Financial Incentives and Hospital Performance

Evidence that financial incentives do not improve hospital performance:

Extra pay does not improve hospital performance, EurakAlert: Paying hospitals extra money does not appear to significantly improve the way they treat heart attack patients or how well those patients do. But giving hospitals the information that they need to improve heart attack care does help.

A team of researchers led by the Duke Clinical Research Institute looked at whether financial incentives to hospitals for adhering to specific treatment guidelines would improve patient outcomes. They found no evidence that financial incentives were associated with improved outcomes, nor that hospitals had shifted their focus from other areas in order to concentrate on the areas being evaluated for possible increased payments.

These findings will add to the national debate over the use of “pay for performance” as a strategy for encouraging hospitals to use drugs and therapies that have been proven to save lives in large-scale clinical trials, the researchers said. The theory is that the possibility of receiving higher reimbursements will motivate hospitals to improve the quality of their care. ...

“There are three important messages from this study,” said cardiologist Eric Peterson, M.D., senior member of the research team. “On one hand, the data showed that care is improving overall in the United States, which is obviously good. However, we did not find that pay for performance alone will be the sole means of improving care. In fact, it all comes down to hard work by individual caregivers and institutions.

“Here, it appears that a voluntary effort to ‘do good and improve care’ was equally as powerful as the incentive for additional payment,” Peterson said. “Finally, heart attack mortality declined significantly over time in pay-for-performance and non-pay-for-performance hospitals over time with better care processes. The bottom line is that patients win when health care providers are committed to improvement, no matter what the incentive is.” ...

Glickman noted that “additional studies are underway to identify hospital policies and organizational characteristics that are associated with a higher standard of care in order to develop more effective incentive based strategies.” ...

Today's Economix column in the NY Times notes:

[T]he three leading Democratic candidates have quietly come up with nearly identical ideas [for cutting medical costs]. Deep inside their health care plans, Mrs. Clinton, Mr. Edwards and Mr. Obama have each called for the creation of a national institute to figure out which kinds of medical care actually work. This institute would sort through the scientific research on, say, spinal fusion and help people understand when it may make sense and when it’s likely to be just another big medical expense that doesn’t solve anything.

Medicare and private insurers could then use the research findings to determine when a procedure or a drug would be covered. There would be room for exceptions, based on a doctor’s judgment. In general, though, a doctor and a patient could proceed with dubious treatment only if they didn’t stick the rest of us with the bill.

As we know, a big concern for the U.S. is the growth of the Medicare program in the future due to rising medical costs and an aging population (though some people still get this confused with Social Security which does not pose a long-term budgetary threat).

Most analysts believe that controlling costs will require rationing -- a government institute decides what procedures will be covered, and then simply refuses to pay for unapproved treatments (private insurers are allowed to make the same decisions). There are also other measures we can and should take, cutting overhead, increasing preventative care, negotiating lower drug prices, using better information technology, universal insurance, and so on. But whatever we do, as the Time's article concludes, "The simple truth is that medical spending can’t continue to rise at its current rate. Somehow, we need to make choices."