Incentives 2.0: A Synergistic Approach to Provider Incentives

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Each day in health care settings across the country, providers and their patients make countless decisions. To improve our health system’s performance, we aim to find ways to help frontline professionals make the best possible choices, day in and day out.

The Commonwealth Fund’s Breakthrough Health Care Opportunities program has developed a new portfolio of work, “Incentives 2.0: A Synergistic Approach to Provider Incentives,” which will explore the use of complementary strategies to influence provider decision-making and promote higher-value health care.

Financial-incentive strategies such as pay-for-performance programs have had limited success in improving outcomes and controlling spending. Our initiative recognizes that a wide range of factors influence providers’ choices, beyond financial rewards or penalties, including intrinsic motivation and medical professionalism, organizational influences, and policy (see Box).

Factors Affecting Providers’ Behavior and Decision-Making
Financial incentives: How providers are paid (e.g., via fee-for-service vs. capitation models), as well as the different payment amounts for different services and outcomes, influences what and how care is delivered.
Intrinsic motivation and professionalism: Innate interest in or enjoyment of an activity can be a strong incentive to perform well. Physician, nurses and other providers may be motivated by their sense of professionalism and their desire to help people by providing good care.
Organizational influences: The culture, management approaches, and operational structures of provider settings (e.g., how appointments are scheduled, what resources are available, whether safety is a priority) can have significant effects on the care delivered.
Policy: Federal, state, or local policies—such as what services are paid for and what given professionals can do—can affect providers’ decision-making.

The goal of this new initiative is to identify influences, understand how they affect behaviors, understand how they interact with each other, and develop ways to use them to optimize health system performance. To do this, we will be seeking insights from diverse fields of study such as economics, psychology, behavioral economics, sociology, and the management sciences. Many health care organizations already apply knowledge from these fields in an effort to improve care.

Examples of approaches that might result from this work include:

  • Redesigning financial incentives so they are more meaningful to providers. Psychological research shows that people tend to spend more effort avoiding losses than achieving gains of comparable value. Massachusetts General Physicians Organization has found it effective to give upfront financial rewards to providers, with the potential to take back some money if performance standards are not met.
  • Leveraging providers’ innate desire to do a better job. Psychological research also demonstrates that nonmonetary motivators, such as peer comparisons, may strengthen people’s inherent desire to perform well. The introduction of quality report cards for cardiac surgeons across Pennsylvania had a four times larger effect on surgeons’ performance than profit incentives.
  • Creating an organizational environment that promotes high performance at the provider level. The link between strong organizational culture and top performance is well demonstrated. One study found that hospitals with a clear mission, highly involved senior management teams, and nonpunitive approaches to problem-solving had lower 30-day mortality rates for heart attack patients than did other hospitals.

The Breakthrough Health Care Opportunities program aims to uncover changes in health care that can have large-scale impact. While tweaking any one of the influences discussed above may not meet that criterion, our new initiative seeks to create a “playbook” for how to combine various influences in ways that can lead to a real breakthrough in performance.

We are excited to launch this initiative, and join the innovators working to design provider incentives that drive high-quality, high-value care.

These first four projects are kick-starting our initiative to promote high-value health care:
Kevin Volpp and Ezekiel Emanuel (Center for Health Incentives and Behavioral Economics at the Leonard Davis Institute, University of Pennsylvania), Using Behavioral Economics and Psychology to Create Effective Provider Incentives

Drawing on insights from the fields of behavioral economics and psychology, this project will develop design principles for financial and nonfinancial provider incentives.
Julia Adler Milstein (University of Michigan) and Christy Lemak (University of Alabama at Birmingham), Improving the Performance of Primary Care Physicians in Caring for High-Need, High-Cost Patients

This project will compare primary care practices that have experienced both high levels of improvement and no improvement in response to financial incentives in order to identify the incentive designs and organizational characteristics associated with higher performance.
Barry Egener (Foundation for Medical Excellence), Creation of a Charter on Organizational Professionalism

While most of the focus on medical professionalism has been on the relationship between providers and their patients, the Charter on Organizational Professionalism will address the health care system’s role in creating a culture that enables medical professionalism.
Elizabeth Mort (Massachusetts General Hospital) and Peter Pronovost (Johns Hopkins Hospital), Improving the Quality of Health Care Through Peer-to-Peer Assessment

Recognizing the limitations of the internal peer-review process, this project will develop an interorganizational, peer-to-peer assessment methodology modeled after approaches used in other high-reliability, high-risk industries. It will be piloted in two academic teaching hospitals.

Products from these grants will be available on our website throughout the year. We invite you to submit ideas for potential projects in the comments section or by sending an email to Mark Zezza at maz@cmwf.org. You can also stay up to date with our work by signing up for alerts.

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