THE P4Q CONTEXT

Hutchison et al. (in Frolich et al. 2004) point to the importance of considering the context in which financial incentives are designed or implemented to understand their potential effects ³⁸. Indeed, each provider’s efforts in responding to incentives are mediated by characteristics of the local market, the medical organisation (if any) in which he or she practices, individual provider characteristics and on patient characteristics.

The following contextual aspects will be discussed in this section: the health care system, the payer-provider relationship (with theoretical grounding), their respective characteristics, and the patient’s characteristics.

3.2.1 The health care system

Obviously, it is essential that incentive models are congruent with the values of the health care system. For instance, in Ontario, Custers et al. (2008) adopted 4 principles that were congruent with the health care system values ⁷⁵:

1. Be fiscally prudent (no new money);

2. Be simple to administer (no additional administrative concerns);

3. Support a culture of continuous improvement (no one-shot action);

4. Improve equity in and access to quality of health services.

General aspects of the system include the type of system (insurance or NHS; level of regionalisation), the public/private mix (% insured), the dominant payment system (fee for service, salary, capitation, etc.) and the level of therapeutic freedom among providers.

According to Conrad and Christianson (2004), these market and environmental conditions will, among other things, drive investment in structural quality (medical equipment, human capital) and could therefore be considered as exogenous determinants of incentive programmes ³⁵. It can be argued that the market and environmental characteristics will also drive process and outcomes related aspects of quality, and hence the success of P4Q programmes.

For instance, the extent of competition between providers may affect their response to incentives: a provider in a monopoly situation could maximise profits without improving quality ³⁸. This level of competition is in its turn related to other healthcare system characteristics, such as the degree of patients’ free choice to consult with providers of their own choosing. Although P4Q is not directly related to the patient’s choice of a provider, the number of providers one patient consults will influence responsibilities’

allocation and the level of care continuity to support high quality healthcare.

Interestingly, the appropriate and timely referring of patients is in several P4Q programmes a quality target on its own. Furthermore, the level of decision making in P4Q policy will influence the uniformity, transparency, awareness and general acceptance of a P4Q programme design. The lower the level, the more risk for fragmentation and for variously competing approaches. This reduces programme awareness and acceptance of providers. It also reduces the impact size of the incentive (the effect of one of many simultaneous programmes, also known as a dilution effect versus the effect of one national programme).

Obviously P4Q design on a national level can, as mentioned before, be combined with involvement and local priority setting on other levels.

Salary as a general payment system is considered as a volume neutral payment system, and will therefore likely not to have any positive or negative influence on P4Q programmes targeting underuse or overuse. Salary provides mainly sufficient security and a reliable income, but no care quality or quantity incentive. P4Q may add an additional quality stimulus when combined with a dominant salary payment system. Fee For Service as an activity volume driver is likely to combine well with P4Q targets aimed at underuse, but also induces a risk to reduce or even to eliminate the effects of P4Q targets aimed at overuse. Capitation as a patient volume driver, but also per patient cost containment driver, is likely to combine well with P4Q targets aimed at overuse, but also induces a risk to reduce or even to eliminate the effects of P4Q targets aimed at underuse.

3.2.2 The payer-provider relationship 3.2.2.1 Principal-agent theory

According to Nahra et al.(2006), the conceptual foundation of providing an incentive to achieve a desired result from the receiver of the incentive can be found within the context of a principal-agent framework ¹⁰⁷. The agency theory describes the relationship between a principal (for instance the insurer or a national health service) and one or more agents (physicians, hospitals,...).

Under this theory, a principal must hire agent(s) to carry out an objective that the principal cannot carry out alone. To align the goals of the agent with those of the principal, rather than contracting with the agent solely for the provision of effort, the principal may contract with the agent, at least partially, on a measure of outcome. ¹⁰⁸, ¹⁰⁷. Such part of a contract refers to pay for quality. Hence, principal-agent theory addresses relationships in which 1° both parties have different abilities (and it is therefore desirable that the first party delegates responsibility for performing a function to the second), 2° there is asymmetric information (for instance the insurer cannot monitor all the actions that physicians take), and 3° the parties have –to some extent- different goals (or other priorities within the diverse set of quality domains).³⁸

In the relationship between the principal/payer and the agent/provider the latter can be both a potential ally and a potential source of resistance to P4Q. Regarding resistance, providers may have particular concerns about the quality of the data and the validity of measures created from the data.

They can also be very sceptical about data produced by outside stakeholders such as government agencies or employer coalitions. Finally, they are also concerned about their ability to influence many outcomes measures of quality because of the substantial role played by patient actions and preferences (see the discussion above regarding the control of providers over processes of care).⁷⁸

In order to avoid the above to some extent, one may implement a voluntary programme wherein not all providers need be ready and willing to participate.

