Abstract
We show that costs of adjustment as opposed to low perceived value may explain why improved quality care practices diffuse slowly in the medical industry. Using a randomized field experiment conducted in Argentina, we find that temporary financial incentives paid to health clinics for the early initiation of prenatal care motivated providers to test and develop new strategies to locate and encourage pregnant women to seek care in the first trimester of pregnancy. These innovations raised the rate of early initiation of prenatal care by 34 percent while the incentives were being paid in the treatment period. We also find that this increase persisted for at least 24 months after the incentives ended. We show that this is consistent with the presence of up-front costs from adjusting care processes that made it too expensive to develop and implement new strategies to increase early initiation of care in the absence of the incentives. Despite large increases in early initiation of prenatal care, we find no effects on health outcomes. (JEL C93, I11, I12, I13, I18, J16, O15)
Highlights
Successful organizations are able to efficiently and reliably produce high quality products through the use of reproducible and stable routines.1 Routines shape the production process by defining each person’s role, their patterns of action, and by coordinating the tasks performed by the different team members.2 They can be thought of as organizational habits that reduce the complexity of decision-‐making, facilitate coordination across team members, and speed production
While we do not have information on the salience of early initiation of care during or shortly after the experiment, we explore whether the temporary fee increase made early initiation of care more important in the minds of the clinic staff after the end of the experiment, using an online survey administered to the chief medical officer of each clinic about the absolute and relative importance of seven different prenatal care procedures including initiating prenatal care prior to week 13 of pregnancy
We examine the effects of temporary financial incentives for medical care providers to increase early initiation of prenatal care for pregnant women using a randomized controlled trial in Argentina
Summary
Successful organizations are able to efficiently and reliably produce high quality products through the use of reproducible and stable routines. Routines shape the production process by defining each person’s role, their patterns of action, and by coordinating the tasks performed by the different team members. They can be thought of as organizational habits that reduce the complexity of decision-‐making, facilitate coordination across team members, and speed production. Changing deep-‐rooted habits is hard and even small costs of adjustment may inhibit changes in favor of maintaining the status quo, (DellaVigna 2009; Thaler and Sunstein 2009).6 In these circumstances, temporary incentives may speed adoption by helping to compensate providers for the initial fixed costs of changing their practice pattern routines. Our results suggest that the mechanism behind positive provider responses to price increases is more related to adjustment costs than to responding to higher profit margins In this case, long-‐term increases in productivity can be achieved more cheaply than through a permanent increase in fees
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