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Link between Pay for Performance Incentives and Physician Payment Mechanisms: Evidence from the Diabetes Management Incentive in Ontario

42 Pages Posted: 14 Apr 2012  

Jasmin Kantarevic

Ontario Medical Association; IZA Institute of Labor Economics

Boris Kralj

Ontario Medical Association

Abstract

Pay for performance (P4P) incentives for physicians are generally designed as additional payments that can be paired with any existing payment mechanism such as salary, fee-for-service, and capitation. However, the link between the physician response to performance incentives and the existing payment mechanisms is still not well understood. In this paper, we study this link using the recent primary care reform in Ontario as a natural experiment and the Diabetes Management Incentive (DMI) as a case study. Using a comprehensive administrative data and a difference-indifferences matching strategy, we find that physicians in a blended capitation model are more responsive to the DMI than physicians in an enhanced fee-for-service model. We show that for a given payment mechanism this result implies that the optimal size of P4P incentives varies negatively with the degree of supply-side cost sharing. These results have important implications for the design of P4P programs and the cost of their implementation.

Keywords: pay for performance, physician remuneration, diabetes management

JEL Classification: I10, I12, I18

Suggested Citation

Kantarevic, Jasmin and Kralj, Boris, Link between Pay for Performance Incentives and Physician Payment Mechanisms: Evidence from the Diabetes Management Incentive in Ontario. IZA Discussion Paper No. 6474. Available at SSRN: https://ssrn.com/abstract=2039660

Jasmin Kantarevic (Contact Author)

Ontario Medical Association ( email )

525 University Ave., Suite 300
Toronto, Ontario M5G 2K7
Canada

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Boris Kralj

Ontario Medical Association ( email )

525 University Ave., Suite 300
Toronto, Ontario M5G 2K7
Canada

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