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PubMed2006

What is the empirical basis for paying for quality in health care?

Despite more than a decade of bench-marking and public reporting of quality problems in the health care sector, changes in medical practice have been slow to materialize. To accelerate quality improvement, many private and public payers have begun to offer financial incentives to physicians and hospitals based on their performance on clinical and service quality measures. The authors review the empirical literature on paying for quality in health care and comparable interventions in other sectors. They find little evidence to support the effectiveness of paying for quality. The absence of findings for an effect may be attributable to the small size of the bonuses studied and the fact that payers often accounted for only a fraction of the targeted provider's panel. Even in non-health settings, however, where the institutional features are more favorable to a positive impact, the literature contains mixed results on the effectiveness of analogous pay-for-performance schemes.

Program Evaluation↗

PubMed2006

Financial incentives and gaming in alcohol treatment.

This study looks at the effect of performance-based contracting (PBC) on administrative information misreports in substance abuse treatment in Maine. For about 700 alcohol abuse treatment episodes in the period 1990-1995, we constructed clinician report gaming indicators from two data sets: the Maine Addiction Treatment System (MATS) and medical record abstracts. Gaming, in this study, refers to differences in MATS reports and the medical records for an episode. Under PBC, which was implemented in 1992, a provider's financial reward was positively related to treatment outcomes measured by some reports from MATS. We found that the introduction of PBC increased gaming. The data supported the hypotheses that clinicians overstated patient severity at the beginning of treatment episodes, and understated severity at the end.

Adult↗

PubMed1996

Diabetes in a managed care system.

Health care expenditures account for over 14% of the gross domestic product in the United States. Managed care has evolved to control these costs. Because diabetes accounts for nearly 15% of health care expenditures, the strategies used by managed care organizations are expected to have a particular effect on diabetes. Managed care organizations have two primary goals: to control costs and to provide care of sufficient quality to attract and satisfy enrollees. Managed care organizations have designed strategies to meet these goals. Four primary managed care strategies and their effects on diabetes care are discussed: 1) payment incentives rewarding desired provider practice patterns; 2) designation of providers who possess desirable practice behaviors; 3) coverage policies that control the services paid for; and 4) traditional insurance strategies that determine who is eligible for insurance and what premiums are to be paid. The few direct studies of the effects of each strategy on the care of diabetic persons are discussed. The conclusion is that although managed care organizations have the potential to provide excellent care for diabetic persons, little evidence exists that they have improved either the quality or the cost-effectiveness of diabetes care. Recommendations to guide the development of cost-effective care for diabetic persons are presented.

Cost-Benefit Analysis↗

PubMedDate not supplied

Using financing to motivate a for-profit health care provider to deliver family planning services: is it a cost-effective intervention? A study of AAR health services in Kenya.

Despite much discussion of the role of private health care providers, there are no tried and tested models for supporting for-profit providers in ways that produce cost-effective public health outcomes. This paper examines the cost effectiveness of using a loan mechanism to motivate a for-profit provider to deliver family planning services. The intervention examined directly resulted in a private provider delivering family planning services, however, it did not create a long-term financial incentive for the private provider to promote the use of family planning. The cost effectiveness of this intervention is analysed using a methodology that captures long term sustainability of the intervention within a traditional family planning outcome measure, such as couple years protection (CYP), by discounting future expected CYPs. Depending on the method for analysing costs and assumptions regarding future CYPs, this intervention produced family planning outcomes at no or very low cost (0 dollars-4.11 dollars per CYP). The analysis demonstrates that innovative family planning interventions with private providers should be considered as they can be more cost effective than traditional programmes.

Capital Financing↗

PubMed2005

Advance price or purchase commitments to create markets for treatments for diseases of poverty: lessons from three policies.

New drugs and vaccines are needed for tackling diseases of poverty in low- and middle-income countries. The lack of effective demand or market for these products translates into insufficient investment being made in research and development to meet the need for them. Many have advocated cost-reducing (push) and market-enhancing (pull) incentives to tackle this problem. Advance price or purchase commitments (APPCs) funded by international agencies and governments offer one way forward. This paper looks at design issues for APPCs for drugs and vaccines for diseases of poverty drawing on experience and lessons from three case studies: the introduction of the meningitis C vaccine in the United Kingdom; the Orphan Drug Act (ODA) in the United States of America (US); and the newly legislated US Project BioShield for bioterrorist interventions. Our key conclusion is that that APPCs have the potential to be a powerful tool and should be tried. The correct structure and design may only be determined through the process of taking action to set one up.

