The problem with financial incentives in healthcare

Guest post by Thomas H. Dahlborg, an industry voice for relationship-centered and compassionate care, keynote speaker, author, consultant and adviser.

Back in the early 1990s, while working for Harvard Community Health Plan (later Harvard Pilgrim Health Care), I was involved in the implementation of quality-based incentive programs (now called pay-for-performance or P4P programs) where we incentivized physicians and medical practices to do certain things such as improve patient satisfaction and adhere to a drug formulary.

Some years later, while at Martin's Point Health Care, I developed these incentive models and oversaw their use and impact. And over time I learned a great deal about controllable outcomes, unintended consequences and the direct and indirect impacts of such models.

Now 15 to 20 years later, as we continue to move from productivity-based reimbursement to quality-based reimbursement via the accountable care organization and other payment reform models, a large caution sign is illuminated before me.

Just before Christmas, I was speaking with a former colleague who had recently decided to leave the nonprofit sector within the healthcare system to go back to school. She is now at Boston University in what sounds like a very interesting MBA program and is apparently learning a great deal more of the business side of nonprofits.

"Yes, Tom, we are studying the impact of incentivizing behaviors and I must admit that during our most recent project there was definitely an adrenaline rush having to do with both chasing and receiving a financial reward for achieving a specific target."

>> Read the full commentary at Hospital Impact

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