Aligning Financial Incentives‪.‬

One of the most common criticisms of our healthcare delivery system is the way we pay care providers for their contributions. Financial incentives for doctors and hospitals to do the right thing or to do better are often mismatched or even in conflict (Berwick et al. 2003). Better alignment of incentives is one of the expectations in the pay-for-performance world. Given that the level of structural change required for alignment is a long way off, I will examine a variety of models currently available to align incentives. Some of these approaches were not developed specifically to improve performance; however, they can all be used for that objective, with some modification. This column focuses on the relationship between doctors, hospitals, and payers as groups. There are similar misalignments within the physician ranks, such as payment for cognitive versus procedural services, that deserve attention but will not be addressed here. For the sake of this discussion, financial incentives are assumed to change behavior for the better, although this view can be legitimately questioned as well.