An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Theoretical Literature and Implications for P4P Design

11/01/2007

The published literature on the use of financial incentives in health care is sparse and provides little information about how specific design features may influence behavioral responses. P4P is common in industries other than health care, and economists and management experts have studied and developed theories on how individuals respond to financial incentives. In the sections that follow, we describe theories that are drawn from the economics and management literature and consider the implications of applying the findings from tests of these theories to the design of a P4P program. Our review is not exhaustive; instead it focuses on selected theories to illustrate how theory might inform program design to achieve the desired behavior changes. It should be noted that the theories described have examined the behavioral responses of individuals, not institutions. It is thus uncertain whether application of these theories would elicit the same type of behavior responses from organizations, such as hospitals.

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