H E A L T H S E R V I C E S
Performance-based reimbursement in health care
Consequences for physicians’ cost awareness and work environment
EWA FORSBERG, RUNO AXELSSON, BENGT ARNETZ *
Background: The funding and structure of health care is currently undergoing major changes. The impact of such
changes on professional behaviour and working conditions have not been widely studied in Europe. The two aims
of this study were to prospectively assess the impact of performance-based reimbursement on physicians’ attitudes
and self-assessed professional behaviour, related to cost awareness, as well as their working conditions.
Method: Physicians in Stockholm County Council (with a performance-based reimbursement system) and physicians
in eleven Swedish councils without performance-based reimbursement were examined simultaneously in 1994. This
was a cross-sectional questionnaire study. Result: The results show a heightened cost awareness among physicians
in Stockholm but also greater discontent with working condition factors such as decision latitude, job satisfaction
and personal well-being. Conclusion: These results suggest that in order to counteract physicians discontent as a
result of altered structure and increased focus on performance-based reimbursement, the autonomy and influence
of physicians over the work processes need to be considered.
Keywords: cost awareness, decision-making, economic incentive, financial incentive, well-being, working conditions, work environment
I
n recent years, health care systems in many countries have undergone major changes.1 Regardless of the type of system in operation it was suggested by many senior managers, economists, politicians as well as health care professionals that there was room for improvement with regard to effectiveness and efficiency. In order to achieve this many countries have organized their health care services in such a way as to enhance competition.2 It has been reported in earlier research that competition and payment by performance will increase efficiency, and this is assumed to depend on an increased cost awareness.3 Most earlier studies, however, studied the US system, and only few concern health care systems in a European country.The organization of health care in Sweden differs from that in most other countries with publicly financed health care. Most of the political management is decentralized to 26 county councils who enjoy a large degree of in-dependence and are free to choose different organiza-tional models. In spite of this, they were very similar in organization until the early 1990s. By 1994, however, approximately half of the county councils had chosen to follow international trends in making a clear split
between purchasers and providers, and instituting a system of performance-based reimbursement based on Diagnosis Related Groups (DRG). This offers a unique opportunity to prospectively identify the specific effects of performance-based reimbursement.
Experience from other countries shows that some possible effects of performance-based reimbursement are an increased cost awareness,4 and incentives for a more efficient use of resources.5 However, even those Swedish councils that did not introduce a performance-based re-imbursement system were subject to decisions at national level, having the potential to increase cost awareness. The most important country-wide decision in Sweden was a guarantee of care within three months, which was introduced for ten diagnoses in 1992.6 Failure to obtain care within three months gives the patient the right to receive care in another hospital, which then bills the hospital with primary responsibility. Another decision concerned patients’ rights to choose a hospital outside the borders of their own county council. This resulted in many hospitals, even these without a purchasing and provision system, experiencing competition. Further-more, many county councils also introduced a system in which the various departments had to pay for diagnostics without having a performance-based system.
Thus, there have been both local and national changes, in Sweden, which were intended to influence hospital finances and which also might affect cost awareness among physicians. At the same time, county councils differ in respect of using or not using a performance-based reimbursement system.
* E. Forsberg1,2, R. Axelsson1,3, B. Arnetz2
1 Centre for Development of Health Services, Stockholm, Sweden 2 Department of Public Health and Caring Sciences, Section of Social Medicine, Uppsala University, Sweden
3 Karolinska Institute, Department of Public Health Sciences, Division of Social Medicine, Sweden
Correspondence: Ewa Forsberg, Centre for Development of Health Services, Box 4402, S-102 68 Stockholm, Sweden,
tel. +46 8 4293105, fax +46 8 4293140, e-mail: ewa.forsberg@smd.sll.se
Stockholm County Council, which is Sweden’s largest county council (1.7 million inhabitants), introduced performance-based reimbursement for hospitals in January 1992. Before that, public hospitals had been financed with an annual budget from the county council. Hospitals now receive performance-based reimbursement, where performance is measured in DRG-points based on the discharge diagnoses determined by the physician responsible for each patient.7 This reimbursement is, among other things, used to pay for laboratory tests and cover other diagnostic costs ordered by the physician. In the previous organization there were no clear incentives for the individual physician to take respons-ibility for a department’s finances. The new system, how-ever, creates a system where every physician is closely involved both in earning and spending the reimburse-ment.8 The system does not create personal financial incentives for physicians but it does create a collective incentive within hospitals which are all interested in a share of the same money.