Bioterrorism↗

PubMed1994

The influence of the New York Quality Assurance System on casemix in nursing homes.

The New York Quality Assurance System (NYQAS) was designed to assure high-quality nursing home care in New York. Among its many incentives, NYQAS may change the likelihood that elderly with heavy-care needs will be admitted to nursing homes. This article addresses that hypothesis. Data for descriptive and multivariate analyses come from the RUGs-II Patient Review Instrument and the Medicare and Medicaid Automated Certification System files for 1986-1990. The descriptive analyses focus on functional ability in new nursing home residents before and after NYQAS. The multivariate analyses adjust for pre-NYQAS, RUGs-related trends in casemix, resident demographics, and nursing home characteristics that influence casemix. The results suggest a significant but small decrease in functional status at admission during the post-NYQAS era.

Data Collection↗

PubMed1987

A community hospital payment experiment outperforms national experience. The Hospital Experimental Payment program in Rochester, NY.

Since January 1980, the hospitals in the Rochester, NY, area have been operating under a community-wide revenue cap. This prospective payment system features local administration and control and is the first time a group of hospitals have committed themselves to a comprehensive regional financing system. This system differs from other prospective payment programs in that it covers both inpatient and outpatient care and offers incentives for ambulatory treatment whenever clinically appropriate. In the first five years of this program, the increase in Rochester area hospital expenses was 46%, compared with 52% for New York State hospitals and 68% for US hospitals at large. Further, the financial position of the Rochester hospitals improved, showing an operating margin of 2.6%, compared with a figure of-15.8% for New York State hospitals at large. A community-wide assessment showed no evidence of a reduction in the quality of or access to care. This community system for hospital payment and planning merits serious consideration for areas wishing to realize high-quality care at an affordable cost through a balanced combination of self-regulation, cooperation, and competition.

Boston↗

PubMed2006

The role of disease management in pay-for-performance programs for improving the care of chronically ill patients.

To date, pay-for-performance programs targeting the care of persons with chronic conditions have primarily been directed at physicians and provide an alternative to health plan-sponsored chronic disease management (DM) programs. Both approaches require similar infrastructure, and each has its own advantages and disadvantages for program implementation. Pay-for-performance programs use incentives based on patient outcomes; however, an alternative system might incorporate measures of structure and process. Using a conceptual framework, the authors explore the variation in 50 diabetes DM programs using data from the 2002 National Business Coalition on Health's eValue8 Request for Information (RFI). The authors raise issues relevant to the assignment of accountability for patient outcomes to either health plans or physicians. They analyze the association between RFI scores measuring structures and processes, and HEDIS diabetes intermediate outcome measures. Finally, the strengths and weaknesses of using the RFI scores as an alternative metric for pay-for-performance programs are discussed.

Chronic Disease↗

PubMed2003

Day treatment for cocaine dependence: incremental utility over outpatient counseling and voucher incentives.

Urban, poor, crack cocaine-dependent clients were randomly assigned to outpatient addiction counseling (n=39) or day treatment (n=40). Participants in both conditions received equivalent individual cognitive-behavioral counseling and earned equivalent payment vouchers for providing cocaine-negative urine samples. However, day treatment participants attended significantly more psychoeducational and recreational groups and received two meals per day. Prior to random assignment, more participants expressed a preference for day treatment and participants were more likely to return for an initial appointment following assignment to day treatment. However, no significant between-groups differences in tenure or abstinence were detected during the 3-month course of treatment. These null findings were attributable to an absence of a dose-response effect for the group interventions in the day treatment condition. In addition, there may have been a ceiling effect from the vouchers, which masked the influence of the additional day treatment components.

Adult↗

PubMed2006

Incentive-compatible guaranteed renewable health insurance premiums.

Theoretical models of guaranteed renewable insurance display front-loaded premium schedules. Such schedules both cover lifetime total claims of low-risk and high-risk individuals and provide an incentive for those who remain low-risk to continue to purchase the policy. Questions have been raised of whether actual individual insurance markets in the US approximate the behavior predicted by these models, both because young consumers may not be able to "afford" front-loading and because insurers may behave strategically in ways that erode the value of protection against risk reclassification. In this paper, the optimal competitive age-based premium schedule for a benchmark guaranteed renewable health insurance policy is estimated using medical expenditure data. Several factors are shown to reduce the amount of front-loading necessary. Indeed, the resulting optimal premium path increases with age. Actual premium paths exhibited by purchasers of individual insurance are close to the optimal renewable schedule we estimate. Finally, consumer utility associated with the feature is examined.

