SETTING PAY FOR PERFORMANCE TARGETS: DO POOR PERFORMERS GIVE UP?

ABSTRACT We examine the effect of a health plan's pay for performance incentives on the percentage of outpatient drug prescriptions that are filled with generic rather than brand‐name drugs in physicians' practices in an established physician network – the generic prescription rate (GPR)....

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Bibliographic Details
Published in:Health economics 2013-02, Vol.22 (2), p.168-179
Main Authors: Dowd, Bryan, Feldman, Roger, Nersesian, WILLIAM
Format: Article
Language:English
Subjects:
Algorithms
Ambulatory Care
Doctors
Drugs, Generic - economics
Drugs, Generic - therapeutic use
Equilibrium
Generic drugs
Generic prescribing
Health economics
Humans
Incentives
Midwestern United States
Models, Theoretical
panel data
Pay for performance
Performance related pay
Physicians
Practice Patterns, Physicians' - economics
Prescriptions
Quality Assurance, Health Care - economics
Quality Assurance, Health Care - standards
Regression Analysis
Reimbursement, Incentive - economics
Rewards
Studies
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Summary:ABSTRACT We examine the effect of a health plan's pay for performance incentives on the percentage of outpatient drug prescriptions that are filled with generic rather than brand‐name drugs in physicians' practices in an established physician network – the generic prescription rate (GPR). The financial reward was based on the performance of the entire network, but the network implemented rewards at the practice level. Practice‐level rewards were awarded on an all‐or‐nothing basis if the GPR met or exceeded specialty‐specific targets that increased each year. Although that design gave the practices a strong incentive to meet the target, practices performing far below the target might ‘give up’, costing the network its reward. Using a partial adjustment model, we estimate that in the absence of pay for performance, the average equilibrium value of GPR was 58.3%. We estimate that GPR would be maximized if the target were set at 77%. The GPR‐maximizing target would induce an improvement in average GPR from 58.3% to 65.8% or 7.5 percentage points. When the target is set above 80%, practices with equilibrium GPR below 58.3% will ‘give up’ in the sense that they will not improve relative to their equilibrium value. Copyright © 2012 John Wiley & Sons, Ltd.
ISSN:1057-9230
1099-1050
DOI:10.1002/hec.2773