Do financial incentives trump clinical guidance? Hip Replacement in England and Scotland

Following devolution in 1999 England and Scotland's National Health Services diverged, resulting in major differences in hospital payment. England introduced a case payment mechanism from 2003/4, while Scotland continued to pay through global budgets. We investigate the impact this change had on activity for Hip Replacement. We examine the financial reimbursement attached to uncemented Hip Replacement in England, which has been more generous than for its cemented counterpart, although clinical guidance from the National Institute for Clinical Excellence recommends the later. In Scotland this financial differential does not exist. We use a difference-in-difference estimator, using Scotland as a control, to test whether the change in reimbursement across the two countries had an influence on treatment. Our results indicate that financial incentives are directly linked to the faster uptake of the more expensive, uncemented Hip Replacement in England, which ran against the clinical guidance.