Daniel Pink’s TED Talk on human motivation is eye-opening. He shows that people who are incentivized with rewards to solve problems more quickly – when those problems require creative thinking – actually perform poorly compared with people who are not incentivized for speed and accuracy. Here is the most amazing moment from his talk:
“Last month, just last month, economists at LSE looked at 51 studies of pay-for-performance plans, inside of companies. Here’s what the economists there said: ‘We find that financial incentives can result in a negative impact on overall performance.’”
“There is a mismatch between what science knows and what business does. […] If we really want high performance on those definitional tasks of the 21st century, the solution is not to do more of the wrong things, to entice people with a sweeter carrot, or threaten them with a sharper stick. We need a whole new approach.
Pink was not discussing the healthcare industry in particular, but his comments reflect spreading concerns about the effectiveness of physician pay-for-performance plans being rolled out by insurers and health systems across the nation. Wrote Andrew M. Ryan and Rachel M. Werner in Harvard Business Review, “…to the extent that health care providers have responded to pay-for-performance programs, that response has been narrowly focused on improving the measures for which they are rewarded.”
The care that clinicians provide for patients is neither simple nor mechanical. Fitting cash rewards that are effective for linear, low-involvement tasks onto multi-dimensional and high-involvement physician decision-making sounds like a disastrous model that will reward narrow diagnosis and treatment at the expense of appropriate treatment that considers a wider range of diagnostic and procedural options.
Let us back up for a moment to consider how pay-for-performance is defined and how these programs are being administered in the current landscape. The Robert Wood Johnson Foundation says that pay for performance “refers to initiatives that provide financial incentives to health care providers to carry out improvements focused on achieving optimal patient outcomes.”
Notable to observe in this definition is that the programs are focused on improvements leading to better outcomes as opposed to just better outcomes. To my knowledge, this focus on process instead of the traditional preference for outcomes is due to the difficulty of proper risk-adjustment that measures “observed over expected” outcomes accurately. Providers who receive lower bonuses in pay-for-outcomes programs would complain that they see sicker patients than other providers see.
Prominent pay-for-performance programs include California Pay for Performance, the Massachusetts-based Alternative Quality Contract, and initiatives from CMS such as Value-Based Purchasing, the Premier Hospital Quality Incentive Demonstration, and the Physician Group Practice Demonstration. For example, an analysis of the Premier Demonstration led by Rachel M. Werner showed that short-term quality improvements were not sustained over the course of the five-year demonstration.
Although studies measuring the impact of pay-for-performance programs on quality are mixed, none of this is to say that providers should not be rewarded for meeting quality or patient satisfaction benchmarks. However, we must also be must be wary of translating clinical uncertainty and intuitive decision-making into rigid, codified process models. Remember the lessons from Daniel Pink described earlier: performance might suffer, along with patient outcomes, if it is still true that healthcare requires creativity and intuition in favor of recipes and cookbooks.
Future pay-for-performance programs should be designed with limited goals and should seek input from affected providers to improve the chances of success. This collaboration will become more important as pay-for-performance programs expand to account for a wider range of healthcare diagnoses and treatments.
Imran Cronk 