here is that we can cut costs while improving quality. If that sounds like having our cake, eating it, too, and retaining our slim, girlish figures, well, it is. But it’s in context of a medical system where 15 percent to 50 percent of what we do does not appear to benefit us at all. Those numbers suggest it’s clearly possible to cut costs while improving quality. The question is simply whether we can pull it off, both technically and politically. And the news out of Medicare and Wellpoint is encouraging.