Selecting effective incentive structures in health care: A decision framework to support health care purchasers in finding the right incentives to drive performance

Thomas Custers 1 2 Jeremiah Hurley 0 Niek S Klazinga 2 Adalsteinn D Brown 1 0 Department of Economics, McMaster University , Hamilton , Canada 1 Health Results Team - Information Management/Ministry of Health and Long-Term Care , Toronto , Canada 2 Department of Social Medicine, Academic Medical Center, University of Amsterdam , PO Box 22700, 1100 DE, Amsterdam , The Netherlands Background: The Ontario health care system is devolving planning and funding authority to community based organizations and moving from steering through rules and regulations to steering on performance. As part of this transformation, the Ontario Ministry of Health and Long-Term Care (MOHLTC) are interested in using incentives as a strategy to ensure alignment - that is, health service providers' goals are in accord with the goals of the health system. The objective of the study was to develop a decision framework to assist policymakers in choosing and designing effective incentive systems. Methods: The first part of the study was an extensive review of the literature to identify incentives models that are used in the various health care systems and their effectiveness. The second part was the development of policy principles to ensure that the used incentive models are congruent with the values of the Ontario health care system. The principles were developed by reviewing the Ontario policy documents and through discussions with policymakers. The validation of the principles and the suggested incentive models for use in Ontario took place at two meetings. The first meeting was with experts from the research and policy community, the second with senior policymakers from the MOHLTC. Based on the outcome of those two meetings, the researchers built a decision framework for incentives. The framework was send to the participants of both meetings and four additional experts for validation. Results: We identified several models that have proven, with a varying degree of evidence, to be effective in changing or enabling a health provider's performance. Overall, the literature suggests that there is no single best approach to create incentives yet and the ability of financial and non-financial incentives to achieve results depends on a number of contextual elements. After assessing the initial set of incentive models on their congruence with the four policy principles we defined nine incentive models to be appropriate for use in Ontario and potentially other health care systems that want to introduce incentives to improve performance. Subsequently, the models were incorporated in the resulting decision framework. Conclusion: The design of an incentive must reflect the values and goals of the health care system, be well matched to the performance objectives and reflect a range of contextual factors that can influence the effectiveness of even well-designed incentives. As a consequence, a single policy recommendation around incentives is inappropriate. The decision framework provides health care policymakers and purchasers with a tool to support the selection of an incentive model that is the most appropriate to improve the targeted performance. - Background The use of incentives in health care to improve performance is increasing rapidly worldwide. There are many reasons for this, but two consistent themes are the need to better align the incentives of providers with health system goals and the need to re-configure incentives to support new, devolved approaches to system governance. A continued misalignment between health service providers' compensation and key system goals drives the failure to deliver efficient and effective services for patient populations despite many efforts in the last decade to improve performance [1-3]. As many countries change governance principles of their health systems from rules and regulations toward devolved, results-driven systems that emphasize strategic planning and decision-making oriented towards performance [4,5], they have realized that success requires individuals and organizations in the system have an incentive to act on information and use their capacities to meet the heath system goals [6]. The health care system in the Canadian province of Ontario is an example of such system. The Ontario Ministry of Health and Long-Term Care is devolving planning and funding authority to community-based organizations, called Local Health Integration Networks (LHINs) while moving itself into the role of a steward. Incentives an integral part of the Ministry's efforts to ensure alignment across the Ontario health care system. Using incentives to create alignment, however, is challenging because the link between incentives and the behaviour of individuals or organizations is not always straightforward. Evidence from a range of countries demonstrates that, at the macro level, the method of provider compensation influences practice patterns. A systematic review by Chaix-Couturie et al. shows that financial incentives have an impact on the use of health care resources, including: admission rates to, and length of stay in, hospitals; compliance with clinical practice guidelines; and achieving general immunisation rates [7]. A second systematic review of the impact of payment methods on the behaviour of primary care physicians found that those paid on fee-for-service basis provided more services than those paid by salary or by capitation [8]. At the micro level, however, the evidence is ambiguous. A systematic review of the impact of explicit financial incentives on quality of care yielded mixed results with respect to improving the processes and outcomes of care, access to care, and patient experience of care in a variety of populations and care settings [9]. Similar observations can be made with regard to public reporting as a tool to create alignment [10,11]. Consequently, although incentives can effect change, their effectiveness in eliciting the desired results depends critically on several (often poorly) understood aspects of the institutional environment in which they are used [12,13]. This poses a challenge for health care managers and purchasers who want to use incentives to improve performance. Recognizing this, the Ontario Ministry of Health and Long-term Care developed a decision framework to assist policy makers and system managers in both the Ministry and the LHINs in designing effective incentive systems. Central to the framework is a series of questions that must be answered to identify what types of incentives can best achieve the desired performance improvement in a manner consistent with provincial values and principles. This article presents the resulting framework which addresses fundamental questions that need to be considered in selecting an incentive model. Although the framework has been developed for the Ontario heath care system, the rationale behind its development and elements can be applied in other jurisdictions facing similar challenges. Dev (...truncated)