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Physician Response to Pay-for-Performance: Evidence from a Natural Experiment

Author

Listed:
  • Jinhu Li
  • Jeremiah Hurley
  • Philip DeCicca
  • Gioia Buckley

Abstract

Explicit financial incentives, especially pay-for-performance (P4P) incentives, have been extensively employed in recent years by health plans and governments in an attempt to improve the quality of health care services. This study exploits a natural experiment in the province of Ontario, Canada to identify empirically the impact of pay-for-performance (P4P) incentives on the provision of targeted primary care services, and whether physicians' responses differ by age, practice size and baseline compliance level. We use an administrative data source which covers the full population of the province of Ontario and nearly all the services provided by practicing primary care physicians in Ontario. With an individual-level data set of physicians, we employ a difference-in-differences approach that controls for both "selection on observables" and "selection on unobservables" that may cause estimation bias in the identification. We also implemented a set of robustness checks to control for confounding from the other contemporary interventions of the primary care reform in Ontario. The results indicate that, while all responses are of modest size, physicians responded to some of the financial incentives but not the others. The differential responses appear related to the cost of responding and the strength of the evidence linking a service with quality. Overall, the results provide a cautionary message regarding the effectiveness of pay-for-performance schemes for increasing quality of care.

Suggested Citation

  • Jinhu Li & Jeremiah Hurley & Philip DeCicca & Gioia Buckley, 2011. "Physician Response to Pay-for-Performance: Evidence from a Natural Experiment," NBER Working Papers 16909, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16909
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    References listed on IDEAS

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    1. Ellis, Randall P. & McGuire, Thomas G., 1990. "Optimal payment systems for health services," Journal of Health Economics, Elsevier, vol. 9(4), pages 375-396, December.
    2. Ma, Ching-to Albert & McGuire, Thomas G, 1997. "Optimal Health Insurance and Provider Payment," American Economic Review, American Economic Association, vol. 87(4), pages 685-704, September.
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    Cited by:

    1. Ansgar Wübker, 2014. "Explaining variations in breast cancer screening across European countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(5), pages 497-514, June.
    2. Jasmin Kantarevic & Boris Kralj, 2013. "Link Between Pay For Performance Incentives And Physician Payment Mechanisms: Evidence From The Diabetes Management Incentive In Ontario," Health Economics, John Wiley & Sons, Ltd., vol. 22(12), pages 1417-1439, December.
    3. repec:kap:ijhcfe:v:17:y:2017:i:2:d:10.1007_s10754-016-9207-3 is not listed on IDEAS
    4. Anell, Anders & Dietrichson, Jens & Ellegård, Lina Maria, 2015. "Can Pay-for-Performance to Primary Care Providers Stimulate Appropriate Use of Antibiotics?," Working Papers 2015:36, Lund University, Department of Economics, revised 29 Jun 2016.
    5. Claudia Keser & Emmanuel Peterlé & Cornelius Schnitzler, 2014. "Money talks - Paying physicians for performance," CIRANO Working Papers 2014s-41, CIRANO.
    6. Cox, James C. & Sadiraj, Vjollca & Schnier, Kurt E. & Sweeney, John F., 2016. "Incentivizing cost-effective reductions in hospital readmission rates," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 24-35.
    7. Jasmin Kantarevic & Boris Kralj, 2016. "Physician Payment Contracts in the Presence of Moral Hazard and Adverse Selection: The Theory and Its Application in Ontario," Health Economics, John Wiley & Sons, Ltd., vol. 25(10), pages 1326-1340, October.
    8. repec:spr:eujhec:v:18:y:2017:i:5:d:10.1007_s10198-016-0813-2 is not listed on IDEAS
    9. repec:zbw:rwirep:0370 is not listed on IDEAS
    10. repec:eee:jhecon:v:55:y:2017:i:c:p:76-94 is not listed on IDEAS
    11. Logan McLeod, Jeffrey A. Johnson, 2014. "Changing the Schedule of Medical Benefits and the Effect on Primary Care Physician Billing: Quasi-Experimental Evidence from Alberta," LCERPA Working Papers 0077, Laurier Centre for Economic Research and Policy Analysis, revised 28 Aug 2014.
    12. 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.
    13. repec:eee:hepoli:v:122:y:2018:i:2:p:157-164 is not listed on IDEAS
    14. Dunn, Abe & Shapiro, Adam Hale, 2015. "Physician competition and the provision of care: evidence from heart attacks," Working Paper Series 2015-7, Federal Reserve Bank of San Francisco.
    15. Sarma, Sisira & Devlin, Rose Anne & Thind, Amardeep & Chu, Man-Kee, 2012. "Canadian family physicians’ decision to collaborate: Age, period and cohort effects," Social Science & Medicine, Elsevier, vol. 75(10), pages 1811-1819.
    16. 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.
    17. Sicsic, Jonathan & Le Vaillant, Marc & Franc, Carine, 2012. "Intrinsic and extrinsic motivations in primary care: An explanatory study among French general practitioners," Health Policy, Elsevier, vol. 108(2), pages 140-148.
    18. Nick Manning & Zahid Hasnain & Jan Henryk Pierskalla, 2012. "Public Sector Human Resource Practices to Drive Performance," World Bank Other Operational Studies 25489, The World Bank.
    19. Kantarevic, Jasmin & Kralj, Boris & Weinkauf, Darrel, 2011. "Enhanced fee-for-service model and physician productivity: Evidence from Family Health Groups in Ontario," Journal of Health Economics, Elsevier, vol. 30(1), pages 99-111, January.
    20. Ansgar Wübker, 2012. "Explaining Variations in Breast Cancer Screening Across European Countries," Ruhr Economic Papers 0370, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    21. Mehdi Ammi & Christine Peyron, 2016. "Heterogeneity in general practitioners’ preferences for quality improvement programs: a choice experiment and policy simulation in France," Health Economics Review, Springer, vol. 6(1), pages 1-11, December.
    22. Van Gestel, R.; Müller, T.; Bosmans, J.;, 2017. "Learning from failure in healthcare: dynamic panel evidence of a physician shock effect," Health, Econometrics and Data Group (HEDG) Working Papers 17/24, HEDG, c/o Department of Economics, University of York.
    23. Sicsic, Jonathan & Krucien, Nicolas & Franc, Carine, 2016. "What are GPs' preferences for financial and non-financial incentives in cancer screening? Evidence for breast, cervical, and colorectal cancers," Social Science & Medicine, Elsevier, vol. 167(C), pages 116-127.

    More about this item

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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