One intention when introducing a performance-based system was to increase pressure on health services to deliver more cost efficient care. Earlier research has shown a difference in costs but no significant difference in outcome between different treatment strategies.9 One way to be cost efficient may therefore be to increase the control of clinical performance. Increased workload may also be expected due to staff reduction.
According to previous research, such a development may entail a number of psychosocial working environment risks, e.g. stress. The main risk factors, recognized as stressors in health care, are high workload, time pressure,10,11 lack of influence and control12 as well as perceived stress from organizational factors, such as poor leadership and low efficacy.13 These risks can be evaluated against criteria for a good work environment, such as job satisfaction where the subjective evaluation of the work environment is more highly associated with well-being than the physical or objective work environ-ment.14
One aim of the present study was to examine whether performance-based reimbursement would change physicians’ attitudes and self-assessed behaviour towards a greater cost awareness. Another aim was to investigate the possible impact of performance-based reimbursement on physicians’ working conditions.
METHODS
Subjects
The subjects were randomly selected physicians employed by Stockholm County Council and by eleven other counties across Sweden, without a performance-based reimbursement system. The physicians were hospital-based physicians working either in medical (internal medicine, respiratory medicine, nephrology, cardiology) or surgical (general surgery, orthopaedics, gynaecology) departments in public hospitals.
The study was performed at the same time in late autumn 1994 in Stockholm and in the other councils. Out of the
343 physicians approached in Stockholm, 281 agreed to take part in the study (82%). Of the 566, 447 physicians from other county councils, 79% agreed to participate. The majority of the physicians were males (69%), specialists (70%) and between 31 and 50 years of age (73%). There was no significant difference between the two groups of physician concerning age, gender and years worked. The participants were representative of the entire population of selected physicians in the county councils
(table 1). Measures
A questionnaire that examined physicians’ views of cost awareness, working conditions, efficiency and quality of care was created in the spring of 1992. It was based on interviews with six senior physicians, a previous study in Stockholm 1991 examining expectations of the new organization among physicians, nurses and assistant nurses,15 and one of the researcher’s (E.F) own experiences as a clinical physician during the period. The questionnaire was tested on a referee group of four physicians who had the opportunity to ask for clarifica-tions and suggest improvements. The revised version of the questionnaire was used twice in Stockholm, in 1992 and 1993, before this study.16 Some questions were then removed due to lack of reliability.
The second revised questionnaire included five items forming the cost awareness index. The items concerned consideration of costs in decisions about examinations and treatment, considering costs when establishing diagnoses (which determine the DRG), refraining from tests or treatment due to cost (table 2) and feeling steered by cost factors in everyday clinical work. Cronbach alpha for index ‘cost awareness’ was 0.63.
Working conditions were addressed by creating an index with eleven items concerning general workload, job Table 1 Background factors: Stockholm and 11 councils, 1994
Parameter Stockholm n=281 % 11 councils n=447 % Age (years) 21–30 8 7 31–40 39 29 41–50 38 45 ≥51 15 19 Gender Male 64 79 Female 36 21 Hospital department
Medical (internal medicine, cardiology, Resp. medicine,
nephrology) 49 48 Surgical (surgery, orthopaedics, gyneacology) 51 52 Frequency missing Specialist Yes 70 71 No 30 29 45
satisfaction, well-being, workload based on work linked to emergency department, negative effects on private life, satisfaction with ones salary compared with other groups, changes in clinical freedom, possibility of influencing the work schedule, opportunities for discussions with colleagues, possibility of influencing the organization and changes in balance of power between health care personnel. Cron-bach alpha for index ‘working conditions’ was 0.72. In addition there were questions on socio-demographic characteristics (e.g. the number of years as a practising physician). Detailed instructions were included with the questionnaire.
Design and procedure
The main goal of this study was to assess whether per-formance-based reimbursement would affect physicians’ working conditions and/or their attitudes related to cost awareness. A cross-sectional design was used and data were collected simultaneously in Stockholm and from the eleven councils without a performance-based reimburse-ment system in 1994. The questionnaire was mailed to the participants’ home addresses, accompanied by a letter asking them to return the questionnaire by post. Two reminders were sent. Confidentiality was emphasized and
guaranteed. The response rate for Stockholm was 82%. The response rate for the other councils was 79%.
Statistical analyses
The data were examined with the statistical package SAS (version 6.12). Overall responses were analysed using descriptive statistics. Correlations were measured with a Spearman Rank correlation and Cronbach alpha was used as a reliability test. Chi-square tests and t-tests were used to compare the two groups and Levene’s test was used for analysis of variance. All tests were two-tailed. Statistical significance was determined at p<0.05.
