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Pay for Performance Compensation Strategy

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In the past, several different techniques were employed to provide good health care in nursing homes. The compensation system and the monitoring and enforcement system were two of the most often utilized instruments. Residential care and quality of life were covered by the reimbursement system, which paid providers in line with the federal Nursing Home Reform Law of 1987’s requirements. And a monitoring and enforcement mechanism ensured that the providers fulfilled these requirements, and if they didn’t, they were penalized with fines and penalties until the faults were rectified. For a number of reasons, these approaches did not prove to be effective enough in improving health-care standards, and simply too many people suffered every day. Providers often expressed dissatisfaction with their pay, claiming that they were underpaid for performing a better job. In light of these conditions, agencies devised the ‘Pay for Performance’ program to guarantee improved health care facilities by paying nurses and doctors based on their performance and increasing the overall quality of care they provide (Mallot, 2008, p.2).

Meaning of Pay for Performance, Compensation, Benefits and Entitlement

Pay for Performance (P4P) is a developing initiative that incentivizes health-care professionals to improve their services by paying them based on their results. Participation, accomplishment, and incentives are the three main elements of the program. The term “participation” refers to all workers of a company who go above and beyond the call of duty. The emphasis on success is on lowering costs while increasing profits. It also emphasizes collective rather than individual achievement, which emphasizes output. Whereas, in most cases, incentives are in the form of monetary awards awarded at regular intervals for exceptional achievement (American Nurse Association, 2006).

Pay for Performance Compensation Strategy

Compensation is a system of trade. Participants are given particular objectives to achieve, and if they do, they are rewarded with money or valuable goods. There are two types of compensation: direct and indirect. Direct compensation is money given to workers in the form of basic pay, incentive pay, merit pay, and deferred pay, while indirect compensation isn’t. Instead, health, pensions, social security, and other insurance programs are covered.

Benefits, on the other hand, are a non-monetary type of remuneration given in addition to a monetary wage to help employees live better lives. As a large number of workers approach retirement each year, health and medical benefits, educational assistance such as tuition reimbursements and book costs, work/life benefits such as life insurance, long or short term disability, cancer/critical illness plans, vision and dental coverage, and, most importantly, retirement and pension plans for retirees are all important (Report by Center of Health Program Development and Management, University of Maryland, Baltimore County, 2003).

Challenges Associated with Pay of Performance Strategy

The Pay for Performance approach has a variety of difficulties and issues. The first is that it has the potential to harm nursing by increasing the paperwork burden. More than 30% of the allotted time is spent on documentation of their job since the program needs a lot of paperwork for maintaining the record, through which nursing providers are monitored and rewarded depending on their performance (American Hospitals Association, 2003; Pg 2004). The authenticity of these documents is further questioned, given that, according to the Centre for Medicare Advocacy’s research, it is common for providers to self-report their data in pay-for-performance schemes. As a result, incorrect documentation is produced. Another issue that comes to mind is that institutions tend to concentrate only on the points targeted by the schemes, rather than wider issues like patient safety and quality of treatment, or how patients really fare. It is feared that clinicians and managers only focus on improving scores without necessarily working on greater issues of providing care or the final outcomes. Some raise concerns on the credibility of whether the currently used performance measures are true indicators of the quality of care or predictors of outcomes used in these institutions (Clarke, Raphael & Disch, 2009).

Because the pay for performance program encourages providers to concentrate on reaching population-based standards rather than addressing the particular needs of the people for whom they are responsible, there is a risk that providers may abandon personalized resident care and cultural change. This presents a problem since it may encourage nursing facilities to simply deny admittance to patients who do not meet their criteria, reducing their chances of receiving P4P funding. Another distressing issue is that institutions with few resources may find themselves in a downward spiral of producing poor outcomes while having few resources to improve underlying performance or document their work in order to meet regulatory mandates, leading to lower reimbursement and even fewer resources, and so on. When a program is set up such that “good” performers get more money and “bad” performers get less, the bad performer’s capacity to offer safe care and maintain a positive image is harmed (Mallot, 2008). As a result, Pay for Performance may contribute to increasing disparities in care quality across institutions.

Measures Taken for Implementing P4P

The Pay for Performance programs which are primarily focused on improving the quality, safety and overall standards of patients’ healthcare can turn out to be a positive force for the healthcare system. For this to happen, measures should be taken for these programs to be implemented properly. These measures range from ensuring quality care services to building a healthy patient/physician relationship. P4P programs should be fair and ethical. Commitment to improved patient care should be given top priority. Quality of care should be evidence-based created by physicians across appropriate specialties. Furthermore, voluntary positions should be offered to physicians to participate in the program. And economic viability of the physicians who don’t participate in these program practices should not be threatened. This supports participation by physicians in all practice settings and minimizes the potential financial or technological barriers including start up costs.

