Financial Incentive Effects on Physician Performance Among Diabetic Patients

Healthcare pay-for-performance programs use financial incentives to influence provider behavior toward improving quality of care and reducing costs. However, little is known about their targeted effectiveness in diabetic care. Motivated by theoretical considerations from physician agency, it is predicted larger amounts of financial incentive will be more effective in improving measureable physician performance and improving patient diabetic outcomes. By matching physician and patient-level panel data, the following study evaluates financial incentive effects in several key performance areas among physicians in a provider-based, pay-for-performance program. There is suggestive evidence that financial incentives modestly improve measureable physician performance in clinical effectiveness quality domains related to diabetic care. Also, it is suggested financial incentives improve patient diabetic outcomes in a primary care setting, particularly among primary care physicians with lower baseline performance.