What Incentives Affect Treatment Choices?

Developing a unified theory of provider and patient incentives to advance payment and benefit-design reforms

Dates of Project: November 15, 2012 to August 15, 2013

Description: Researchers at the Health Care Incentives Improvement Institute® (HCI3) worked with experts in behavioral and health economics to develop a theory to unify both the external incentives (such as professional payment schemes or consumer benefits) and the intrinsic personal motivations that compel patients and providers to choose (or not) the most affordable, efficient, and effective health care.

By better understanding the role incentives play in the U.S. health care system, the research team aimed to help reduce cost variability, inefficiency, and waste in health care delivery.

Key Results

  • Institute researchers, in consultation with behavioral and health economists, developed the Incentives Improvement Framework (the unified theory) that emphasizes removing incentives that hinder the motivation inherent in all providers and patients to do what is best for the patient's health. In contrast, the theory argues, most pressures exerted on providers and patients today encourage them to make bad health care choices.

  • Institute researchers produced an issue brief, Improving Incentives to Free Motivation, on the unified theory of incentives improvements for providers and patients.

  • The research team created a Web-based application of the Incentives Improvement Framework, or unified theory, and is working on two websites—one for payers and providers and the other for patients.  They plan to complete them by the end of 2014.

  • Researchers initiated, through the Web application, an "operational model." This allows payers and providers who use the framework to test different ways to pay for health care for effectively and efficiently and to design health benefit plans, and then to report what they learned back to researchers for sharing with others.

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Theory suggests reforming pay systems & benefit structures can reduce costs & improve quality.