New Report Challenges Basic Assumptions About Reforming Payment in Health Care

Authors reject “carrot and stick” approach to controlling costs, offer new framework

    • August 7, 2013
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Newtown, Conn.—A new report from the Health Care Incentives Improvement Institute, Inc. (HCI3®), developed with support from the Robert Wood Johnson Foundation (RWJF), questions conventional wisdom about how to improve the quality and affordability of health care in the United States. The critique comes at a time when the federal government and many states are pursuing strategies, like payment reform, to control costs and improve health.

In a report entitled “Improving Incentives to Free Motivation,” leading health care economist and HCI3 executive director François de Brantes rejects the assumption that health care costs will drop and quality will improve if policymakers and payers simply find the right mix of rewards (“carrots”) and punishments (“sticks”). He argues instead for an approach that harnesses the inherent motivation that doctors and patients have to make good decisions about health care.

“Incentives can and do work—but only when they are applied with the nuances of the clinical encounter in mind,” said de Brantes. “The approach to incentives that we use in other work settings simply won’t do for health care. If we don’t get payment reform right, we risk not just failing to fix our cost problem—we risk exacerbating it further. We can’t afford to get this wrong.”

The report draws on a large body of research that shows external incentives designed to change simple behaviors, like improving productivity in rote tasks, do not work for more complex behaviors. They can actually be harmful when used for complex behaviors, undermining assets like creativity and drive, which are essential to the success of health professionals and workers in other nuanced fields.

For providers, the factors that distort good decision-making include misguided fee-for-service payment models, which reward volume over value, or a lack of well-established guidelines for how to treat specific conditions. For patients, they may include poor health care literacy, socioeconomic factors, and the structure of benefits provided by employers—among many other financial and environmental factors. The report also analyzes cost and quality variability data for over 20 health conditions, identifying those (such as diabetes and coronary heart disease) most ripe for incentive experimentation and reform.

Instead, the authors argue that reform should focus on identifying and eliminating the external incentives that don’t work while also amplifying the powerful internal motivations that doctors and patients have to deliver or seek the best care.

As Michael Painter, senior program officer for RWJF, explained, “Most health professionals enter training with the same goal that their patients enter the doctor’s office with: to improve patients’ health. But, as doctors begin to practice and patients begin to pay, they encounter a whole host of conflicting external forces that distort their once shared goal.”

“It’s time to focus on removing those negative factors that have sapped our health professionals of all their inherent passion and creativity and our patients of their rationality and motivation,” added Painter.

Early next year, HCI3 plans to release a set of web-based interactive tools that will help both payers and patients identify which negative external factors are contributing most to their cost and quality variability issues. The tools will draw on comprehensive data that account for the nuanced ways in which sources of, and the extent of, variability can differ on a condition-by-condition basis. Users will end up with a custom plan of action for addressing the unique set of negative forces they face—and tools for measuring the effectiveness of that plan once it has been implemented.

About Health Care Incentives Improvement Institute™, Inc

The Health Care Incentives Improvement Institute, Inc. (HCI3®) is a not-for-profit multi-stakeholder umbrella organization for Bridges to Excellence® and PROMETHEUS Payment®. The mission of the organization is to create significant improvements in the quality and affordability of health care by developing and implementing programs that recognize and reward physicians, hospitals and other health care providers that deliver safe, timely, effective, efficient, equitable and patient-centered care. HCI3 offers a comprehensive package of solutions to employers, health plans and coalitions to improve the flawed incentives that currently permeate the U.S. health care system. www.HCI3.org

About the Robert Wood Johnson Foundation

The Robert Wood Johnson Foundation focuses on the pressing health and health care issues facing our country. As the nation’s largest philanthropy devoted exclusively to health and health care, the Foundation works with a diverse group of organizations and individuals to identify solutions and achieve comprehensive, measurable, and timely change. For more than 40 years the Foundation has brought experience, commitment, and a rigorous, balanced approach to the problems that affect the health and health care of those it serves. When it comes to helping Americans lead healthier lives and get the care they need, the Foundation expects to make a difference in your lifetime. For more information, visit www.rwjf.org. Follow the Foundation on Twitter at www.rwjf.org/twitter or on Facebook at www.rwjf.org/facebook.

Media Contacts

Melissa Blair

Robert Wood Johnson Foundation (609) 627-5937

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Diabetes and coronary heart disease most ripe for incentive experimentation and reform.

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