Academic journal article Australian Health Review

Financial Incentives and the Health Workforce

Academic journal article Australian Health Review

Financial Incentives and the Health Workforce

Article excerpt


Incentives constitute a key issue in the design and operation of healthcare systems. Changes in incentives provided to medical practitioners, healthcare organisations, and patients are being considered by the Australian Government1 with input to its decision-making from the National Health and Hospitals Reform Commission,2 the National Primary Health Care Strategy3 and National Preventative Health Taskforce.4 In this paper, we provide an overview of the incentives that may be provided to healthcare professionals and providers. We focus on the behaviour that different types of financial incentives tend to encourage and upon the consequences - both intended and unintended - that may be produced as a result.

Incentives can be used to help align the behaviour of healthcare providers with the broad objectives of the healthcare system and organisations within it. Designing the 'right' set of incentives is, however, problematic. It is often mucheasier to identify situations where existing incentives are promoting the 'wrong' behaviours, than it is to design incentives to promote the 'right' behaviours. This is mainly because there is often little agreement on what the 'right' behaviours are, especially in healthcare where the evidence- base can be poor.

Good incentive design also requires evidence on what motivates healthcare providers and health professionals.5 In practice, healthcare providers are motivated by a range of factors, including the health and well-being of patients and earnings,6 but also factors such as autonomy and intellectual satisfaction. The relative weight placed on these factors in different decision contexts will determine the effectiveness of incentives in terms of the extent to which health professionals react to them and change their behaviour. If health professionals are only partially motivated by money, financial incentives might not be the most efficient way of achieving an objective of interest.

Incentives are also embedded in and created by social, professional and cultural contexts. Often, existing sets of incentives have evolved over a long period of time (e.g. the Medicare Fee Schedule) or are the result of lengthy negotiations between strong professional lobby groups and governments. Radical changes might be hard to achieve in the short-term, and a staged long-term plan might be needed.

What are the objectives of the incentives?

Akey issue in incentive design is to specify the objective in terms of service delivery, health outcomes and costs.7 Incentives that help reduce costs while maintaining an acceptable quality of care and achieving the desired health outcomes are important for the efficiency of the sector. Where there is clear evidence from randomised trials or systematic reviews that an intervention (e.g. a test or treatment) is more cost-effective than the alternatives that are being used, the efficiency of the sector may be improved with measures to support its use or discourage the use of the costineffective alternatives. For example MSAC and PBAC both have review processes in place that are designed to ensure that new technologies, procedures and pharmaceuticals are competitive, on cost-effectiveness grounds, for Commonwealth subsidies. The Service Incentive Payments that are paid to GPsfor diabetes, asthma, and cervical screening for women who have not had a recent pap smear, are also based on established evidencebased guidelines for treatment.

However, there are other areas where incentives are provided but the evidence-base is weak. For example, the Medicare fees for Health Assessments are not based on good evidence that medical advice on primary prevention works: such evidence does not exist or, at least, is weak. The fee relativities between primary care and specialist services in the Medicare Fee Schedule are also not necessarily based on the relative cost-effectiveness of the services provided, and indeed may create incentives to provide less costeffective services at the expense of more cost-effective services. …

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