More than 75% of health care incentives are so small or poorly communicated that they go unnoticed by providers.  As a result, more than $20 billion in incentives may be wasted annually, according to a study.

Performance incentives (and penalties) are a widely accepted tool to achieve health care cost and quality goals. They are a key element in the Patient Protection and Affordable Care Act and also a central part of the design and rationale behind accountable care organizations where plan participants earn incentives for achieving performance goals.

In its 2012 Incentives for Health Professionals report, ZS Associates surveyed more than 4,500 health care providers and payers on the use of pay-for-performance incentives to guide provider behavior and achieve goals such as efficient care coordination, increased patient drug compliance, decreased hospital readmission rates and improved quality.

The study concludes that, though well intentioned, most incentives neither affect behavior nor help meet health care quality and cost goals. The goals of some ACOs may also be in jeopardy.

Even though as many as 85% of doctors and nurses could earn an incentive, up to 75% were either unaware of the rewards or unable to distinguish incentive payouts from base pay. Also, one-third of respondents who knew about the incentives did not find them motivating.

“While incentive compensation plans are intended to change behavior, improve patient outcomes and achieve critical business objectives, design and execution of the plans are often flawed,” says Angela Bakker Lee, one of the report’s authors and managing principal for the health care service providers practice at ZS. “Relatively small increases in a doctor's rate of reimbursement, for example, fail to motivate change.”  

Torsten Bernewitz, report co-author and ZS managing principal for the health care insurers and payers practice, agrees.

“Many health care organizations — hospitals, group practices and insurance companies — are missing a huge opportunity. They spend big dollars, but get little impact. To reform how health care is delivered and paid for, we must make incentives more meaningful and truly motivating.”

Health care professionals overwhelmingly favor incentives. The report shows 71% of respondents viewed health care incentives as positive, and most expected an increase in their use. 

“Incentives have proven to be effective in many other settings,” says Bakker Lee. “But they have not been executed in a way that can help change provider behavior in health care.  For example, many health care organizations focus on selecting the right pay-for-performance metrics in their incentives plans.  They believe if they get that part right, success will follow. However, they often overlook other key principles that make incentives work. It is here where we need to correct the course.”

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access