Financial incentives in healthcare delivery

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In 2012 the Australian Commission for Safety and Quality in Health Care (The Commission) and Independent Hospital Pricing Authority (IHPA) undertook a literature review to identify Australian and international hospital pricing systems that integrates quality and safety. Recently the groups met as part of a roundtable convened by Federal Minister for Health Sussan Ley to compile a list of improvements for the Australian hospital system.

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The following is an excerpt from the 2012 review as accessible at safetyandquality.gov.au. It serves as a literature review of existing Australian and international mechanisms for integrating safety and quality into hospital pricing mechanisms.
The majority of studies evaluating the various incentive schemes in healthcare fail to produce conclusive evidence for their effectiveness in raising quality of care and patient outcomes.
This may be partly attributable to the design and execution of the evaluations, recognising the difficulty in scientifically evaluating the effect of an initiative across a complex, dynamic and changing system. However, it is prudent to ask the question of whether financial incentives have genuine potential for application in healthcare and driving clinical behaviour, or whether there are more effective approaches based on review of other industries.
This section briefly examines:

1. Learnings from other disciplines regarding pay-for-performance (P4P) in healthcare, including
   
   
   
   • potential motivation of healthcare providers
   
   
   • innovation and adaptation to local context.
   
   
   
   


2. Key differences of ‘successful’ schemes identified in the P4P literature.

Learnings from other academic disciplines and settings
Evidence from disciplines such as behavioural economics and psychology suggests that while financial incentives improve performance in menial, repetitive tasks, their effect in complex, cognitively challenging work is far from clear. In settings that include healthcare they can exhibit a neutral, even detrimental effect.¹
Some useful insights can be drawn from literature on how financial incentives interact with other motivators. Most of these address how financial rewards exhibit a tendency to ‘crowd out’ other potential behavioural motivators: ^2-3

• Tangible rewards, particularly monetary ones, undermine motivation for tasks that are intrinsically interesting or rewarding.


• Symbolic rewards (e.g. recognition) do not crowd out intrinsic motivation, and may augment it.


• The negative effects of monetary rewards are strongest for complex cognitive tasks.


• Crowding out effects tend to reduce reciprocity and augment selfish behaviors.


• Crowding out may spread (both to other tasks and to co-workers), decreasing intrinsic motivation for work not directly incentivized by the monetary rewards.


• Crowding-out is strongest when external rewards are large; perceived as controlling; contingent on very specific task performance; or associated with surveillance, deadlines or threats.

Evidence from the education setting in the US does not support financial incentives as positively influencing professional performance. Schemes to improve high school teaching and students’ academic results in the US have been unsuccessful. In some instances student achievement even declined following application of incentives.^4-5
In healthcare, a key additional factor is that it is increasingly a ‘team sport’ where outcomes are ultimately dependent on a people and systems interacting in concert with one another. It is difficult to incentivise team work with bonus payments to individuals, which is why how incentives are distributed among those whose behaviour they are intended to influence is important.
This may also explain why financial rewards tend to be more effective in healthcare settings when applied to tasks or objectives not contingent on collaboration (e.g. radiology reporting times; immunisation).
Provider motivation
While the quality improvement literature has identified many causes of failures in healthcare quality (poorly designed workflow and systems; undue commercial influence; knowledge gaps; reliance on inappropriate heuristics; poor communication and insufficient teamwork), “not trying hard enough” is rarely cited.
Yet the application financial incentives implies that a lack of motivation is seen by policy makers as a key factor in poor quality care.
This points to flaws in the economic assumptions underpinning financial incentive schemes, particularly the wholesale application of these to all aspects of human endeavour. The orthodox view that monetary reward is either the only motivator, or amplifies other, intrinsic motivators such as personal pride, professional norms and standards or altruism appears to be challenged by findings in healthcare and other similar domains. These arguments are not new.⁶
In reality, the behaviour of healthcare providers may be driven by a range of interacting factors including:

• Intrinsic rewards


• Competitiveness


• Professional norms and standards


• Reputation among peers and the community


• Remuneration.

