Incentive Contracts for Quality Improvement in Health Care

Abstract

Quality performance measures are harder to weight in incentive contracts because they are harder to determine in regard to sensitivity, precision and congruence. Additionally, performance measures are often subjectively weighted, in practice. An incorrect weighting of performance measures does not lead to an optimal allocation of the agent's effort for an appropriately balanced between cost- and quality-related actions. In the special case of health care, unwanted effects of quality incentives could have direct negative consequences because e.g. patients are immediately affected. It was investigated how incentive contracts with targets of quality improvement and cost minimization influence the quality and cost of health care. It was hypothesized that such incentive contracts decrease the quality of health care (H1) and lead to lower costs or higher budget of health care (H2), compared to no incentives. The panel data analysis was conducted on the basis of 292 intensive care units in Germany from 2013 and 2014 with a random effects model. The results show, that intensive care units with incentive contracts for quality improvement and cost reduction have significantly (p