Do extrinsically motivated mental health care providers have better treatment outcomes?
Authors: Rudy Douven*, Minke Remmerswaal**, Robin Zoutenbier**
*CPB, Bureau for Economic Policy Analysis and Erasmus University Rotterdam
**CPB, Bureau for Economic Policy Analysis
Abstract:
This paper studies differences in provider sensitivity to financial incentives and how these differences affect their decisions, treatment and treatment outcomes. We make use of discontinuities in the compensation scheme for providers of mental health care in the Netherlands. Provider compensation can increase by many hundreds of Euros if treatments are prolonged to over a next treatment duration threshold. Providers can increase their financial compensation by strategically choosing duration of treatment. A theoretical model of imperfect agency predicts that, with such a compensation scheme, extrinsically motivated providers are more likely to prolong treatment to the start of a higher tariff as compared to non-extrinsic providers. Moreover, longer treatment duration by extrinsic providers may result in a higher benefit to the patient.
We test these predictions by using a large proprietary administrative dataset that covers the majority of treatments performed in the Dutch curative secondary mental health care sector during the years 2008 to 2010. We find large variation across providers in their sensitivity to the discontinuities in the compensation scheme. The majority of providers exploits the discontinuities and strategically sets treatment duration. We find that non-extrinsic providers, as compared to extrinsic providers, do not respond to the discontinuities, treat patients significantly shorter and report better treatment outcomes, as measured by the improvement in General Assessment of Functioning. This suggests that the compensation scheme rewards low quality providers. Our findings provide an additional argument for outcome-based payment. Outcome or value based payments may not only incentivize providers to improve treatment value but may also have the advantage that it rewards higher quality providers.
Our main contribution to the literature on the economics of treatment choices is that the discontinuous compensation scheme allows us to separate extrinsically from non-extrinsically motivated providers in a clean way and test a number of imperfect agency aspects in the provider utility model.