The range of influences on the functioning and performance of a healthcare system, as well as how individuals and groups within this system interact, is illustrated in Figure 2 (adopted from Appleby et al, 2012). (Figure to be added here.)
The relative importance of these will vary between the healthcare professions and disciplines. However, manipulating greed as an engine for quality or other healthcare policy objectives may be too simplistic and, as conveyed by various commentators, should be approached with caution. While financial incentives may play a role, they should not supplant other behavioural incentives which may include:

• Timely feedback of performance data to stimulate improvement.


• Providing information on performance in comparison with peers and benchmarks.


• Encouraging and supporting opportunity for local innovation.


• Providing granular information on how systems and processes can be improved in a local context.


• Harnessing other motivators such as collaboration, teamwork and collective achievement of results.

Innovation local context
The findings of Appleby and colleagues stress the need for adaptability and local innovation. Harnessing local ingenuity and innovation is promoted by organisations such as the Institute for Healthcare Improvement (IHI), and empirically supported in large system transformation.⁷

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“Manipulating greed as an engine for quality or other healthcare policy objectives may be too simplistic.”

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An Australian example of local practice improvement resulting in both better patient outcomes and efficiency is provided in the box on the next page.
Door to balloon times at Sir Charles Gairdner Hospital (SCGH)⁸
Timely primary percutaneous coronary intervention (PCI) has proven mortality benefits over thrombolysis for treating ST-elevation myocardial infarction (STEMI). These benefits are time dependent with longer door-to-balloon (DTB) times associated with higher mortality. Guidelines recommend DTB times < 90 minutes in 75% of cases presenting to institutions providing primary PCI. Australian registry data suggest these targets are rarely achieved.
A team at SCGH implemented an interdepartmental protocol of patient transfer from ED to the Cardiac Catheterisation Laboratory (CCL). Two important steps of the primary angioplasty pathway were improved: the decision-making process and transfer of the patient to the CCL.
The change in the admission and transfer system through ED resulted in immediate and sustained improvements with a highly significant 20-minute reduction in median DTB time and a marked increase in the proportion of patients with < 90 minute DTB times. Secondary outcomes are likely to include reduced morbidity and complications, shortened NOS and earlier discharge.
This illustrates an effective process redesign at clinical microsystem level to ensure consistent evidence-based care.⁸
Key aspects of ‘successful’ schemes
There are some common traits of P4P schemes demonstrating a desirable effect. These include inter alia:

• engagement of key stakeholders in the design of schemes


• use of reliable data and metrics that are ‘accepted’ by the those whose behaviour is being influenced


• adaptation to local requirements and context


• the targeted activity not excessively dependent on collaboration and team work.

Comparing the Advancing Quality (UK) with PHQID (US) schemes
Comparing the evaluation of the Premier Hospital Quality Improvement Demonstration (PHQID) project with the ‘Advancing Quality’ (AQ) scheme provides some useful insights. Both are fundamentally similar, and both function on a ‘tournament’ basis. PHQID evaluations have repeatedly failed to demonstrate outcome benefits9-12 whereas positive results associated with the UK scheme are emerging.^13-14
What are the key differences? Firstly, the incentives in AQ are larger and distributed among a wider spread of high performing hospitals. Whether this is the key is debatable as there is no clear consensus in the literature.
Second is the way in which participants implemented and applied the schemes. From the outset, CEOs of AQ participating hospitals agreed that bonuses would not be taken as personal income but “would be allocated internally to clinical teams whose performance had earned the bonus” ¹³(p1822). The bonuses were re-invested in quality improvement activity such as:

• Employment of specialist nurses


• Development of new or improved data collection systems for regular feedback to clinical personnel about local performance

