Financial incentives, healthcare providers and quality improvements

Jon Christianson, University of Minnesota
Sheila Leatherman, University of North Carolina and London School of Economics
Kim Sutherland, University of Cambridge
QQUIP and the Quality Enhancing Interventions project
QQUIP (Quest for Quality and Improved Performance) is a five-year research initiative of The Health Foundation.

"…..Within healthcare there has been a longstanding interest in how the type and amount of payment to healthcare organisations and practitioners affects the type and amount of services received by consumers and, ultimately, the costs of healthcare to individuals, employers, insurers and governments.

There has been an equally longstanding interest in how the cost of health services to consumers affects the services they seek out and use, along with the implications of this for overall costs at various levels of aggregation. But there has been much less attention devoted by researchers to the impact of financial

incentives on the quality of care. The Institute of Medicine in the USA has defined quality of care as ‘the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge"(p. 21).

This study reviews the healthcare literature that examines the effect of financial incentives on the behaviour of healthcare organisations and individuals with respect to the quality of care they deliver to consumers. Its purpose is to provide guidance to policy-makers in government and decision-makers in the private sector in their efforts to improve quality of care through payment reforms. In this review and synthesis we assess the quality of the evidence relating to the relationship between financial incentives for providers and quality improvement. Specifically, we address:

  • How effective are efforts to reward providers for improving the quality of care they provide or achieving benchmark levels of quality?
  • Whether, and to what degree, financial incentives intended to restrain costs and utilization have had secondary effects on quality of care?

We also review studies where the main focus was on analysis of utilisation and costs, and find clear evidence that financial incentives can influence these two outcomes. Although this is outside the scope of our ‘quality-enhancing’ brief, we include these studies in an appendix in order to provide a sense of how the literature on the impact of financial incentives on quality has evolved over time, and because many countries have a growing interest in modifying use of health services as costs continue to escalate.

We reviewed 36 published articles that examined the impacts of financial incentives directed at improving the quality of care delivered by institutional providers and by healthcare practitioners, particularly physicians. The findings from this review can be summarised as follows:

  • The findings from studies on the effect of payer initiatives that reward providers for quality improvements or the attainment of quality benchmarks are mixed. Relatively few significant impacts are reported, and it is often the case that payer programmes include quality improvement components in addition to incentive payments, making it difficult to assess the independent effect of the financial incentives.
  • Very little research has been done on the impact of direct payments to hospitals to improve quality. The published research to date in this area is too limited to draw conclusions with confidence.
  • Though relatively more attention has been paid to preventive services, there is limited evidence that targeted interventions employing financial incentives to improve the delivery of preventive services are effective. The few studies in this area with strong research designs find small, if any, effects of payments to providers that are intended to improve quality…..”

Executive summary
1. Financial incentives and quality improvement: background and overview
Definition and background
Structure of report
2. Financial incentives directed at improving quality
Historical context
Conceptual issues
Evidence summary
Description of findings
Literature reviews
Targeted studies of the impact of payment incentives on quality
Purchaser/payer initiatives that reward physicians and other healthcare practitioners for achieving quality goals
Purchaser/payer initiatives that reward institutions for achieving quality goals
3. Financial incentives and secondary impacts on quality
Historical context
Structure of this chapter
Evidence summary
Description of findings
Literature reviews
Insurance-level comparisons
Hospital-level comparisons
Physician-level comparisons
System-level comparisons
Appendix 1. Financial incentives, utilisation, and costs
Appendix 2. Information on database searches