THE COST-EFFECTIVENESS OF USING FINANCIAL INCENTIVES TO IMPROVE PROVIDER QUALITY: A FRAMEWORK AND APPLICATION
Version of Record online: 14 AUG 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Volume 23, Issue 1, pages 1–13, January 2014
How to Cite
Meacock, R., Kristensen, S. R. and Sutton, M. (2014), THE COST-EFFECTIVENESS OF USING FINANCIAL INCENTIVES TO IMPROVE PROVIDER QUALITY: A FRAMEWORK AND APPLICATION. Health Econ., 23: 1–13. doi: 10.1002/hec.2978
- Issue online: 16 DEC 2013
- Version of Record online: 14 AUG 2013
- Manuscript Accepted: 2 JUL 2013
- Manuscript Revised: 16 MAY 2013
- Manuscript Received: 22 FEB 2013
Despite growing adoption of pay-for-performance (P4P) programmes in health care, there is remarkably little evidence on the cost-effectiveness of such schemes. We review the limited number of previous studies and critique the frameworks adopted and the narrow range of costs and outcomes considered, before proposing a new more comprehensive framework, which we apply to the first P4P scheme introduced for hospitals in England. We emphasise that evaluations of cost-effectiveness need to consider who the residual claimant is on any cost savings, the possibility of positive and negative spillovers, and whether performance improvement is a transitory or investment activity. Our application to the Advancing Quality initiative demonstrates that the incentive payments represented less than half of the £13m total programme costs. By generating approximately 5200 quality-adjusted life years and £4.4m of savings in reduced length of stay, we find that the programme was a cost-effective use of resources in its first 18 months. Copyright © 2013 John Wiley & Sons, Ltd.