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Key issues in the design of pay for performance programs

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  • Frank Eijkenaar

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    Abstract

    Pay for performance (P4P) is increasingly being used to stimulate healthcare providers to improve their performance. However, evidence on P4P effectiveness remains inconclusive. Flaws in program design may have contributed to this limited success. Based on a synthesis of relevant theoretical and empirical literature, this paper discusses key issues in P4P-program design. The analysis reveals that designing a fair and effective program is a complex undertaking. The following tentative conclusions are made: (1) performance is ideally defined broadly, provided that the set of measures remains comprehensible, (2) concerns that P4P encourages “selection” and “teaching to the test” should not be dismissed, (3) sophisticated risk adjustment is important, especially in outcome and resource use measures, (4) involving providers in program design is vital, (5) on balance, group incentives are preferred over individual incentives, (6) whether to use rewards or penalties is context-dependent, (7) payouts should be frequent and low-powered, (8) absolute targets are generally preferred over relative targets, (9) multiple targets are preferred over single targets, and (10) P4P should be a permanent component of provider compensation and is ideally “decoupled” form base payments. However, the design of P4P programs should be tailored to the specific setting of implementation, and empirical research is needed to confirm the conclusions. Copyright The Author(s) 2013

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    File URL: http://hdl.handle.net/10.1007/s10198-011-0347-6
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    Bibliographic Info

    Article provided by Springer in its journal The European Journal of Health Economics.

    Volume (Year): 14 (2013)
    Issue (Month): 1 (February)
    Pages: 117-131

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    Handle: RePEc:spr:eujhec:v:14:y:2013:i:1:p:117-131

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    Related research

    Keywords: Compensation methods; Incentive reimbursement; Pay for performance; Program design; Provider behavior; D03; D86; I11; J31; J33;

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    References

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    15. Gneezy, U. & Rustichini, A., 1998. "Pay Enough - Or Don't Pay at All," Discussion Paper 1998-57, Tilburg University, Center for Economic Research.
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    Cited by:
    1. Rud Kristensen, Søren & Siciliani, Luigi & Sutton, Matt, 2014. "Optimal Price-Setting in Pay for Performance Schemes in Health Care," CEPR Discussion Papers 9915, C.E.P.R. Discussion Papers.
    2. Fiorentini, Gianluca & Lippi Bruni, Matteo & Ugolini, Cristina, 2013. "GPs and hospital expenditures. Should we keep expenditure containment programs alive?," Social Science & Medicine, Elsevier, vol. 82(C), pages 10-20.
    3. E. Iezzi & M. Lippi Bruni & C. Ugolini, 2011. "The role of GP’s compensation schemes in diabetes care: evidence from panel data," Working Papers wp766, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Kristensen, Soren Rud & Bech, Mickael & Lauridsen, Jørgen T, 2013. "Who to pay for performance? The choice of organisational level for hospital performance incentives," COHERE Working Paper 2013:5, COHERE - Centre of Health Economics Research, University of Southern Denmark.
    5. Eijkenaar, Frank & Emmert, Martin & Scheppach, Manfred & Schöffski, Oliver, 2013. "Effects of pay for performance in health care: A systematic review of systematic reviews," Health Policy, Elsevier, vol. 110(2), pages 115-130.
    6. John Buckell & Andrew Smith & Roberta Longo & David Holland, 2013. "Health inefficiency and unobservable heterogeneity - empirical evidence from pathology services in the UK National Health Service," Working Papers 1307, Academic Unit of Health Economics, Leeds Institute of Health Sciences, University of Leeds.

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