An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Payment Structure
Payout Method. The sponsors with whom we spoke tended to use one of two performance-based rewards. About half (10/22) pay a lump-sum bonus, usually annually. The other half (9/22) pay the reward on a continuous basis (e.g., an ongoing “bump up” to per diem or DRG payments) and use past performance to determine the future year’s payment in
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Measures
Measure Set Determination . We identified two general approaches used by sponsors to determine the measure set for their hospital P4P programs. The first is a standardized, “one-size-fits-all” approach in which the measures applied to hospitals in the program do not vary.
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. General Descriptive Characteristics of Hospital P4P Programs
Length of Time in Operation. Of the 23 P4P programs, a majority were relatively new. Seven had made their first incentive payment to hospitals in 2006 or were about to make a payout early in 2007, five had made their first payout in 2004 or 2005, and 11 had made their first incentive payments starting in 2003 or earlier. Only one program report
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Methodological Approach
We used several sources to identify candidate private- and public-hospital P4P programs to construct the universe of hospital P4P programs:
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. III. Summary of Discussions with Pay-for-Performance Program Sponsors
Given the scarcity of empirical data showing the effects of P4R and P4P programs on improving quality, safety, or efficiency and showing the effects of design elements that may influence provider behavior, RAND held discussions with a broad cross-section of P4P programs to gather information on the current state-of-the-art of P4P program design an
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Conclusions
Together, the economic and management theories that we reviewed suggest that the way in which P4P incentives are structured, or framed, may influence whether they achieve the desired behavioral response. Incentives that are framed as withholdings, paid out in small and frequent payments, and paid out close to the time that care is delivered might
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Intrinsic Versus Extrinsic Motivation
Empirical meta-analyses of studies that examined incentive programs show that such programs have a mixed response; some studies show an impact, and many others show little or even a negative impact (Rothe, 1970; Deci, Koestner, and Ryan, 1999; Cameron, Banko, and Pierce, 2001). Researchers have tried to reconcile the mixed results by theorizing th
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Multidimensional Output
Multidimensional output, or multitasking, refers to situations in which the responsibilities of an individual encompass multiple activities or outputs that may require different types of skills to accomplish (Holmstrom and Milgrom, 1991). A hospital’s output includes many different components, such as managing a patient’s chronic illness, the
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. A Series of Tiered Absolute Thresholds May Be Better Than One Absolute Threshold
An individual’s motivation and effort when faced with a goal greatly depend on that individual’s baseline performance. Economists and psychologists have described this phenomenon as a “goal gradient” (Heath, Larrick, and Wu, 1999). If baseline performance is far away from goal performance, the individual exerts little effort, because the g
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Reducing the Time Lags Between Performance and Receipt of Incentive Can Help to Achieve Maximum Response
In economics, the principle of discounting is based on the fact that individuals value having a sum of money now more than sometime in the future, even after accounting for inflation. The concept of discounting and the use of a discount rate are well accepted in both accounting and economics. Studies have found, however, that individuals discount
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Uncertainty May Reduce the Behavioral Response
When given a choice, most people are risk averse; they will choose an option with 100 percent certainty over an option involving an uncertain but likely more valuable outcome. This principle of risk aversion is illustrated in a study in which subjects were given a choice between a one-week vacation that was certain or a three-week vacation they ha
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. A Series of Small Incentives Might Lead to More Quality Improvement Than Would One Large Incentive
Why do people go across town to save $10 on a clock radio but not to save $10 on a large-screen TV? After all, the same amount of money can be saved in both cases.
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Withholds May Have More of an Impact Than Bonuses
One aspect of prospect theory is the principle of “loss aversion,” which finds that individuals are more sensitive to incentives when they perceive they are losing as opposed to gaining something. This effect has also been described as “losses loom larger than gains.” This behavioral effect has been demonstrated in a series of experiments
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Prospect Theory and the Role of Framing in Decisionmaking
P4P incentives are designed to change the behavior of providers and the systems in which they operate in ways that will improve quality or efficiency. Various factors, such as the size of the incentive, are likely to influence a hospital and its physicians’ behavioral responses to a P4P program. For example, a large incentive would likely lead t
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Theoretical Literature and Implications for P4P Design
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 finan
An Environmental Scan of Pay for Performance in the Hospital Setting: Final Report. Summary of the Evidence on Hospital P4P Programs
As of June 2007, there were only nine studies on the impact of hospital P4P programs, one of which was not peer reviewed. All of these studies evaluated programs that targeted the inpatient setting, and none examined P4P interventions in the hospital outpatient setting.
