One of the nation’s large hospital systems is about to try an experiment in pay for performance (P4P) – that is, linking pay for doctors to how well they reduce costs, increase patient satisfaction, and improve the quality of care. The Health and Hospitals Corporation, which runs New York City’s 11 public hospitals, will soon change the way it determines bonuses for the more than 3,300 doctors at the New York University School of Medicine, the Mount Sinai School of Medicine, and the Physician Affiliate Group of New York. These doctors will receive no increases for the next three years (they are salaried) but instead will be given bonuses if they meet goals such as improving the coordination of care and reducing the average length of stay. Hospital officials and the union that represents these doctors are still finalizing the details, but it looks like this experiment will be implemented within a few months.

This new approach to health care raises lots of questions, both large (Are doctors’ practices the cause of the huge and growing health care costs in the U.S.?) and small (How much influence does one doctor have over an indicator – for example, reducing time in the emergency room – when that time may actually depend on the actions of other hospital staff members?). And what evidence is there that this P4P approach works? Many health care experts are in this debate – read more here and here – but there are many compensation experts with lots of experience with P4P in areas other than health care that should also weigh into the discussion.

The impetus for the New York plan appears to be an attempt to incorporate provisions of the impending U.S. health care reform legislation (Obamacare) that include rewards for hospitals that tie pay to a list of quality metrics. Achieving many of these same performance measures that are proposed for the NYC doctors will be a part of the hospitals’ compliance with national health care reforms, designed to bring down costs and provide incentives for improved medical care.

Clearly this is an important proposal, which may influence how health care is delivered in the U.S. P4P is not a new concept to compensation professionals – it has been used in many industries and sectors. Now is the time for a review of the lessons learned in implementing P4P in various situations to see how they apply to health care and hospital doctors.