Missing data were analysed by a stepwise comparison, comparing those who answered after the second reminder with all the respondents. The underlying assumption was that this group were more like the non-responders than those who answered immediately or after one reminder. No differences were found between the groups. There was a non-response rate for single questions of 6% maximum. RESULTS
Cost awareness
More than 30% of physicians from all county councils reported that they relatively often took costs into Table 2 Physicians’ opinions about cost awareness
Questions Alternatives Stockholm County Council (SCC) n=281 % Eleven councils n=447 % Statistics SCC/11 Cs Making financial considerations when deciding about investigations
and/or treatments
Never 16 16 ns
Once in a while 49 54
Quite often 28 24
Often 7 6
Refraining from a diagnostic measure, e.g. laboratory tests, X-rays, due to cost considerations
Never 43 52 χ2(3) =10.9, p<0.05
Once in a while 43 39
Quite often 10 8
Often 4 1
Refraining from a therapeutic measure (including rehabilitative measures), due to cost considerations
Never 75 77 ns
Once in a while 23 22
Quite often 1.5 1
Often 0.5 0
Consider different reimbursement when establishing a discharge diagnosis?
Never 40 88 χ2(3) =191, p<0.01
Once in a while 29 9
Quite often 17 3
Often 14 0
Reasons for refraining from diagnostic/therapeutic measures (only those
who have refrained) n=124 n=194
The measure was unnecessary 15 21 ns
The benefit could not warrant the cost 74 74 I felt myself compelled to refrain for other
reasons, namely … 11 5
consideration when making decisions about tests and treatments for their patients (table 2). There was no significant difference between the different councils in this respect. Physicians also reported in general that they had abandoned, due to cost, certain tests and types of examination that they would have decided upon three years ago. The number of physicians who reported that they relatively often avoided using certain tests or other diagnostic methods due to cost considerations was, how-ever, higher in Stockholm than in the other eleven county councils. A majority of those who reported abandoning certain tests did so because they considered that the possible benefits did not warrant the cost. Another difference between Stockholm and the other county councils was that more physicians in Stockholm regarded themselves as being governed by financial con-siderations in their everyday clinical work (table 3). More physicians in Stockholm also reported that they relatively often considered costs when making decisions about discharge diagnoses.
Working conditions
A higher proportion of physicians in Stockholm than in the other county councils considered themselves to have less freedom in clinical decision-making compared with
three years earlier (table 3). At the same time, very few physicians in any of the county councils studied, reported an increase in the number of guidelines (11%) or an increased emphasis on using only recommended drugs (6%). More physicians in Stockholm than in other county councils agreed with the statement that their possibility of controlling their own work schedule had deteriorated. Both groups of physicians agreed with the two statements that possibilities for physicians to affect the organization have deteriorated and that there is a change in the balance of power between health care personnel towards a more negative situation for physicians. There was no significant difference between physicians from different county councils in this respect.
The workload was rated to be heavy in all county councils. Sixty-eight percent of physicians in all the county councils studied reported a heavy or a very heavy work-load (table 4). There was also an equally high degree of agreement with the statement that the physician’s private life was negatively affected by workload.
More physicians in Stockholm than in the other councils reported a deterioration in mental well-being. Even job satisfaction was reported to have deteriorated to a higher degree in Stockholm than in the other councils. Another significant difference was that physicians in Stockholm Table 3 Physicians’ opinions about decision latitude
Questions Alternatives Stockholm County Council (SCC) n=281 % Eleven councils n=447 % Statistics SCC vs 11 Cs Do you consider your clinical freedom to have changed compared to
three years ago?
No 47 61 χ2(4) =14.5, p<0.01
Yes, due to stricter demands to adhere to basic
list of medications 7 5
Yes, due to more guidelines 12 10
Yes, financial directives govern choice of
treatment more than previously 24 16
Yes, in another way … 10 8
My possibilities for affecting my own working day have diminished
Do not agree at all 1 18 24 3.4±0.09 vs 3.1±0.07
2 9 12 t(568)=2.8, p<0.01
3 10 10
4 39 36
Agree completely 5 24 18
The influence of the medical profession in health care organization has diminished
Do not agree at all 1 10 16 3.8±0.08 vs 3.7±0.07
2 8 6 ns
3 10 9
4 33 32
Agree completely 5 39 37
The balance of power between various professional groups has shifted to the physicians’ disadvantage
Do not agree at all 1 14.7 15.9 3.7±0.09 vs 3.7±0.07
2 9.0 7.2 ns
3 12.4 9.2
4 21.8 28.3
Agree completely 5 42.1 39.5
were more dissatisfied than their colleagues in the other councils regarding their salary as compared to other professions.