Moreover, despite the competitive nature of the scheme, staff from all participating hospitals in northern England regularly met face-to-face to discuss issues and share learnings.¹³ No such re-investment of bonuses, or collaboration with peers (with the exception of ‘webinars’) was evident in the PHQID scheme.
It could be argued that financial incentives alone are perhaps not sufficient unless coupled with other interventions which tap into other motivational factors listed above. Indeed, financial bonuses could be seen as a facilitator of these.
It is clear that the success of financial incentive schemes in complex healthcare organisations depends strongly on implementation and application, as well as their design and theoretical underpinnings.
A checklist for implementation of financial incentive schemes
Glasziou and colleagues note that while financial incentive schemes can sometimes improve the quality of care, such schemes can also be an ‘expensive distraction’.¹⁵ They propose a checklist to prevent inappropriate implementation and unintended consequences of such schemes.
A. Planning
1. Does the desired clinical action improve patient outcomes?
2. Will undesirable clinical behaviour persist without intervention?
3. Are there valid, reliable, and practical measures of the desired clinical behaviour?
4. Have the barriers and enablers to improving clinical behaviour been assessed?
5. Will financial incentives work, and better than other interventions to change behaviour, and why?
6. Will benefits clearly outweigh any unintended harmful effects, and at an acceptable cost?
B. Implementation
7. Are systems and structures needed for the change in place?
8. How much should be paid, to whom, and for how long?
9. How will the financial incentives be delivered?

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1 This may explain why there is stronger evidence for P4P in settings where recipients work individually and where the work is discrete (e.g. immunisation rates, radiologists’ reporting times).
2 PHQID participation is voluntary whereas AQ is compulsory.

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References
1. Woolhandler S, Ariely D, Himmelstein DU. Why pay for performance may be incompatible with quality improvement. BMJ 2012;345.
2. Deci EL, Koestner R, Ryan RM. A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Psychol Bull 1999;125(6):627-668; discussion 692- 700.
3. Productivity Commission. Behavioural Economics and Public Policy, Roundtable Proceedings. Canberra. Productivity Commission, 2008.
4. Springer MG, Ballou D, Hamilton L, Le V, Lockwood JR, McCaffrey D, et al. Teacher Pay for Performance: Experimental Evidence from the Project on Incentives in Teaching. Nashville, TN. National Center on Performance Incentives at Vanderbilt University, 2010.
5. Fryer RG. Teacher Incentives and Student Achievement: Evidence from New York City Public Schools. Cambridge MA. National Bureau of Ecoomic Research, 2011.
6. Sen A. Rational Fools: A Critique of the Behavioral Foundations of Economic Theory. Philosophy & Public Affairs 1977;6(4):317-344.
7. Best A, Greenhalgh T, Lewis S, Saul JE, Carroll S, J B. Large-System Transformation in Health Care: A Realist Review. The Milbank Quarterly 2012 2012;90(3):421-456.
8. Willson AB, Mountain D, et al. Door-to-balloon times are reduced in ST-elevation myoca infarction by emergency physician activation of the cardiac catheterisation laboratory and immediate patient transfer. Medical Journal of Australia 2010;193(4):207-212.
9. Jha AK, Joynt KE, Orav EJ, Epstein AM. The long-term effect of premier pay for performance on patient outcomes. N Engl J Med 2012;366(17):1606-1615.
10. Ryan A, Blustein J. Making the best of hospital pay for performance. N Engl J Med 2012;366(17):1557-1559.
11. Ryan AM, Blustein J, Casalino LP. Medicare’s flagship test of pay-for-performance did not spur more rapid quality improvement among low-performing hospitals. Health Aff (Millwood) 2012;31(4):797-805.
12. Lee GM, Kleinman K, Soumerai SB, Tse A, Cole D, Fridkin SK, et al. Effect of Nonpayment for Preventable Infections in U.S. Hospitals. New England Journal of Medicine 2012;367(15):1428- 1437.
13. Sutton M, Nikolova S, Boaden R, Lester H, McDonald R, Roland M. Reduced Mortality with Hospital Pay for Performance in England. New England Journal of Medicine 2012;367(19):1821-1828.
14. Appleby J, Harrison T, Hawkins L, Dixon A. Payment by results: how can payment systems help to deliver better care? London. The King’s Fund, 2012.
15. Glasziou PP, Buchan H, Mar CD, Doust J, Harris M, Knight R, et al. When financial incentives do more good than harm: a checklist. BMJ 2012;345.