However, voluntary programmes will be likely to attract those providers who expect to perform well — usually those that are already performing well — while the poor performers remain on the sideline.⁷⁸

3.2.2.2 The payer

Several organizational and market mechanisms influence the way a payer can and will implement P4Q ¹⁰⁹. For instance, if there is already an existing policy of clinical guidelines endorsed by the payer, it will be easier to build further on this policy and add a P4Q dimension to it. Also, if a variable patient contribution in function of provider and/or technology performance is already in place, then again, it will be more acceptable to introduce P4Q ³⁵. In general the inclusion of elements of existing quality incentive schemes obviously will influence the success of a new programme ³⁸.

On the structural side, the availability of management information systems is crucial for the success of P4Q.

Also, in a context of multiple payers, the question about coordinated action from different payers can be raised. On the one hand, a payer may be reluctant to work alone if the fruits from the programme are also of benefit for other payers (because the providers treat patients related to different payers); in other words, one wants to avoid a free-rider situation in which certain payers profit from the efforts of other payers. On the other hand, if payers compete with each other, it may be more interesting to obtain a competitive advantage through P4Q.⁷⁸

Although the vision on the health care system and the typology have already been discussed before (see health care system, page 24) these may also be considered as payer specific since it obviously possible that a payer has a different vision as compared to the overall health system, and operates in his specific way (e.g. a private insurer within a NHS).

3.2.2.3 The provider

The health (care) provider can be considered as the target audience of a P4Q programme. The provider can be an individual physician (GP or specialist), a group of physicians, a hospital, a hospital department, a resting home, etc...

As said before, it is of importance that the programme is in line with the provider’s culture. For instance, the emphasis of Custers et al. (2008) on continuous improvement, innovation and mutual learning (see above) was believed to fit well with the vision of the Canadian physicians ⁷⁵.

In the following, we will discuss consecutively provider’s motivation, the target unit, and other organisational aspects.

Motivation

How can providers be motivated to participate in a programme? Motivation of health professionals is often ignored in P4Q programmes ^{110 , 111}.

A rather simplistic view on this is that when explicit incentives are used to change behaviour, the motivating effect of money will channel the professionals to the policy defined goals.

In this view, each physician has a target income, and incentives that help to achieve that income will change behaviour. It also means that if the desired income has already been reached a P4Q programme will have less effect ³⁸, or that providers whose performance has improved but does not reach the threshold, could become demotivated to make an effort ⁶⁷.

More importantly, this view ignores the complex interplay of internal and external factors affecting the health professional’s behaviour ^{75 , 110}. As social beings and as agents for their patients, physicians are driven by important societal and professional norms and by altruism, in addition to net income.^{35, 67}

Thus, the financial incentive might either enhance intrinsic motivation if it is viewed as being legitimating the internal or professional norms or reinforcing them; but it may as well diminish the strength of the intrinsic quality motivators ³⁵. In other words, an extrinsic motivation like the use of financial incentives can crowd out the intrinsic motivation by for example demotivating individual providers, or devaluating their altruistic motivation.

Motivation is possibly also related with the level of trust the physician has in the payer.

Conrad et al. (2004) therefore cite trust as a key factor influencing the effectiveness of P4Q programmes ³⁵.

It eventually comes down to “internalizing” the external regulation ¹¹⁰, i.e. to make the incentives instrumentally important for the personal goals. One could also argue that our systems should more externalize the intrinsic values of medicine, i.e. reward societal and professional norms.

Also, the role of medical leadership in supporting the P4Q programme (as one of the many roles that medical leadership fulfils) is described by Conrad et al. (2004) as potentially influencing motivation and therefore effectiveness of P4Q programmes ³⁵. Finally, the practicing physician’s knowledge and understanding will contribute to the motivation to act in line with the goals 35 , 38, 54 .

The latter is immediately related with the level of involvement of the individual clinicians and their degree of autonomy. Here again, it could be argued that more involvement and more autonomy will increase motivation.

Note that Conrad et al. (2004) also refer to peers’ knowledge of individual provider performance, as a variable potentially influencing effectiveness of P4Q programmes.

Indeed, if peers are aware of the performance of an individual physician, this will definitely influence his/her behaviour ³⁵.

According to Adams and Hicks (2001), the industry can have an important role in affecting physician professional behaviour ¹¹². The incentives given by pharmaceutical representatives to providers can effect providers prescribing and professional behaviour

113.

The role of the media in P4Q programmes is rather small. However in public reporting, where the quality of care provided by physicians or hospitals is made publicly, the media plays an important role. The availability of ranking lists or performance reports on the internet can influence physicians’ behaviour ³⁸.

The target unit

Another important question is related to the “target unit” , i.e. to whom to address the incentive.

