Value of Physician Performance in Diabetes System of Care Among the Elderly Medicare Patients: Implications for Pay-for-Performance

While pay-for-performance (P4P) is an appealing method of influencing physician behavior, the direct impact of P4P on quality performance and return on investment remains unknown. This study seeks to quantify in dollar terms the value of incremental improvements in Geisinger’s Diabetes System of Care (DSC) – i.e., an all-or-none “bundle” of nine diabetes-related performance measures – among Medicare Advantage members attributable to individual primary care physicians (PCPs). The results indicate that a one-percentage point improvement in the percent of a PCP’s patients with diabetes that met all the DSC elements in a given year – i.e., DSC bundle score – was associated with approximately $4 per-member-per-month (in 2006 dollars) reduction in total medical cost incurred in the same year.  This was driven mainly by reductions in inpatient cost. Moreover, there is variation in how much each DSC element contributes to the cost reduction.  Among the nine elements, urine protein testing and blood pressure measurements were most consistently associated with lower total medical costs. These findings suggest the DSC may be useful in establishing a feasible P4P scheme that incentivizes PCPs to improve diabetes care quality.