But you already knew that didn’t you? I usually disagree with Steffie Woodhandler and David Himmelstein but (like a stopped clock) they are occasionally correct. This is their view on why pay-for-performance doesn’t work:
Intensive coding — that is, embellishing diagnoses to maximize payment under per case or risk adjusted capitation schemes — also makes patients seem sicker on paper, and hence boosts risk adjusted quality scores. Under US Medicare’s DRG (diagnosis related groups) hospital payment system, recoding a diagnosis as “aspiration pneumonia with acute or chronic systolic heart failure” rather than simply “pneumonia with chronic heart failure” triples the payment and increases the risk score. Such “upcoding” is endemic among private health maintenance organizations that contract with Medicare for risk adjusted capitation payments, as well as among hospitals.
HT: Sarah Kliff.