According to Dudley and Rosenthal (2006) 3 factors determine the choice of the unit:

1° Where the largest benefit can be achieved; 2° the share of covered services delivered by the providers (providers treating rare diseases are in this view less interesting targets); and 3° available performance measures and existing data for each type of provider.⁷⁸

A related question is whether the programme should be focussed on a manager of a department, an individual clinician, or a department or group of physicians ⁶⁷.

Most studies on P4Q have not distinguished between the effects of incentives that target the physician organisation and those that target the individual physician.

Targeting incentives at the individual provider makes the accountability clearer and implies that the target provider is more in control of his actions.

Targeting incentives at the medical group or hospital system level can also be beneficial because it can encourage collaboration, coordination and interaction. Also, if the performance measurement system is subject to some variation, this variation is expected to be averaged out ⁷⁸. On the other hand, the free-rider phenomenon may occur here as well when targeting provider groups ³⁵.

An automatic question that then rises is what the role of the “meso” level will be (e.g.

the head of department): will this meso level play the role of a principal or of an agent

67? Referring back to the agency theory, definition of the principal and the agent requires careful consideration. Suppose that in a P4Q programme, hospitals are the target audience (hence the agent): the incentive payments go to the hospital for performance according to the standards of the principal. To successfully improve quality of delivered care, the hospital as an agent must rely on the cooperation of their medical staff and other clinical people, who are often not employees of the hospital ¹⁰⁷.

Physicians enjoy a monopoly in several major decision areas: the decision to admit patients to the hospital, the decision to perform procedures, the decision regarding which procedure to perform, and the decision to prescribe pharmaceuticals. This professional autonomy is reinforced in a fragmented financing system, paying physicians on a fee-for-service basis and hospitals on a prospective payment basis.

This dual split may create conflicting goals and is often cited as a major obstacle to effective collaboration. Financial incentives for doctors and hospitals to do the right things or to do better are often mismatched or even in conflict ^{114 , 115}. Better alignment of incentives is one of the expectations in the pay-for-quality world ¹¹⁶. A possibility is that the hospital may make a part of the incentive payment available to clinicians responsible for quality improvements, thereby to motivate their cooperation. An alternative form of this “gain sharing” can be developed to afford physicians direct payments as an incentive, not to improve efficiency but to improve overall hospital quality. Another form of shared gain (or risk) is the bundled payment in which the physician and hospital are paid together in one lump sum, which then must be divided among the different specialists participating in the patient’s treatment. Finally some specific pay-for-quality models compensate physicians for clinical improvement that require collaboration with hospitals, or reward hospitals for improvements that may require physicians to collaborate. This kind of compensations encourages the needed collaboration between hospitals and physicians in joint quality improvement initiatives.

Further research on Hospital-Physician relationships, who are at the centre of several policy proposals such as pay-for-quality, gains sharing and bundled payments is required in this regard.

Organisational aspects

Regardless of how the target unit is defined, organisational aspects at the provider’s side need to be taken into account. When participating in a P4Q programme, providers may need to create patient registries, use support staff to monitor medical management and patient compliance with preventive and treatment protocols, and adopt information technology to improve access to patient data ⁵⁴. Hence, there may be little value in establishing ambitious performance targets based on process or outcome measures if providers have weak information systems and poor office systems for managing patient care ⁷⁸.

Moreover, there may be costs associated with complying with the programme ⁷⁵, and the response of providers is likely to be influenced by their costs of performing the tasks necessary to improve. This can be considered in economic terms as an opportunity cost ³⁸. Hence, the reward should address these additional costs in the design. Obviously one should also take into account the possible benefits. This relates to cost-effectiveness of P4Q and is being discussed later in this report.

Finally, the number of patients in a practice, the quantity of services per patient ^{35 , 38}, but also the physician’s age, gender, specialty, years since completion of the training, etc. can influence the compliance of physicians with the guidelines. ^{37, 38, 78}

3.2.3 The patients

Several patient characteristics can influence the outcomes of a programme ^{38, 54} . For instance, age, education level, insurance status, socio-economic status, etc.

Also their awareness of the programme (are patients aware of prices, and financial aspects of the programme, do patients receive information about the provider’s behaviour) is of importance. Several authors notice that such disclosures should be handled carefully to safeguard the patient provider relationship ¹¹⁷.

Especially the presence of co-morbidities in patients and how this affects best practice care is of concern to some ^{118 , 119}. Finally, the patient has through his own behaviour a large influence on certain P4Q outcome targets. His lifestyle, cooperation and level of therapeutic compliance will co-determine his health evolution, next to provider action.

A general principle is to safeguard P4Q purposes by assigning accountability only to a degree that corresponds with clear responsibility and control. Therefore patient behaviour has to be taken into account ¹²⁰.