International Journal for Quality in Health Care Advance Access originally published online on September 1, 2005
International Journal for Quality in Health Care 2005 17(6):521-531; doi:10.1093/intqhc/mzi074
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Economic modeling of methods to stimulate quality improvement
Department of Economics, Tufts University, Medford, MA, USA
Objective. This paper uses an economic model to compare three methods for stimulating quality improvement: payment incentives, competition for patients, and emphasis on professional ethics.
Design. Use an economic model to simulate the impact on quality distortions (risk selection) of differences in payment incentives, competition for patients, and emphasis on professional ethics.
Setting. Health care policymakers in many countries seek to use incentives and competition to spur quality improvement. However, strong incentives often promote risk selection: insurers and providers financially benefit from distorting quality to attract profitable patients.
Results. The analysis suggests that intense competition for patients and strong financial rewards for cost control can exacerbate quality distortions and compromise social solidarity.
Conclusions. Carefully regulated competition and mixed forms of provider payment (risk sharing) appear to be the best options. Moreover, designing competition, regulation, payment, and other forms of health policy to promote suppliers’ professional ethics can help society to reap the quality and efficiency benefits of competition and incentives without sacrificing social solidarity.
Keywords: altruism, competition, payment incentives, provider ethics, quality distortions, quality improvement, risk selection
Address reprint requests to Karen Eggleston, Tufts University Department of Economics, Braker Hall Medford, MA 02155, USA. E-mail: karen.eggleston{at}tufts.edu
Accepted for publication August 5, 2005.