Behavioral Economics in Provider Incentive Design

Overview

The shift towards value-based reimbursement in U.S. healthcare is accelerating. Payment reform initiatives have taken many shapes-accountable care organizations, bundled payments, value-based purchasing, medical homes, global payment-but all share the common strategy of tying provider (physician, hospital, health system) reimbursement to performance on costs, outcomes, or both. Yet, pay-for-performance has demonstrated little effect on physician behavior and patient outcomes. Payers and provider groups are in need of novel approaches to structure provider incentives-both financial and non-financial-to better promote the delivery of quality, cost-effective care. In this project, the study team plans to study how behavioral economic principles can improve the effectiveness of physician incentives to deliver higher quality and lower cost care. They will test the application of specific behavioral economic principles including immediacy, social pressure, and loss aversion in incentive design and implementation. The study will contribute to an empirical foundation for re-design of existing physician incentive programs and implementation of new policies through secondary data analyses and a multi-arm experiment that evaluate the impact of promising behavioral economics principles on the effectiveness of provider financial and nonfinancial incentives.

The key goal of this project is to demonstrate how using behavioral economic principles to inform the structure of provider incentives and the practice environment can improve provider performance, especially in settings that are moving away from fee-for-service reimbursement and fragmented care towards new payment and delivery models that emphasize coordination of care and provider accountability. The project will build upon the recently completed 'Phase 1' project in which a set of behavioral economic approaches to provider performance were identified that could meaningfully improve provider performance, a focused research agenda of high-priority tests of these concepts (i.e., content of this proposal) was developed; and information on how behavioral economics can be used to improve incentives for physicians was disseminated. For this phase, an experimental evaluation will be conducted of the impact of social pressure by varying individual and group incentives and the comparative effectiveness of two loss aversion framing methods (endowment versus performance gap) on provider performance via a multi-arm experiment. We will complement the quantitative evaluations with pre- and post-intervention qualitative surveys of physicians and patients to better understand the influence on behavior change, culture, acceptability of the incentive program, and patient reported outcomes on health and experience.