Abstract
Financial incentives for quality improvement in hospital care [known as pay for performance (P4P)] can be directed to either the hospital level or redistributed to the department level. Theoretically, performance payments distributed to lower organisational levels are more effective in increasing performance than payments directed to the hospital level, but the empirical evidence for this expectation is scarce. This paper compares the performance of hospital departments at hospitals that do and do not redistribute performance payments to the department level. We study a Danish P4P scheme to provide patients with case managers. Applying difference in differences analysis, we estimate a 5 percentage points higher performance at hospital departments that are subject to a direct financial incentive. Our results suggest that payers can improve the effectiveness of P4P payments by distributing payments to the department level rather than the hospital level.
Similar content being viewed by others
References
Adams, C.: Does size really matter? Empirical evidence on group incentives. FTC Bureau of Economics Working Paper (52) (2002)
Ai, C., Norton, E.C.: Interaction terms in logit and probit models. Econ. Lett. 80(1), 123–129 (2003)
Alchian, A.A., Demsetz, H.: Production, information costs, and economic organization. Am. Econ. Rev. 62(5), 777–795 (1972)
Backes-Gellner, U., Werner, A., Mohnen, A.: Team size and effort in start-up-teams—another consequence of free-riding and peer pressure in partnerships (2004). Working Paper Series.
Barua, A., Sophie Lee, C.-H., Whinston, A.B.: Incentives and computing systems for team-based organizations. Org. Sci. 6(4), 487–504 (1995)
Duckett, S.: Design of price incentives for adjunct policy goals in formula funding for hospitals and health services. BMC Health Serv. Res. 8(1), 72 (2008)
Eijkenaar, F.: Key issues in the design of pay for performance programs. Eur. J. Health Econ. 14(1), 117–131 (2013)
Eijkenaar, F., Emmert, M., Scheppach, M., Schffski, O.: Effects of pay for performance in health care: a systematic review of systematic reviews. Health Policy
Epstein, A.M.: Will pay for performance improve quality of care? The answer is in the details. N. Engl. J. Med. 367(19), 1852–1853 (2012)
Greene, W.H.: Econometric Analysis, vol. 4. Prentice Hall, Upper Saddle River (2000)
Greene, W.H.: Econometric Analysis, 7th edn. Prentice Hall, Upper Saddle River (2011)
Hardin, J.W., Hilbe, J.M.: Generalized Linear Models and Extensions. Stata (2007)
Holmstrom, B.: Moral hazard in teams. Bell J. Econ. 13(2), 324–340 (1982)
Kandel, E., Lazear, E.P.: Peer pressure and partnerships. J. Polit. Econ. 100(4), 801–817 (1992)
Kristensen, S.R.: The power of incentives: to pay or not to pay for performance. Dissertation, University of Southern Denmark (2012)
Liang, K.-Y., Zeger, S.L.: Longitudinal data analysis using generalized linear models. Biometrika 73(1), 13–22 (1986)
Maynard, A.: The powers and pitfalls of payment for performance. Health Econ. 21(1), 3–12 (2012)
McCullagh, P., Nelder, J.A.: Generalized Linear Models, 2nd edn. Chapman and Hall, London (1989)
Mehrotra, A., Damberg, C.L., Sorbero, M.E.S., Teleki, S.S.: Pay for performance in the hospital setting: what is the state of the evidence? Am. J. Med. Qual. 24(1), 19 (2009)
Ministry of Finance: Finansministeriet agreements on the economy for local governments 2005 [Aftaler om den kommunale økonomi for 2005]. Finansministeriet, Copenhagen (2004)
Nelder, J.A., Wedderburn, R.W.M.: Generalized linear models. J. R. Stat. Soc. Ser. A Gen. 135(3), 370–384 (1972)
Norton, E.C., Wang, H., Ai, C.: Computing interaction effects and standard errors in logit and probit models. Stata J. 4(2), 154–167 (2004)
Oliver, A., Brown, L.D.: Incentivizing professionals and patients: a consideration in the context of the united kingdom and the united states. J.Health Polit. Policy Law 36(1), 59–87 (2011)
Papke, L.E., Wooldridge, J.M.: Panel data methods for fractional response variables with an application to test pass rates. J. Econ. 145(1), 121–133 (2008)
Papke, L.E., Wooldridge, J.M.: Econometric methods for fractional response variables with an application to 401(k) plan participation rates. National Bureau of Economic Research Technical Working Paper Series, No. 147 (1993)
Papke, L.E., Wooldridge, J.M.: Econometric methods for fractional response variables with an application to 401(k) plan participation rates. J. Appl. Econ. 11(6), 619–632 (1996)
Roland, M.: Pay-for-performance: not a magic bullet. Ann. Intern. Med. 157(12), 912–913 (2012)
Rosenthal, M.B., Frank, R.G.: What is the empirical basis for paying for quality in health care? Med. Care Res. Rev. 63(2), 135 (2006)
Ryan, A.: Hospital-based pay-for-performance in the united states. Health Econ. 18(10), 1109–1113 (2009)
The Danish Institute for Quality and Accreditation in Healthcare. The danish healthcare quality programme—accreditation standards for hospitals(DDKM) 1st ver. 2nd edn. [Den danske kvalitetsmodel - akkrediteringsstandarder for sygehuse] (2011)
Van Herck, P., De Smedt, D., Annemans, L., Remmen, R., Rosenthal, M.B., Sermeus, W.: Effects, design choices, and context of pay-for-performance in health care. BMC Health Serv. Res. 10(1), 247 (2010)
Van Herck, P., Annemans, L., De Smedt, D., Remmen, R., Sermeus, W.: Pay-for-performance step-by-step: introduction to the MIMIQ model. Health Policy 102(1), 8–17 (2011)
Wooldridge, J.M.: Econometric Analysis of Cross Section and Panel Data. MIT, Cambridge (2002)
Author information
Authors and Affiliations
Corresponding author
Appendix
Appendix
See Table 4.
Rights and permissions
About this article
Cite this article
Kristensen, S.R., Bech, M. & Lauridsen, J.T. Who to pay for performance? The choice of organisational level for hospital performance incentives. Eur J Health Econ 17, 435–442 (2016). https://doi.org/10.1007/s10198-015-0690-0
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10198-015-0690-0