IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v206y2022ics0047272721002164.html
   My bibliography  Save this article

Performance pay, productivity, and strategic opt-out: Evidence from a community health center

Author

Listed:
  • Cadena, Brian C.
  • Smith, Austin C.

Abstract

We use data from a health center serving primarily low-income patients to examine medical providers’ output responses to a change from a salary-based compensation plan to one that rewards providers for seeing more patients each month. Providers working for piece rates produce 18 percent more patient encounters, but only a small portion of this increase was due to individual responses to the incentives. The remainder resulted from changes in workforce composition and from providers’ strategic choices about when to join the piece-rate plan. The small incentive effect is consistent with experimental evidence that effort is less sensitive to financial incentives when individuals work for an organization whose mission is aligned with their values.

Suggested Citation

  • Cadena, Brian C. & Smith, Austin C., 2022. "Performance pay, productivity, and strategic opt-out: Evidence from a community health center," Journal of Public Economics, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:pubeco:v:206:y:2022:i:c:s0047272721002164
    DOI: 10.1016/j.jpubeco.2021.104580
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272721002164
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpubeco.2021.104580?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kesternich, Iris & Schumacher, Heiner & Winter, Joachim, 2015. "Professional norms and physician behavior: Homo oeconomicus or homo hippocraticus?," Journal of Public Economics, Elsevier, vol. 131(C), pages 1-11.
    2. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    3. Oriana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Social Preferences and the Response to Incentives: Evidence from Personnel Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(3), pages 917-962.
    4. Daniel Jones & Mirco Tonin & Michael Vlassopoulos, 2018. "Paying for what kind of Performance? Performance Pay and Multitasking in Mission-Oriented Jobs," CESifo Working Paper Series 7156, CESifo.
    5. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    6. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
    7. Hamsa Bastani & Joel Goh & Mohsen Bayati, 2019. "Evidence of Upcoding in Pay-for-Performance Programs," Management Science, INFORMS, vol. 65(3), pages 1042-1060, March.
    8. Mark McClellan, 2011. "Reforming Payments to Healthcare Providers: The Key to Slowing Healthcare Cost Growth While Improving Quality?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 69-92, Spring.
    9. Chandra, Amitabh & Cutler, David & Song, Zirui, 2011. "Who Ordered That? The Economics of Treatment Choices in Medical Care," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 397-432, Elsevier.
    10. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-431, July.
    11. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    12. Lorens A. Helmchen & Anthony T. Lo Sasso, 2010. "How sensitive is physician performance to alternative compensation schedules? Evidence from a large network of primary care clinics," Health Economics, John Wiley & Sons, Ltd., vol. 19(11), pages 1300-1317, November.
    13. Diane Alexander, 2020. "How Do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs," Journal of Political Economy, University of Chicago Press, vol. 128(11), pages 4046-4096.
    14. Diane Alexander & Molly Schnell, 2024. "The Impacts of Physician Payments on Patient Access, Use, and Health," American Economic Journal: Applied Economics, American Economic Association, vol. 16(3), pages 142-177, July.
    15. Dumont, Etienne & Fortin, Bernard & Jacquemet, Nicolas & Shearer, Bruce, 2008. "Physicians' multitasking and incentives: Empirical evidence from a natural experiment," Journal of Health Economics, Elsevier, vol. 27(6), pages 1436-1450, December.
    16. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850c12h1p is not listed on IDEAS
    17. Godager, Geir & Wiesen, Daniel, 2013. "Profit or patients’ health benefit? Exploring the heterogeneity in physician altruism," Journal of Health Economics, Elsevier, vol. 32(6), pages 1105-1116.
    18. Gittleman, Maury & Pierce, Brooks, 2013. "How Prevalent is Performance-Related Pay in the United States? Current Incidence and Recent Trends," National Institute Economic Review, National Institute of Economic and Social Research, vol. 226, pages 4-16, November.
