The Potential of Linking Quality of Medical Care with Payment Structures in the German and U.S. Healthcare Systems

May 21, 2012

On May 21, 2012, the American-German Institute hosted a conference on “The Potential of Linking Quality of Medical Care with Payment Structures in the German and U.S. Healthcare Systems” with the generous support of the Robert Bosch Stiftung. Bringing together German and American health care policy experts, the conference was part of AGI’s project on health care payment structures, which will also include several seminars and a policy report, ending with a final conference in Berlin on June 27, 2012. At the May 21 conference in Washington, German and American policy experts described the political obstacles to payment reform, agreed that both countries have much to learn from one another, and emphasized both the importance of data analysis of the effects of outcome-based payment structures on improving quality and controlling costs in guiding future reforms.

After a keynote address by former Senator David Durenberger (MN), a panel of four experts involved in studying and implementing a “pay-for-performance” (P4P) payment structure in Germany discussed their experiences working with P4P systems and attempting to implement quality-based payment reforms. Following a lunchtime address by Sherry Glied, Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services, the conference moved on to a discussion of quality-based payment reforms in the United States, with a particular focus on the Affordable Care Act (ACA).

In describing the role of P4P and other payment reforms in Germany, the first panel emphasized the use of payment reform as a means to achieve greater quality care at lower cost. Regarding the latter, the panel highlighted the lack of clear evidence and consensus regarding the ability of P4P structures to control or reduce costs. On the other hand, the panel did find evidence for increased quality outcomes after the implementation of P4P reforms, although one expert reemphasized that P4P is not the best suited payment structure for certain conditions and remains shrouded in a great deal of uncertainty regarding the best implementation methods. As a result, the panel concluded that policymakers must continue to balance quality and cost and use P4P only as a tool rather than a panacea in tackling issues in health services. Furthermore, the panel judged Germany’s extensive monitoring of health care outcomes as awkwardly excessive of the amount necessary to gauge the performance of the German system, but insufficient to allow for its use in wider P4P implementation. This reflects both a feeling of inevitability in Germany’s transition to P4P and continued uncertainty regarding its implementation.

Additionally, the panel illuminated the difficulty in implementing payment reforms. Although the panelists did highlight 37 active P4P initiatives, they also underscored the tremendous political opposition to quality-based reform, which physicians tend to oppose. While the P4P projects have achieved great success in improving outcomes, especially when implemented properly in conjunction with other initiatives, policymakers have so far failed to establish a quality culture in Germany. As a result, policymakers have been forced to take a slower approach than their American counterparts, who successfully promoted a number of P4P reforms within the ACA, relying on an incremental implementation of quality documentation and outcome-based payment structures with a looming threat of reversal.

Following Assistant Secretary Glied’s introduction of P4P within the context of the ACA, the second panel discussed the impetus for payment reform in the U.S. health care system and the ways in which U.S. policymakers have attempted to address systemic shortcomings through the ACA. Notably, one expert described an inverse relationship between the cost of Medicare treatments and the outcomes of that treatment. Furthermore, the panel reminded the audience of the intrinsic difficulty of establishing a national system to address health issues in a country as large and diverse as the United States while simultaneously attempting to bend the cost curve and bring spending under control. Like their German counterparts, the U.S. speakers emphasized the uncertainty concerning the ability of P4P to reduce cost while acknowledging its ability to increase quality when implemented correctly.

Policymakers are faced with the challenges of uncertainty regarding the effectiveness of payment structure reforms and tremendous diversity within the U.S. health system, which influenced the decision of whether to include P4P programs in the ACA. Payment structure reforms are generally included as voluntary demonstration initiatives, the results of which the Department of Health and Human Services will carefully monitor to determine the generalizability of these reforms. So far, the Department has been successful in attracting participants, particularly to the Affordable Care Organization (ACO) initiative. Ultimately, the ACA creates a system based on the preexisting foundations of the United States’ fragmented, employer-based health care system. Therefore, reforms in the U.S. face different obstacles than in the more unified German system, exacerbated by a heavily polarized political landscape. As a result, the future of P4P in the United States remains uncertain despite the creation of a number of programs through the ACA.

Ultimately, policymakers in the United States and Germany must confront differing obstacles in implementing quality-based delivery system reforms. In Germany, policymakers must overcome opposition from physicians and a suspicious body politic, resulting in slow but steady reforms. In the United States, policymakers must simultaneously establish a national system and test the most effective methods to improve quality and reduce cost, leading to more rapid but less certain reforms. As a result, the United States has focused on testing programs in a limited context with an afterthought of national application, while Germany has prioritized more detailed documentation and the implementation of P4P reforms on a national scale.


Kimberly Frank