Health Policy$ense

Physician Incentives - Making Performance Measures Meaningful

Q&A With Amol Navathe

How can we redesign physician incentives to improve their impact on behavior and performance?  Recently, the Commonwealth Fund published a round-up of expert views on reforming physician incentives, and one of the experts was LDI Senior Fellow Amol Navathe, MD, PhD. Navathe, a physician, health economist, and engineer, studies how to apply behavioral economic principles to physician financial and non-financial incentives. At a recent retreat, he described ongoing research on physician pay-for-performance measures; you can watch an excerpt here

And below is Amol's Q & A from the Commonwealth Fund's October 2015 issue of "Transforming Care", reproduced here with permission. 

Q: When it comes to designing workplace incentive programs, are there unique things about the way physicians work that necessitate a different approach?

A: Absolutely. In economic terms, we think of the principal–agent relationship, meaning physicians act as agents first and foremost for the patients—making decisions and recommendations on their behalf. This is unlike other employees who have an almost singular duty to their employers or customers. However with health care reform, physicians are increasingly being asked to serve as agents for not just patients and society, but also for health insurers, for accountable care organizations, and as agents of value-based care. As a result, employers must adapt incentive programs so they align the multiple agency relationships that physicians carry.

Q: What about transparency in reporting performance at the individual physician level. How important is that?

A: When using unblinded reports, physicians have to feel it’s a fair comparison, that it’s people they perceive or know to be their peers. If not—say in a large-scale reporting program in which physicians are being compared to someone in another market and it’s unclear what resources they have—comparisons may actually be harmful rather than helpful. It’s important to remember that as a group, physicians are quite motivated to meet professional standards and not lag [relative to] colleagues, so peer effects can be very powerful.

Q: What are some of the biggest unanswered questions in this field?

A: We don’t yet understand how the design of incentives influences behavior and performance. It is very much an open space still. The many open questions include the what, when, and how of information feedback. We know that we probably need to simplify the hundreds of quality measures the National Quality Forum has endorsed down to a practical set that we can make salient, actionable, and tied to meaningful amounts of both financial and nonfinancial incentives. We just don't know which measures and how many to use.

Q: Your work focuses on using behavioral economics to change physician behavior. What are some good examples of how health systems used them—perhaps unwittingly?

A: Most, if not all, health systems that use behavioral economics were trying to solve their business needs through trial and error, rather than with an explicit agenda to use psychology and economics to motivate behaviors. There are several good examples, including group-based incentives, dashboards with peer comparisons, and public award ceremonies.