DISCUSSION
The main differences between physicians from Stockholm County Council, where a performance-based reimbursement system is in operation, and those from the other participating county councils, is that the former assessed a more heightened cost awareness, but also greater discontent about working condition factors such as decision latitude, personal well-being and job satisfaction.
This is a questionnaire study and some objectives might be raised against that. One is that sometimes there is a discrepancy between words and action. This objection is most relevant for the cost awareness measure. The result in this study can, however, be related to earlier findings about greater decreases in average length of stay in the council with performance-based reimbursement, which corresponds well with an increased cost awareness.17 The response rates of the study were 82% for Stockholm and 79% for the other counties. One objection related to this is that the non-responders are different from the
responders. It can never be guaranteed that this has not been the case, but the stepwise comparison does not support this conclusion.
Why then choose a questionnaire study design? Physicians’ behaviour can be assumed to be affected by their attitudes about what constitutes ‘best possible care’. But, due to the fact that many decisions in medicine are partly subjective, decisions may also be affected by a general change in physicians’ minds about financial con-siderations. For example, there are various options with regard to examinations and tests. A new technology, attractive on the grounds that it will yield more accurate diagnostic information, may be more expensive as well as more demanding and/or dangerous for the patient. On the other hand, an older well-known method may give less information but is also less expensive.
It is therefore important to ascertain physicians’ opinions about taking financial aspects into consideration, whether or not this affects their decisions, and in what way. This is a reason for using a questionnaire. The importance of financial incentives, on physicians behavi-our has been reported in earlier studies.18
The self-reported behavioural changes among physicians from Stockholm County Council correspond well with Table 4 Physicians opinions about work load and well-being
Questions Alternatives Stockholm County Council (SCC) n=281 % Eleven councils n=447 % Statistics SCC vs 11 Cs How would you describe your workload?
Have too little to do 0.5 0.5 ns
Have just the right amount to do 7 10.5
Uneven- sometimes have too much to do 22.5 22
Have too much to do 26 27
Have far too much to do-often work overtime 44 40 My work is so onerous that it negatively affects my private life
Do not agree at all 1 17 20 3.6±0.09 vs 3.4±0.07
2 8 8 ns
3 10 12
4 25 28
Agree completely 5 40 32
How much do you like your work today, compared with three years ago?
Better 5 15 χ2(2) =28.9, p<0.001
Unchanged 44 50
Worse 51 35
Have your job satisfaction changed compared to three years ago?
Yes, it has increased a lot 2 4 χ2(4) =31.7, p<0.001
Yes, it has increased a bit 5 17
No, not at all 24 26
Yes, it has decreased a bit 47 37
Yes, it has decreased a lot 22 16
I am not satisfied with my salary trend in relation to other professional groups (inside or outside health care)
Do not agree at all 1 15 41 4.02±0.09 vs 2.48±0.07
2 4 16 t(710)=13.2, p<0.001
3 7 15
4 12 12
Agree completely 5 62 16
those indicated by earlier research, for example an increased cost awareness and a reduced amount of laboratory tests.19,20 The fact that attitude changes in the same direction were found also in the other eleven county councils indicates, however, that other changes unrelated to the introduction of performance-based reimbursement may have similar effects. Still there was a significant difference in the degree of change in attitudes concerning cost awareness, between Stockholm and the other county councils.
Cost awareness
The performance-based reimbursement system, with a fixed reimbursement (per diagnosis) intended to cover all costs, highlights the need to minimize costs. The present study indicates that the reform may have succeeded in this respect. The physicians in Stockholm consider costs relatively often when making treatment decisions, and report that they more frequently refrain from previously used diagnostic methods, than their colleagues in the other eleven councils. The main reason for refraining from tests is that the possible benefits do not warrant the cost, which means, that those tests to some extent are viewed as unnecessary. Refraining from using something which is ‘unnecessary’ ought to reduce health care costs. It may be postulated that there are at least two mechanisms behind the increased cost awareness. Before the introduction of this new organizational system diagnostics were regarded as ‘free utilities’. Drawing attention to, and clarifying the costs of diagnostics was something new. This kind of feedback has in earlier studies been postulated to have an effect.20 The second explanation is the performance-based reimbursement which gives a total frame of resources for the clinical departments.
