Physician Response to Pay-for-Performance: Evidence from a Natural Experiment

76 Pages Posted: 28 Mar 2011 Last revised: 16 Mar 2023

See all articles by Jinhu Li

Jinhu Li

McMaster University - Department of Economics

Jeremiah Hurley

McMaster University - Department of Economics

Philip DeCicca

McMaster University - Department of Economics; Ball State--Department of Economics

Gioia Buckley

McMaster University

Date Written: March 2011

Abstract

Explicit financial incentives, especially pay-for-performance (P4P) incentives, have been extensively employed in recent years by health plans and governments in an attempt to improve the quality of health care services. This study exploits a natural experiment in the province of Ontario, Canada to identify empirically the impact of pay-for-performance (P4P) incentives on the provision of targeted primary care services, and whether physicians' responses differ by age, practice size and baseline compliance level. We use an administrative data source which covers the full population of the province of Ontario and nearly all the services provided by practicing primary care physicians in Ontario. With an individual-level data set of physicians, we employ a difference-in-differences approach that controls for both "selection on observables" and "selection on unobservables" that may cause estimation bias in the identification. We also implemented a set of robustness checks to control for confounding from the other contemporary interventions of the primary care reform in Ontario. The results indicate that, while all responses are of modest size, physicians responded to some of the financial incentives but not the others. The differential responses appear related to the cost of responding and the strength of the evidence linking a service with quality. Overall, the results provide a cautionary message regarding the effectiveness of pay-for-performance schemes for increasing quality of care.

Suggested Citation

Li, Jinhu and Hurley, Jeremiah and DeCicca, Philip and DeCicca, Philip and Buckley, Gioia, Physician Response to Pay-for-Performance: Evidence from a Natural Experiment (March 2011). NBER Working Paper No. w16909, Available at SSRN: https://ssrn.com/abstract=1795858

Jinhu Li (Contact Author)

McMaster University - Department of Economics ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Jeremiah Hurley

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Philip DeCicca

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Ball State--Department of Economics ( email )

United States

Gioia Buckley

McMaster University ( email )

Canada

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