The role of pay-for-performance in promoting integrated care

This work discusses the role pay-for-performance schemes (P4Ps) have in mitigating coordination problems between two sequentially organized providers (first and second). We analyse global budgets as well as three P4Ps that differ with respect to the targeted provider (the first, the second or both). It follows that global budgets introduce coordination problems being reduced when P4Ps are brought in. With respect to coordination, P4Ps that target the first provider do better than P4Ps that target the second provider due to the first provider having sole responsibility for some coordination problems. Furthermore, the optimal P4Ps are found, not only to define optimal quality levels, but also to depend on the providers’ altruism, the providers’ productivity, their position in the production chain and spill-over effects. The collection of relevant information will thus be costly for P4Ps, and it cannot be ruled out that global budgets do better than the optimal P4Ps.