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Who to pay for performance? The choice of organisational level for hospital performance incentives

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  • Søren Rud Kristensen

    () (University of Manchester
    COHERE – Centre of Health Economics Research, Department of Business and Economics, University of Southern Denmark)

  • Mickael Bech

    (COHERE – Centre of Health Economics Research, Department of Business and Economics, University of Southern Denmark)

  • Jørgen T. Lauridsen

    (COHERE – Centre of Health Economics Research, Department of Business and Economics, University of Southern Denmark)

Abstract

Abstract Financial incentives for quality improvement in hospital care [known as pay for performance (P4P)] can be directed to either the hospital level or redistributed to the department level. Theoretically, performance payments distributed to lower organisational levels are more effective in increasing performance than payments directed to the hospital level, but the empirical evidence for this expectation is scarce. This paper compares the performance of hospital departments at hospitals that do and do not redistribute performance payments to the department level. We study a Danish P4P scheme to provide patients with case managers. Applying difference in differences analysis, we estimate a 5 percentage points higher performance at hospital departments that are subject to a direct financial incentive. Our results suggest that payers can improve the effectiveness of P4P payments by distributing payments to the department level rather than the hospital level.

Suggested Citation

  • Søren Rud Kristensen & Mickael Bech & Jørgen T. Lauridsen, 2016. "Who to pay for performance? The choice of organisational level for hospital performance incentives," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(4), pages 435-442, May.
  • Handle: RePEc:spr:eujhec:v:17:y:2016:i:4:d:10.1007_s10198-015-0690-0
    DOI: 10.1007/s10198-015-0690-0
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    References listed on IDEAS

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    Cited by:

    1. Ammi, Mehdi & Fortier, Grant, 2017. "The influence of welfare systems on pay-for-performance programs for general practitioners: A critical review," Social Science & Medicine, Elsevier, vol. 178(C), pages 157-166.

    More about this item

    Keywords

    Pay for performance; Hospital incentives; Incentive design; Team production;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

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