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Incentives In Primary Care and Their Impact on Potentially Avoidable Hospital Admissions

Financial incentives in primary care have been often introduced with the purpose of improvingappropriateness of care and containing demand. We usually observe pay-for-performance programs, but alternatives have been also implemented, such as pay-for-participation in improvement activities and pay-for-compliance with clinical guidelines. Here, we assess the influence of different programs which ensure extra-payments to GPs, for containing episodes of avoidable hospitalisations. Our dataset covers patients and GPs of the Italian region Emilia-Romagna for year 2005, and we control for a wide range of factors potentially influencing GPs’ behaviour. By separating pay-for-performance from pay-for-participation and pay-for-compliance programs, we estimate the impact on the probability of (inappropriate) hospitalisation of financial incentives included in contracts between GPs and the NHS. As dependent variable, we consider two different sets of conditions, for both of which timely and effective primary care should be able to limit the need of hospital admission. The first is based on 27 medical DRGs that Emilia-Romagna identifies as at risk of inappropriateness in primary care, while the second refers to the internationally recognised ACSCs (ambulatory care-sensitive conditions). We show that pay-for-performance schemes may have a significant effect over aggregate indicators of appropriateness, while the effectiveness of pay-for-participation schemes is adequately captured only by taking into account subpopulations affected by specific diseases. Moreover, the same incentive scheme has fairly different effects on the two sets of indicators used, with performance improvements limited to the target explicitly addressed by the policy maker (i.e. the list of 27 DRGs). This evidence is consistent with the idea that a “tunnel vision” effect may occur when public authorities promote and monitor specific sets of objectives, as proxies for more general improvements in health care practices.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 660.

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Date of creation: Mar 2009
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Handle: RePEc:bol:bodewp:660
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  1. Anthony Scott & Stefanie Schurer & Paul H. Jensen & Peter Sivey, 2008. "The Effect of Financial Incentives on Quality of Care: The Case of Diabetes," Melbourne Institute Working Paper Series wp2008n12, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Greir Godager & Tor Iversen & Ching-to Albert Ma, 2007. "Service Motives And Profit Incentives Among Physicians," Boston University - Department of Economics - Working Papers Series WP2007-042, Boston University - Department of Economics, revised Sep 2007.
  3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  5. P.C. Smith, 2002. "Measuring health system performance," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 3(3), pages 145-148, September.
  6. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough or Don't Pay at All," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 791-810.
  7. Iversen, Tor & Luras, Hilde, 2000. "Economic motives and professional norms: the case of general medical practice," Journal of Economic Behavior & Organization, Elsevier, vol. 43(4), pages 447-470, December.
  8. W. J. Browne & S. V. Subramanian & K. Jones & H. Goldstein, 2005. "Variance partitioning in multilevel logistic models that exhibit overdispersion," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(3), pages 599-613.
  9. George France & Francesco Taroni & Andrea Donatini, 2005. "The Italian health-care system," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages S187-S202.
  10. Lippi Bruni, Matteo & Nobilio, Lucia & Ugolini, Cristina, 2009. "Economic incentives in general practice: The impact of pay-for-participation and pay-for-compliance programs on diabetes care," Health Policy, Elsevier, vol. 90(2-3), pages 140-148, May.
  11. James J. Heckman & Jeffrey A. Smith & Christopher Taber, 1996. "What Do Bureaucrats Do? The Effects of Performance Standards and Bureaucratic Preferences on Acceptance into the JTPA Program," NBER Working Papers 5535, National Bureau of Economic Research, Inc.
  12. Nigel Rice & Andrew Jones, 1997. "Multilevel models and health economics," Health Economics, John Wiley & Sons, Ltd., vol. 6(6), pages 561-575.
  13. Avinash Dixit, 2002. "# Incentives and Organizations in the Public Sector: An Interpretative Review," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 696-727.
  14. Maria Goddard & Russell Mannion & Peter Smith, 2000. "Enhancing performance in health care: a theoretical perspective on agency and the role of information," Health Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 95-107.
  15. Victor Lavy, 2004. "Performance Pay and Teachers' Effort, Productivity and Grading Ethics," NBER Working Papers 10622, National Bureau of Economic Research, Inc.
  16. David Cutler, 2006. "The Economics of Health System Payment," De Economist, Springer, vol. 154(1), pages 1-18, 03.
  17. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
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