This slide deck discusses some of the relevant factors that should be considered when designing financial incentives for providers of healthcare services.

1. USING FINANCIAL INCENTIVES TO
INFLUENCE CLINICAL DECISION MAKING
S O R AYA G H E B L E H , M P H
T H E D A R T M O U T H I N S T I T U T E F O R H E A LT H
P O L I C Y A N D C L I N I C A L P R A C T I C E

2. PROVIDER DECISION MAKING
- Providers are a major component influencing healthcare
outcomes and healthcare expenditures
- The most expensive item in healthcare is the “provider’s pen”
- Resource utilization is determined by provider decision making
- Under the existing Fee-for-service (FFS) in healthcare:

3. HEALTHCARE REFORM
- Healthcare reform aims to realign financial incentives with quality of care
- The Institute of Medicine’s six aims for improving quality in healthcare include
- Safety, Effective, Patient-Centered, Timely, Efficient, Equitable
Requires financial incentives to be tied to quality metrics
in order for providers to receive reimbursement for care
Incentives, however, need to be monitored and evaluated as prior attempts of
using financial incentives to influence clinical decision making have not always
been successful in improving quality for patients

4. WHAT ARE THE ISSUES?
(1) Fee-for-service drives high healthcare costs because providers are incentivized to
perform more services without necessarily improving quality of care
(2) Magnitude of financial incentives that can potentially be introduced makes
determining the appropriate incentive difficult
(3) Replication of successful results across the numerous settings available for
healthcare service delivery is not assured
(4) Applicability of incentives that may work in a large provider system may not translate
to a solo or small group practice
(5) Protecting practices that cannot transition towards integrated delivery that requires
high-start up capital and advanced healthcare technology
(6) Numerous stakeholders need to collaborate for successful incentive programs that
include providers, insurance companies, beneficiaries, and government agencies

5. WHY ARE FINANCIAL INCENTIVES IMPORTANT?
- Providers are the target population for financial incentive
models in healthcare
- Potential implications with regard to ethnicity, geographical
location, and cultural background of participating providers
- Distinctions between providers that work in self-owned
practices and small group practices compared to those in
large provider networks or accountable care organizations

6. KEY DETERMINANTS
Biology Behaviors
Social
Environment
Physical
Environment
Policies and
Interventions
Access to
Quality
Health care
Many key factors determine which, if any, incentives should be
utilized in improving the quality of care being delivered by providers

7. KEY DETERMINANT - BIOLOGY
Biological makeup of providers varies widely and can directly affect how they
respond to financial incentives to deliver care
Specific indicators include:
• Age of the physician
• Where the physician went to school and trained
• Gender
• Religious Background and Upbringing
• Value System
• Ethnic Background
• Socioeconomic Status
• Personal Bias

8. KEY DETERMINANT - BEHAVIORS
Provider behaviors implicated in decision-making include:
• Prescribing habits
• Personal work ethic and the amount of preparation time
• Average number of tests physician typically orders
• Physician self-monitoring
• Personal spending habits
• Size of the workload the physician takes on
The target income level of the provider
will affect whether a financial
incentive will be an important factor,
tying into family financial obligations
Implicit assumption in medicine
that all providers practice in the
best interest of their patients

9. KEY DETERMINANT – SOCIAL ENVIRONMENT
Different Provider Settings
• Hospitals
• Clinics
• Ambulatory Care Centers
• Offices
• Nursing Homes
• Skilled Nursing Facilities
• Community Health
Centers
- Provider settings dictate the structure and
magnitude of incentive given to the provider
- Organizational structure and culture of the
provider setting can affect the success of
incentives
- The proportion of the group to which the
incentive is applied is relevant

10. KEY DETERMINANT – PHYSICAL ENVIRONMENT
- Provider access to necessary tools for quality
improvement is crucial
- Providers practicing in rural or impoverished areas may
have different responses to incentives compared to
providers practicing in urban or higher income locations
- Different geographic locations are tied with different
patient populations who have different diseases and can
determine the way providers react when providing care

11. KEY DETERMINANT – POLICES & INTERVENTIONS
Structure of the incentive affects provider participation
Government policy factors include government insurance reimbursements from
Medicare and Medicaid
Provider adherence to clinical guidelines set by academic institutions and what the
status quo of quality provision is among a provider community are indicators of the
likelihood of incentives working within that provider community
Healthcare reform will have huge implications for providers if methods of
reimbursement change and shared savings and accountable care models begin to
dominate the healthcare arena

12. KEY DETERMINANT – ACCESS TO QUALITY HEALTH CARE
Lack of reimbursement to providers and healthcare settings that
see patients who are underinsured or have no insurance often
leads to an increase in over-testing, over-prescribing, and over-
diagnosing of patients who have more reliable insurance or the
ability to pay. Providers don’t necessarily need incentives to
provide increased access to quality care but under current
reimbursement schemes, providers have more of an incentive
to increase quantity and this has increased the cost burden.

13. WHAT NOW?
Financial incentives should be used in defined settings for defined problems
within defined populations where measurable results can be produced
indicating a movement towards a desired improvement in
quality.

14. LARGE AND SMALL PROVIDER SETTINGS
Large Provider Settings
Can assume more
risk
Higher capabilities
for infrastructure and
technology
implementation
Larger pool to
measure
performance
improvement and
quality metrics
Provider buy-in and
active participation is
more likely in a larger
setting
Potential to
participate in shared
savings models and
accountable care
Large and Small Provider Settings
Absolute
threshold, directly
measurable
incentives
Vaccinations
Reduced repeat
unnecessary lab
tests
Increased
screenings and
preventative care
initiatives

15. CHARACTERISTICS TO CONSIDER
- Interventions of any kind should be explicitly described and known to
providers so they are aware of what entity is paying for the intervention
- Determining short-term goals compared to long-term goals is important when
coming up with metrics of success for the incentive
- Metrics to be considered for any incentive program should include the
provider population providing the data, percentage of patients being targeted
for the incentive, expected overall effects of the incentive, and the type of
feedback given
- Financial risks and penalties can be used to influence and change physician
behavior as well
- Organizational pressure can either increase or decrease intrinsic motivation
to perform depending on the environment, setting, and culture

16. CONCLUSIONS
Financial incentives are not going anywhere and will
continue to be implemented in a variety of healthcare
settings. In order for these incentives to be utilized
properly, the healthcare community needs to understand
that financial incentives and reimbursement strategies
are provider and setting specific and they must
implement incentives accordingly.