Adolescent↗

PubMed1998

The impact of financial incentives on quality of health care.

Purchasers of health care could offer financial incentives to plans or providers in order to increase quality. Unfortunately, the current health care market, in which quality is rarely measured and there is no risk adjustment, actively discourages both plans and providers from maximizing quality, resulting in a poor overall level of quality, both in fee-for-service arrangements and health maintenance organizations. Health plans and providers will not focus on quality until mechanisms to correct for risk differences among enrollees can be developed. Although such risk adjustment will be the most important stimulus for quality, it should also be linked to improvements in information systems and agreement on a minimum benefits package, quality reporting standards, and financial solvency requirements.

Delivery of Health Care↗

PubMed2005

Decentralization strategies and provider incentives in healthcare: evidence from the english national health service.

INTRODUCTION: This article examines the incentive effects of delegating operational and financial decision making from central government to local healthcare providers. It addresses the economic consequences of a contemporary policy initiative in the English National Health Service (NHS)-earned autonomy. This policy entails awarding operational autonomy to 'front-line' organisations that are assessed to be meeting national performance targets. In doing so, it introduces new types of incentives into the healthcare system, changes the nature of established agency relationships and represents a novel approach to performance management. METHODS: Theoretical elements of a principal-agent model are used to examine the impact of decentralization in the context of the results of an empirical study that elicited the perceptions of senior hospital managers regarding the incentive effects of earned autonomy. A multi-method approach was adopted. In order to capture the breadth of policy impact, we conducted a national postal questionnaire survey of all Chief Executives in acute-care hospital Trusts in England (n = 173). To provide added depth and richness to our understanding of the impact and incentive effects of earned autonomy at an organisational level, we interviewed senior managers in a purposeful sample of eight acute-care hospital Trusts. RESULTS: This theoretical framework and our empirical work suggest that some aspects of the earned autonomy as currently implemented in the NHS serve to weaken the potential incentive effect of decentralization. In particular, the nature of the freedoms is such that many senior managers do not view autonomy as a particularly valuable prize. This suggests that incentives associated with the policy will be insufficiently powerful to motivate providers to deliver better performance. We also found that principal commitment may be a problem in the NHS. Some hospital managers reported that they already enjoyed a large degree of autonomy, regardless of their current performance ratings. We also found evidence that the objectives of providers may differ from those of both the central government and local purchasers. There is, therefore, a risk that granting greater autonomy will allow providers to pursue their own objectives which, whilst not self-serving, may still jeopardize the achievement of strategic goals. CONCLUSION: It is apparent that the design and implementation features of decentralizing policies such as earned autonomy require careful attention if an optimal balance is to be struck between central oversight and local autonomy in the delivery of healthcare.

Hospitals, Public↗

PubMed2003

Risk selection and matching in performance-based contracting.

This paper examines selection and matching incentives of performance-based contracting (PBC) in a model of patient heterogeneity, provider horizontal differentiation and asymmetric information. Treatment effectiveness is affected by the match between a patient's illness severity and a provider's treatment intensity. Before PBC, a provider's revenue is unrelated to treatment effectiveness; therefore, providers supply treatments even if their treatment intensities do not match with the patients' severities. Under PBC, budget allocation is positively related to treatment performance; patient-provider mismatch is reduced because patients are referred more often. Using data from the state of Maine, we show that PBC leads to more referrals and better match between illness severity and treatment intensity. Moreover, we find that PBC has a positive but insignificant effect on dumping.

Adolescent↗

PubMed1983

Low nicotine cigarettes: cigarette consumption and breath carbon monoxide after one year.

