Pay for performance -- and the controversy that goes with it -- is now a part of Medicare.

In the last moments of the lame duck session, Congress replaced a 5 percent cut in the rate Medicare pays physicians with a rate freeze and the possibility of earning as much as 1.5 percent in bonuses for doctors who report their performance according to pre-set measures. Eventually, a portion of physicians' pay is slated to be based on how high their performance scores are.

Such schemes have already been a part of the private sector for years, mostly at the urging of large employers and insurers who want to make sure they are not paying for unhelpful care. Doctors participating in such programs may add as much as $20,000 to their annual income.

They have long been called for by the Bush Administration, as well, and enjoy the support of prominent Republicans and some Democrats in Congress.

Critics, however, say it could be expensive, ultimately do little to improve quality or efficiency of care, and place dangerous restrictions on the way doctors practice medicine.

"Medicare is a broken payment system," said Gail Wilensky, a health economist at Project HOPE, at a briefing Friday sponsored by the Alliance for Health Reform.

Wilensky was one of the authors of two seminal Institutes of Medicine reports which recommended immediately beginning a gradual approach to implementing pay for performance in Medicare.

The current payment system, which pays doctors based on the volume of care they provide -- regardless of whether the treatment actually does any good -- encourages both high cost and poor quality of care, the report found.

Part of the solution, the authors wrote, is to establish guidelines -- like giving aspirin to a heart attack patient -- and then pay more to doctors who fulfill those all of those guidelines.

"The object of pay for performance is to start paying for what you want," said Stuart Guterman, head of the Commonwealth Fund's Program on Medicare's Future.

But figuring out what you want to pay for is not so easy.

A pay-for-performance mechanism that is large enough to really change physician behavior also might not result in much in the way of savings.

Last year, the British National Health Service found itself tens of millions of dollars over budget when doctors collected much more money than expected in a pay-for-performance arrangement.

Also, a study in the Journal of the American Medical Association this week found that hospital performance data collected by Medicare was not a very robust predictor of patient mortality for three common conditions.

Complicating the matter is the fact that private-sector standards and the reporting required for Medicare are not always in synch, thus imposing significant administrative burdens on doctors, Robert Galvin, director of global healthcare at General Electric, told United Press International. "It hurts the healthcare system when there are too many measures. But we are coordinating more extensively than before."

Some have argued that patient outcome data should be included in the performance measures, but that raises the risk of doctors turning away the most vulnerable patients to protect their scores -- and thus, their income.

"It's a perverse incentive to not treat the sicker, more difficult patients," said Robert Berenson, a senior fellow at the Urban Institute, a left-leaning think tank, and doctors are also likely to try to manipulate data in other ways.

A better solution would be to address fundamental financing and payment systems in Medicare that are creating unproductive incentives in the first place, Berenson said. If hospitals are getting paid for readmitting patients the same day they are released, for example, it would make sense to simply stop paying for same-day readmissions.

"Change the system," he said. "Don't expect pay for performance to solve the problem.

"We have more important things to do with physician payment."

The group with perhaps the most at stake are doctors in small and solo practices.

A majority of such doctors still use paper records, a fact that makes the prospect of manually collecting data daunting, said George Petruncio, a doctor in solo practice in New Jersey.

The cost of making records electronic is also prohibitively high, he said. A computer system for an office like his could cost as much as $100,000, but the potential gains from pay-for-performance are relatively small.

"It's an unfunded mandate," he told UPI.

Many doctors also worry that they will not have the leeway to make decisions about their patients' care because performance measures, which must be painstakingly developed by each medical specialty society, cannot keep up with the latest science, Petruncio said. "What if there's a better drug available, but it hasn't yet made it into the guidelines?

"I have to take a (financial) hit just to do what's best for my patient."

Ultimately, he added, it might just be better to let people learn about quality the old-fashioned way -- through word of mouth.

"Patients can vote with their feet," he said. "People talk."