Almost all the other eleven councils have introduced systems for showing the costs of diagnostics and their physicians also report an increased cost awareness. Even so, cost awareness among physicians in Stockholm seems to be greater than among physicians from the other eleven councils. The conclusion is therefore that performance-based reimbursement to clinical departments gives a stronger incentive to maintain cost awareness than is the effects from merely clarifying the cost of diagnostics. An alternative explanation may be that the system of reimbursement is unimportant, and that the main ex-planation for increased cost awareness is the financial constraints. If this is correct, Stockholm County Council should have been subject to more severe constraints than the other eleven councils in order to explain the differences found in the present study. That is not the case. Official statistics concerning health care costs per inhabitant 1991–1994 and cost volume changes 1991– 1994, show that Stockholm County Council has not reduced its resources for health care any more than the other councils.21 Even experiments in other countries with performance-based reimbursement to clinics undergoing expansion have yielded similar results,3 thus giving support to the conclusion that performance-based
reimbursement is important in explaining the findings of this study.
Working conditions
Performance-based reimbursement may, due to earlier research, be expected to reduce the workforce and thereby increase the pressure on the remaining personnel in hospitals.4 It has not been possible to support this. Although workloads are reported to be very high, no significant differences were found in this respect between Stockholm County Council and the other county councils. Factors outside the payment system seems to explain the high workload.13
A financial incentive often sharpens the demand for cost effectiveness. Earlier findings indicate that variations in clinical practice may be expensive without being medically motivated.9 One would therefore expect the introduction of performance-based reimbursement to intensify the pressure on physicians to use treatments that are proven to be cost effective. This applies both to drugs recommended by the hospital as well as guidelines. This reduces the clinical freedom of physicians. Experiments aimed at increasing efficiency by increasing financial control are being conducted in a number of countries, (e.g. in the USA) with the development of managed care.22 The results in this study indicate that there is a widespread feeling among physicians from all the county councils that their own influence over the organization as a whole has been curtailed and that much power has been transferred from physicians to other health care personnel. Physicians also report that their freedom to plan their own daily schedule has been curtailed. How-ever, this was reported by more physicians in Stockholm than in the other councils, which may reflect not only a shift in the balance of power but also the effect of in-creased financial considerations.
The results of this study show that more physicians in Stockholm than in the other councils consider their clinical freedom to have been curtailed, but they do not report more frequent demands to use recommended drugs or to adhere to guidelines. Here we find a discrepancy between the feeling of being governed by financial con-siderations and the concrete examples of control via recommended drug lists and/or guidelines. It has been found, however, that the perceived work environment is more important than the actual physical work environ-ment with respect to how it affects well-being.14 Thus, the physicians in Stockholm consider themselves to have less autonomy than their colleagues from the other councils: this means that they perceive less clinical freedom, a feeling of being governed by financial considerations in everyday clinical work and a limited possibility to plan their own daily schedule. These findings reflect an increased financial control and a decreased decision latitude for physicians, in order to increase cost efficiency in a performance-based re-imbursement system. As shown in an earlier article, Stockholm County Council have succeeded in increasing efficiency more than the other eleven councils.17 Is 49
increased control over physicians the price that must be paid for increased efficiency? It is possible, but critical voices have been raised even in other countries, against the negative consequences of too much control, e.g. within the framework of managed care.23
Earlier research has shown a clear connection between feelings of job control, decision latitude and the experi-ence of job satisfaction and well-being.12,14 There is also research indicating a connection between physicians’ job satisfaction and well-being on the one hand, and quality of care on the other.24 In this study, both job satisfaction and mental well-being are reported to have deteriorated among physicians in the participating councils. With reference to the above discussion it is not surprising that this deterioration is found more often among Stockholm physicians than among those from the other eleven councils. We do not yet know the consequences of this, but it might well be that a deterioration in quality of care due to reduced well-being and job satisfaction among physicians will, in the long run, counteract the desired effect of performance-based reimbursement to increase efficiency and effectiveness.17
CONCLUSION
There is an important difference between Stockholm County Council and the other county councils studied. The tendency, according to an increased cost awareness, is similar but the degree of change is different, without a similar difference in the level of constraints.
The conclusion is therefore that performance-based re-imbursement has heightened the financial pressure and the result is a larger increase both with regard to cost awareness and efficiency. However, this system seems also to have strengthened the negative occupational effects. Physicians in general reported a very heavy workload but more physicians in Stockholm feel that their decision latitude has been curtailed. Job satisfaction and well-being have decreased everywhere, although more so in Stockholm.
The ‘good’ result achieved by performance-based re-imbursement thus seems to be an increased cost aware-ness, while the ‘bad’ effect seems to be an increased experience of being controlled by financial pressures and, subsequently, a deterioration in job satisfaction and well-being. Long-term implications of current changes in payment system ought to be carefully evaluated in terms of discontent, staff turn-over and quality of care.
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Received 12 April 2000, accepted 5 December 2000
