Financial rewards in pay-for-performance become less important over time

Monday, June 13, 2016: 1:35 PM
F45 (Huntsman Hall)

Author(s): Thomas Allen; William Whittaker; Matt Sutton

Discussant: Derek S Brown


Pay-for-performance programs often involve both financial rewards and public reporting on provider quality. The impact and sustainability of the effects of these components is unknown.


We examine how over 9,000 family practices in England responded to changes to the financial and reputational rewards for increasing performance on 60 indicators over nine years (2004 to 2012) under the Quality and Outcomes Framework. We use fixed effects multivariate regression to measure how the proportion of eligible patients treated relates to financial and reputational rewards in each year.


Financial incentives and reputational incentives are both highly significant predictors of practice performance. Analysis finds a unit increase in financial incentives increases performance by 0.280 percentage points [t=12.79] while a unit increase in reputational incentives increases performance by 0.172 percentage points [t=10.13].

Allowing for the effect of each incentive to differ in each of the nine years reveals a change in the response to incentives over time. The response to financial incentives is initially larger relative to reputational incentives: 0.662 [t=8.53] compared with -0.078 [t=-1.47]. The response to financial incentives decreases to 0.217 [t=6.92] in the ninth year, while the response to reputational incentives increases to 0.112 [t=3.56].


The reputational incentive had a smaller effect on performance than the revenue incentive when the scheme was first introduced. However, over time the effect of the reputation incentive became more important, and the effect of the revenue incentive became less important. Financial rewards are needed at the start of pay-for-performance programs but providers become less responsive to these rewards once benchmarks for reputational rewards become established.