            The patient/physician relationship also plays a very important role in building up a successful program. The nurse-patient connection, according to Press Ganey Associates Inc., sets the tone of the care experience and has a significant effect on patient satisfaction. Since patients spend most of their time with these nurses, their interaction allows the patients to draw positive conclusions about the providers and the overall program. This also supports the Pay for Performance program since the program is all about performing and maintaining the standards. Failure to do so would result in fines and other penalties, which would be applied until the flaws were addressed.

            Use of accurate data and fair reporting should also be practiced during the implementation of these programs since documentation plays a vital role in awarding these nurses. This also includes scientifically valid analytical methods. There should be some check in place for these physicians and nurses while documenting so that their performance is evaluated on fair basis. One other suggestion could be to take feedback from the patients themselves together with their families of the services provided by these physicians and if they are satisfied with them. Another important factor contributing to the overall performance by these physicians is providing new funds for positive incentives to physicians for their participation in the program. This not only supports a healthy competition but also the goal of quality improvement across all participating physicians. Agency theories suggest that these financial incentives are most likely to influence behaviors when there is a clear link between behaviors and rewards.

            Pay for performance programs should also be made public for the sake of transparency. All the information regarding different programs including their awards and criteria should be put on a dedicated website which should be monitored on regular basis. This will not only create public awareness of the program but also help sharing of data and information on the best practices available (American Medical Association Report, 2005).

Review on a Registered Nurse Position

Registered Nurse position under review in this report would be of a labor and delivery nurse. One of the primary responsibilities of a labor and delivery nurse is to assist a mother or a pregnant woman during the whole child delivery process. For some women, having children can be a very stressful and frightening experience. Fatal complications can arise for both baby and the mother and its highly important and recommended if there is some medical professional present with the mother at all times. A successful labor and delivery nurse loves to work with people and perform in pressure situations. And when needed, they help the doctor deliver the baby by monitoring the mother throughout the labor process providing guidelines, support and directions in breathing and relaxing techniques as necessary. In many hospitals, they help mothers to prepare for delivery and accompany them into the delivery room. Typically, they are employed in hospital maternity wards but may also be employed in health clinics, birthing centers or obstetrics and gynecology (OB/GYN) offices.

            There are some specific requirements for one to become a labor and delivery nurse. One should have successfully completed a Bachelor of Science in Nursing and must be a registered nurse (RN). Some prior work experience in this field is critical. A background in teaching or social work can also be helpful since their work includes interacting with women and educating them on birth control, nursing, postpartum depression and other child care issues. All in all, labor and delivery nurses have a great prospect of excelling in their field with job offers projected to grow at a rate of 21-23% throughout year 2018 (Top Nursing Schools, 2012).

Pay for Performance Plan Including Compensations and Benefits

There are a few questions that should be kept in mind when considering Pay for Performance. The first one is if the agency is ready for Pay for performance program. This includes if the organizational culture supports this program and if the management is committed to change in the culture. Secondly, what are the goals of pay for performance? Is it motivation or to increase individual or organizational performances etc. Who should be paid for performance? Does it cover all the employees? What should be rewarded and how should employees be rewarded? What sort of compensation and benefits are included? Who provides input on the performance ratings? Is it the managers or first-level supervisors? How are these programs funded and how the overall cost is managed? These are all the questions that should be considered while writing a successful Pay for Performance plan.

            Since it is a performance driven program, individuals are gauged according to their performances and meeting their goals in order to be eligible for the rewards. Rewards should be awarded in the form of cash bonuses. Unlike base pay which an employee is bound to get and is part of the employment contract, bonuses should depend purely on performance and are not guaranteed. Another form of benefit can be performance-based pay increase which in contrast to bonuses are incorporated into employee’s base pay and is usually adjusted upwards. Employees may find this more attractive as compared to the bonuses since it enhances the value of several other benefits including retirement earnings, savings plan and life insurance (McPhie, 2006).


The data and statistics on the effect of the Pay for Performance program are, unsurprisingly, few. Because it is a new program, considerable consideration must be given to the kind of study required to fully comprehend its effect on health-care practices. It is clear that it provides great opportunities to the care providers to enhance their care standards by providing reimbursements corresponding to their performances and also to improve overall medical care process. However, it is yet to be seen if the system is efficient and effective enough to sustain for a longer period of time.

  • McPhie, A. G. (January 2006). Report on Design an Effective Pay for Performance Compensation Plan
  • American Medical Association Report. (2005, June 21). Principles for Pay for Performance Program
  • Clarke, Raphael & Disch. (2009). Challenges and Directions for Nursing in Pay for Performance
  • Movement. Retrieved from: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2697611/
  • Mallot, J. (2008). Report of the Long Term Care Community Coalition Report by Center of Health Program Development and Management, University of Maryland, Baltimore County (2003, October).
  • The Americal Nurse Association. (2006). RNs and Pay for Performance. Retrieved from: http://www.nursingworld.org/dlwa/wages/wp8.htm
  • Top Nursing Schools. (2008). Retrieved from: http://www.topschoolsfornursing.com/445/labor-delivery-nurse

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