Organizations and Markets

Incentives Still Matter, Medical Care Edition

27 May 2013 at 1:40 pm Peter G. Klein Leave a comment

| Peter Klein |

Old-fashioned pay-for-performance schemes are about as fashionable these days as Taylorite hierarchy. In the academic and practitioner literatures on compensation and motivation, ideas about biases and heuristics, team motivation, trust, framing, etc., are in; work on agency costs and opportunism is out. So I was interested to see a new empirical paper on physician motivation — a randomized controlled trial set in Rwanda — with pretty conventional findings. Check it out:

Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes
Paul Gertler, Christel Vermeersch
NBER Working Paper No. 19046, May 2013

We nested a large-scale field experiment into the national rollout of the introduction of performance pay for medical care providers in Rwanda to study the effect of incentives for health care providers. In order to identify the effect of incentives separately from higher compensation, we held constant compensation across treatment and comparison groups – a portion of the treatment group’s compensation was based on performance whereas the compensation of the comparison group was fixed. The incentives led to a 20% increase in productivity, and significant improvements in child health. We also find evidence of a strong complementarity between performance incentives and baseline provider skill.

Entry filed under: - Klein -, Management Theory, Strategic Management.