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Subject: qotd: What is wrong with P4P schemes?
Date: Fri, 12 Oct 2012 10:58:57 -0700
From: Don McCanne <firstname.lastname@example.org>
To: Quote-of-the-Day <email@example.com>
Physicians for a National Health Program (PNHP)
October 12, 2012
Financial incentives may sap motivation, undermine quality: Health
A leading authority on behavioral economics has teamed up with two
health policy experts in an article at the Health Affairs blog to argue
that pay-for-performance (P4P) schemes in medicine may do more harm than
good by "crowding out" altruism and other intrinsic motivations to do a
Such P4P schemes, which are being quickly adopted by Medicare and many
private insurers under the new federal health law, typically involve
giving bonuses to doctors and hospitals for hitting specific, numerical
targets in such matters as prescribing certain drugs or ordering
However, despite the widespread rush to embrace P4P, a growing body of
research has found no evidence that these schemes actually benefit
patients, write professor Dan Ariely and physicians Dr. Steffie
Woolhandler and Dr. David Himmelstein. Their article was posted to the
blog late Thursday afternoon.
Moreover, it's likely the introduction of such schemes into the
cognitively complex work of medicine will backfire, they say.
"Traditionally, economists have viewed extrinsic (i.e. monetary) reward
as either the only motivator or as simply additive to intrinsic
motivators such as purpose, altruism, mastery, or autonomy," the authors
"According to this view, higher pay induces better performance. But this
simple model of reward-induced performance ignores the complexity of
human drive, particularly the role of intrinsic motivation – the desire
to perform an activity for its own inherent rewards.
"Offering your dinner-party host a $10 reward for cooking a wonderful
meal isn't likely to motivate future invitations."
The authors cite multiple research studies – involving blood donors in
the United States, volunteer workers in Switzerland, and Israelis with
children in day care, to name just a few – that show how introducing
financial incentives into the picture led to diminished motivation to do
the right thing.
They also cite a meta-analysis summarizing 128 studies that show such
findings are representative of a consistent body of research.
In addition, the authors warn that "crowd-out" of doctors' intrinsic
motivation may be particularly severe when contracts are more detailed
and controlling. P4P incentives may also lead providers to game the
system by checking boxes or exaggerating diagnoses when they know that
doing so will garner bonuses.
Pay-for-performance programs also increase administrative costs, they
say, citing the extensive economics literature on the downsides of
overly detailed contracts.
The authors are recognized experts in their respective fields. Dan
Ariely is the James B. Duke Professor of Psychology and Behavioral
Economics at Duke University. He is the author of numerous research
studies and three bestselling books on behavioral economics, including
"The (Honest) Truth about Dishonesty."
Dr. Steffie Woolhandler and Dr. David Himmelstein are physicians and
professors at the City University of New York's School of Public Health
at Hunter College and visiting professors of medicine at Harvard Medical
School. They have published many articles in leading medical journals on
health insurance and mortality, medical bankruptcy and administrative
costs in health care, among other subjects. They are also co-founders of
Physicians for a National Health Program, a single-payer advocacy group.
PNHP provided no financial or other support for their research.
And excerpts from the cited article...
Health Affairs Blog
October 11, 2012
Will Pay For Performance Backfire? Insights From Behavioral Economics
By Steffie Woolhandler, Dan Ariely and David Himmelstein
Paying for performance (P4P) has strong intuitive appeal. Common sense
and rigorous studies tell us that paying more for, say, angioplasties or
immunizations yields more of them. So paying doctors and hospitals for
better care, not just more of it, seems like a no-brainer. Yet while
Medicare and many private insurers are charging ahead with
pay-for-performance (P4P), researchers have been unable to show that it
Findings from the new field of behavioral economics may explain these
negative results. They challenge the traditional economic view that
monetary reward is either the only motivator or is simply additive to
intrinsic motivators such as purpose or altruism. Studies have shown
that monetary rewards can undermine motivation and worsen performance on
cognitively complex and intrinsically rewarding work, suggesting that
P4P may backfire.
The Science Of Performance And Reward
The quality improvement literature has pinpointed many causes of quality
breeches in medical care: fatigue; poorly designed workflow and care
systems; undue commercial influence; knowledge gaps; memory lapses;
reliance on inappropriate heuristics; poor interpersonal skills and
insufficient teamwork, to name just a few. But "not trying" is rarely
cited. Yet P4P implicitly blames lack of motivation for poor quality care.
But even when motivation is the problem, money isn't always the
solution. Findings from the new field of behavioral economics indicate
that performance bonuses often backfire, particularly for cognitively
Traditionally, economists have viewed extrinsic (i.e. monetary) reward
as either the only motivator, or as simply additive to intrinsic
motivators such as purpose, altruism, mastery, or autonomy. According
to this view, higher pay induces better performance. (Figures appear at
the end of this post.)
But this simple model of reward-induced performance ignores the
complexity of human drive, particularly the role of intrinsic motivation
— the desire to perform an activity for its own inherent rewards.
None can doubt health care's grave quality deficits and cost excesses.
As remedy, P4P suggests manipulating greed, a fuel that's powered
exponential growth in productivity in the overall economy. But Adam
Smith, who first recognized greed's awesome power, was also a moral
philosopher who believed that commodity production required a parallel
public service economy driven by social duty.
Sadly, greed has caused many of the worst abuses within the current
system. Injecting different monetary incentives into health care can
certainly change it, but not necessarily in the ways that policy makers
would plan, much less hope for.
Comment: Many of us cringe when we see various pay-for-performance
(P4P) schemes. Why should that be? After all, providing monetary rewards
for improving quality and possibly reducing costs intuitively might seem
like a good thing. Dan Ariely, an expert on behavioral economics, along
with Steffie Woolhandler and David Himmelstein, provide us with insight.
Most of us really did enter the health professions to serve patients,
not to sell a commodity.