“Pay-for-performance” medicine has gained popularity in recent years, and Obamacare makes it a reality for Medicare enrollees.  But that’s not necessarily a good thing.

Pay-for-performance allows third parties to pay physicians based on treatment outcomes.  In theory, this sounds like a great way to encourage doctors to improve outcomes.  But in practice, it’s a bit more complex.

To determine payments, payers must use some sort of yardstick to measure outcomes.  Medicare has done this for years.  Its hospital and physician quality reporting programs require health care providers to report on government-chosen quality measures or face reduced reimbursement rates.

Obamacare carries that a step further.  Under the new law, providers won’t just see reimbursement cuts for failing to report on quality measures—they’ll also face pay cuts if performance on those measures doesn’t satisfy standards to be set by the Secretary of Health and Human Services.  This opens up a whole new can of worms.

In some cases, tying financial incentives to outcomes may produce positive effects.   Studies show that the jury is still out on its real effectiveness.  For the most part, value-based purchasing (pay-for-performance) seems to do little to improve patient health.  Indeed, financial incentives could actually punish physicians for doing the right thing.

A recent study from Cleveland Clinic shows how this could happen.  The Clinic studied hospital readmission rates for patients with heart failure.  It is often considered a sign of poor quality care when a heart patient, once released from a hospital, must be readmitted for further treatment.  Turns out, this may not be the case at all.

Writes Karen Pallarito for the HealthDay Reporter, the Clinic reasons that “[k]eeping more patients alive for a month in the first place means there are more patients eligible for readmission…They also suspect that assuring appropriate care for these patients, including any necessary procedures or surgery, may necessitate readmission to the hospital — which would drive up readmission rates.”

The results of the study showed that high readmission rates actually corresponded to lower 30-day death rates.  The Cleveland Clinic’s 30-day readmission rate for heart failure was 28 percent, 3.3 points higher than the national average.  But their 30-day death rate of 8.8 percent was 2.4 points below the national average.

Starting on Oct. 1, 2012, Medicare payments for hospitals with high readmission rates for certain conditions, including heart failure, will be reduced.  This means Obamacare may actually punish hospitals and physicians for providing better quality care.  As Dr. Eiran Z. Gorodeski of the Cleveland Clinic put it, “I think that the message to patients and the general public is that they should be wary of seemingly simple measures of quality of care.”

There’s also a message here for lawmakers: health care is too large and complex to expect central planning to yield positive results.  Unfortunately, the passage of Obamacare and the recent recess appointment of Dr. Donald Berwick as Medicare head only move the U.S. further in that direction.