Using Incentives to Improve Quality in Health Care: Key Concepts and Review of the Literature

1. Using Incentives to Improve Quality in Health Care: Key Concepts and Review of the Literature R. Adams Dudley, MD, MBA, Jason Talavera, Harold S. Luft, PhD University of California, San Francisco Anne Frolich, MD Bispebjerg Hospital, University of Copenhagen Peter Broadhead Australian Dept of Health and Ageing Support: Agency for Healthcare Research and Quality, Commonwealth Fund

2. Conceptual Considerations: Characteristics of the Incentive • Magnitude of a financial incentive • Reputational effects from public reporting • Costs of complying Dudley 2004

3. Conceptual Considerations: Factors External to the Incentive • Business environment (e.g., FFS vs. capitation, alternative incentive programs) • Specific characteristics of the provider (e.g., years since training, work load before the incentive) • Organizational characteristics of the provider’s group (e.g., information technology available) • Patient factors (e.g., education level, willingness to take on self-care) Dudley 2004

4. Model of An Individual Provider’s Response to Incentives Intervention Component Recipient of Incentive Predisposing Factors Incentive: • Revenue Potential • Direct and Opportunity Costs of Complying • Non-financial Characteristics Provider Group (if applicable) General Financial Environment; Other Incentives Provider Characteristics Market Characteristics Provider’s “Need” to respond to the incentive Enabling Factors Organization’s capabilities and goals Patient factors Provider response: change in care structure or process • Outcomes--change in: • Clinical performance measures • Non-financial outcomes for the provider (e.g., provider satisfaction) • Financial results for the provider

5. The Literature On Value-Based Purchasing (VBP): What is Known? • Only 9 randomized trials of incentives to improve quality • Two general findings: - Providers respond appropriately to financial incentives - Providers respond appropriately to public release of performance data Dudley 2004

6. The Literature On VBP: Incentives Can Work • In some circumstances, providers respond to financial incentives: • Paid residents their salary plus $2/visit scheduled vs. $20/month for attending clinic • FFS-incentivized residents did better complying with well-child care recommendations and continuity…for $2! Reference: Hickson et al. Pediatrics 1987;80(3):344 Dudley 2004

7. Public Reporting of Quality Measurements: Impact on hospitals with poor scores* • (p < .001, N=34) • Reference: Hibbard et al. Health Affairs 2003;22(4):84 Dudley 2004

8. The Literature On VBP: Results by Topic • Uncertainty about the chance of success may matter • FFS: 4 positive studies, one negative • Bonus for hitting a compliance rate target: • two positive, three negative • two negative were for a ~10-20% chance of getting a bonus if performance better than other groups Dudley 2004

9. The Literature On VBP: What is still unknown? • How big do incentives need to be? • Does it matter if you’re adding incentives to a fee-for-service or a capitated system? • Should they focus on individual providers or groups? • Should there be incentives to adopt enabling technologies (e.g., information systems)? • Does using incentives save purchasers money? Dudley 2004