Subjects who took part in a 12-wk study of switching behavior were observed during the subsequent year. Data were obtained for 96 smokers every 3 mo. A sample of smokers who, at 12 wk, had switched to a brand delivering less than half the nicotine of their baseline brand were offered continued monetary incentives to participate for an additional 6 mo (maintenance study). In the maintenance study, subjects continued to smoke low-nicotine cigarettes during the 6-mo period in which money and contact reinforcement were continued; maintenance control subjects increased their tar and nicotine exposure significantly. In the follow-up study of those who had not changed by more than 50%, the original control group, nonswitchers, and moderate switchers did not significantly change their nicotine exposure from what it had been at the end of the initial 12-wk study. Carbon monoxide (CO) in breath showed remarkably little change across the year despite substantial changes in tar and nicotine exposure. To the extent that CO is involved in smoking-related disorders, switchers derived little if any benefit from switching to low-nicotine brands.

Adult↗

PubMed2000

Casemix and rehabilitation: evaluation of an early discharge scheme.

This paper presents a case study of an early discharge scheme funded by casemix incentives and discusses limitations of a casemix model of funding whereby hospital inpatient care is funded separately from care in other settings. The POSITIVE Rehabilitation program received 151 patients discharged early from hospital in a twelve-month period. Program evaluation demonstrates a 40.9% drop in the average length of stay of rehabilitation patients and a 42.6% drop in average length of stay for patients with stroke. Other benefits of the program include a high level of patient satisfaction, improved carer support and increased continuity of care. The challenge under the Australian interpretation of a casemix model of funding is ensuring the viability of services that extend across acute hospital, non-acute care, and community and home settings.

Aftercare↗

PubMedDate not supplied

[Financial incentives for employees as part of a policy to upgrade care in a public hospital in Volta Redonda, Rio de Janeiro State, Brazil].

The authors present and analyze six years of regular and steady application of an institutional evaluation policy based on financial incentives in a public hospital in Volta Redonda, Rio de Janeiro State, Brazil, as a part of the hospital's administrative modernization policy. This type of policy is considered implicitly capable of developing a sequence of strategic wagers: (1) release of financial resources for payment of bonuses; (2) creation of an operationally feasible and sensitive evaluation instrument; (3) creation of adequate management mechanisms to improve evaluation policy; (4) employee adherence to the hospital upgrading policy based on the bonus system; and (5) maintenance of the effects of evaluation policy over time. The article discusses the "degree of success" of each of these wagers in an attempt to portray possible gains throughout the process, while also identifying inherent difficulties in such a policy.

Brazil↗

PubMed1998

Purchasing population health: aligning financial incentives to improve health outcomes.

OBJECTIVE: To review the concept of population health, including its definition, measurement, and determinants, and to suggest an approach for aligning financial incentives toward this goal. DATA SOURCE, STUDY DESIGN, DATA EXTRACTION. Literature review, policy analysis PRINCIPAL FINDINGS: The article presents the argument that a major reason for our slow progress toward health outcome improvement is that there is no operational definition of population health and that financial incentives are not aligned to this goal. Current attempts at process measures as indicators of quality or outcome are not adequate for the task. It is suggested that some measure of health-adjusted life expectancy be adopted for this purpose, and that integrated delivery systems and other agents responsible for nonmedical determinants be rewarded for improvement in this measure. This will require the development of an investment portfolio across the determinants of health based on relative marginal return to health, with horizontal integration strategies across sectoral boundaries. A 20-year three-phase development strategy is proposed, including components of research and acceptance, integrated health system implementation, and cross-sectoral integration. CONCLUSIONS: The U.S. healthcare system is a $1 trillion industry without a definition of its product. Until population outcome measures are developed and rewarded for, we will not solve the twenty-first century challenge of maximizing health outcome improvement for the resources available.

Cost-Benefit Analysis↗

PubMed1993

Insurance incentives for ambulatory surgery.

This study is an attempt to address both the extent to which surgical procedures on an outpatient basis substitute cost-effectively for inpatient procedures, and whether or not an insurance policy's financial incentives increase the volume of outpatient surgical procedures. In particular, given an insurance product of a given composition: What is the probability that the insured will have surgery? and if a surgery does take place, what is the probability that it will occur in an outpatient setting? Finally, the article assesses the implication of such products on the total cost of care by quantifying the insurance plans along two parameters, the relative user price for outpatient versus inpatient surgery and the absolute price for the inpatient surgery. The results indicate that insurance policies that offer relatively lower out-of-pocket payments for ambulatory surgery do not increase the probability that surgery will be done in the ambulatory setting. However, higher out-of-pocket payments for surgery, regardless of site, do reduce the surgery rate. There are other patient and market characteristics, especially the availability of freestanding surgery firms, that do influence the location of surgery.

Ambulatory Surgical Procedures↗