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What Is the Empirical Basis for Paying for Quality in Health Care?

Richard G. Frank

Harvard University

Despite more than a decade of benchmarking and public reporting of quality problems in the health care sector, changes in medical practice have been slow to materialize. To accelerate quality improvement, many private and public payers have begun to offer financial incentives to physicians and hospitals based on their performance on clinical and service quality measures. The authors review the empirical literature on paying for quality in health care and comparable interventions in other sectors. They find little evidence to support the effectiveness of paying for quality. The absence of findings for an effect may be attributable to the small size of the bonuses studied and the fact that payers often accounted for only a fraction of the targeted provider's panel. Even in nonhealth settings, however, where the institutional features are more favorable to a positive impact, the literature contains mixed results on the effectiveness of analogous pay-for-performance schemes.

Key Words: financial incentives • quality

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