Eurohealth SYSTEMS AND POLICIES
Katharina Janus is a Professor, Ulm University and Columbia University, New York, USA.
Email: katharina.janus@uni-ulm.de
PAY-FOR
PERFORMANCE
DOES NOT ALWAYS
11PAY JJ
By: Katharina Janus
Summary: Pay-for-performance (P4P) has dominated medicine for the last decade although evidence from economics and psychology has shown that it can entail fundamental risks and side effects, especially in knowledge-intensive and complex situations. This article, thus, questions the comparability of medicine to Tayloristic factory work where P4P has been the preferred control mechanism. It then offers alternative solutions to managing motivation of doctors that focus on strengthening competence, autonomy and social relatedness to professional culture.
Key words: Pay-for-Performance, Incentives, Principal-Agent Relationship, Crowding Effects, Knowledge-Intensive Work
Incentives aim at enticing agents to act in the best interest of the principal. In this way, doctors should make decisions for the patient, but they are also expected to consider the interests of health insurance/
budget holders in tax funded systems and the health care system at-large.
Additionally, doctors might factor in some interests of their own - they also have to pay their rent. Reconciling the plethora of interests in one agent (the doctor) seems impossible and "side effects"
inevitably result. As a consequence, the contract between principal and agent cannot be exactly defined and is affected by continuous mistrust that is intensified by information discrepancies (information asymmetry) between principals and agents. Thus, designing the perfect incentive system that controls the
"relationship of mistrust" was and remains one of the fundamental questions in health care management.
Approaches to incentive system design have to date largely focused on experimenting with various monetary incentives. Although "money as a motivator" for behaving in the best interest of the principal was first employed more than 3000 years ago, it is still the predominant tool for influencing agents'
"proper" behaviour. This long, but not always laudable, history of paying agents for desired performance raises the question as to whether performance
based payment is an adequate concept for incentivising high quality in medicine.
A careful review of nearly all pay-for
performance (P4P) initiatives in health care by Rosenthal and Frank comes to the conclusion that "money works" if quantity determines performance. If, however, quality is the desired performance objective, there exists no evidence in favour of money as an effective motivator for achieving better quality careD. Human decision-making, problem-solving and
Eurohealth incorporating Euro Observer -Vol.17 I No.4 I 2011
