Friday, November 2, 2012

Do Financial Incentives Really Work?

The cornerstone of President Obama’s efforts to improve the quality of health care in the US is a series of financial incentives. These incentives reward hospitals that meet certain requirements, and punish those that do not.

It is still a controversial strategy, several months after the first of these incentives rolled out. Many experts attacked the president’s plan, citing some fairly obvious reasoning.

The idea that people will be motivated to do better if they are paid more as a result may seem like common sense, but medicine is complex, Himmelstein said. Often the measures used to determine success do not match the conditions of care or patient outcomes the program is meant to address, he said. Himmelstein said other fields have struggled with pay-for-performance programs. Under national education policy, schools that score poorly on standardized tests receive less funding. “They’re the ones who need it most,” he said. “Is the right reaction to poor quality that those institutions need fewer resources, not more?”

A study was conducted in August, measuring the efficacy of financial incentives to quality of care. While the results weren’t purely negative, they also didn’t exactly celebrate the President’s victory.

A review of seven studies of primary care programs that paid doctors extra for meeting certain targets, published by the Cochrane Collaboration in September, was inconclusive about the effect on quality of care. “Implementation should proceed with caution,” the authors wrote.

Other studies were less neutral. The New England Journal of Medicine released results showing that financial incentives for performance “did not reduce short-term patient mortality rates.”

What do you think? Are incentives effective in the long term? Do we need a new national strategy to improve quality of care?


Pam Argeris is a thought leader in the Healthcare Industry and possesses extensive, hands-on experience with CMS compliance, and multiple regulatory bodies such as NCQA, JACHO, and DOI. In her role at Merrill Corp., Pam focuses on developing solutions for compliance and quality assurance, delivered in a cost effective manner to improve beneficiary and prospect communications. You can contact Pam at

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