    19. Hennig-Schmidt, Heike & Selten, Reinhard & Wiesen, Daniel, 2011. "How payment systems affect physicians' provision behaviour--An experimental investigation," Journal of Health Economics, Elsevier, vol. 30(4), pages 637-646, July.
    20. Oxholm, Anne Sophie & Di Guida, Sibilla & Gyrd-Hansen, Dorte, 2021. "Allocation of health care under pay for performance: Winners and losers," Social Science & Medicine, Elsevier, vol. 278(C).
    21. Nibene H. Somé & Rose Anne Devlin & Nirav Mehta & Gregory S. Zaric & Sisira Sarma, 2020. "Stirring the pot: Switching from blended fee‐for‐service to blended capitation models of physician remuneration," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1435-1455, November.
    22. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 513-534.
    23. Devlin, Rose Anne & Sarma, Sisira, 2008. "Do physician remuneration schemes matter? The case of Canadian family physicians," Journal of Health Economics, Elsevier, vol. 27(5), pages 1168-1181, September.
    24. Jinhu Li & Jeremiah Hurley & Philip DeCicca & Gioia Buckley, 2014. "Physician Response To Pay‐For‐Performance: Evidence From A Natural Experiment," Health Economics, John Wiley & Sons, Ltd., vol. 23(8), pages 962-978, August.
    25. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2016. "Using artefactual field and lab experiments to investigate how fee-for-service and capitation affect medical service provision," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 17-23.
    26. Li, Jing & Dow, William H & Kariv, Shachar, 2017. "Social preferences of future physicians," Department of Economics, Working Paper Series qt5vw9g5tj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    27. Jeannette Brosig‐Koch & Heike Hennig‐Schmidt & Nadja Kairies‐Schwarz & Daniel Wiesen, 2017. "The Effects of Introducing Mixed Payment Systems for Physicians: Experimental Evidence," Health Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 243-262, February.
    28. Kathleen J. Mullen & Richard G. Frank & Meredith B. Rosenthal, 2010. "Can you get what you pay for? Pay‐for‐performance and the quality of healthcare providers," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 64-91, March.
    29. Brian A. Jacob & Steven D. Levitt, 2003. "Rotten Apples: An Investigation of the Prevalence and Predictors of Teacher Cheating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 843-877.
    30. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    31. Jeannette Brosig‐Koch & Nadja Kairies‐Schwarz & Johanna Kokot, 2017. "Sorting into payment schemes and medical treatment: A laboratory experiment," Health Economics, John Wiley & Sons, Ltd., vol. 26(S3), pages 52-65, December.
    32. Nibene H. Somé & Rose Anne Devlin & Nirav Mehta & Greg Zaric & Lihua Li & Salimah Shariff & Bachir Belhadji & Amardeep Thind & Amit Garg & Sisira Sarma, 2019. "Production of physician services under fee‐for‐service and blended fee‐for‐service: Evidence from Ontario, Canada," Health Economics, John Wiley & Sons, Ltd., vol. 28(12), pages 1418-1434, December.
    33. Green, Ellen P., 2014. "Payment systems in the healthcare industry: An experimental study of physician incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 367-378.
    34. Douven, Rudy & Remmerswaal, Minke & Mosca, Ilaria, 2015. "Unintended effects of reimbursement schedules in mental health care," Journal of Health Economics, Elsevier, vol. 42(C), pages 139-150.
    35. Jeffrey Carpenter & Erick Gong, 2016. "Motivating Agents: How Much Does the Mission Matter?," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 211-236.
    36. Liran Einav & Amy Finkelstein & Neale Mahoney, 2018. "Provider Incentives and Healthcare Costs: Evidence From Long‐Term Care Hospitals," Econometrica, Econometric Society, vol. 86(6), pages 2161-2219, November.
    37. Jason Barro & Nancy Beaulieu, 2003. "Selection and Improvement: Physician Responses to Financial Incentives," NBER Working Papers 10017, National Bureau of Economic Research, Inc.
    38. Zhang, Xue & Sweetman, Arthur, 2018. "Blended capitation and incentives: Fee codes inside and outside the capitated basket," Journal of Health Economics, Elsevier, vol. 60(C), pages 16-29.
    39. Li, Jing, 2018. "Plastic surgery or primary care? Altruistic preferences and expected specialty choice of U.S. medical students," Journal of Health Economics, Elsevier, vol. 62(C), pages 45-59.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Kokot, Johanna & Wiesen, Daniel, 2024. "A new look at physicians’ responses to financial incentives: Quality of care, practice characteristics, and motivations," Journal of Health Economics, Elsevier, vol. 94(C).
    2. Anell, Anders & Dackehag, Margareta & Dietrichson, Jens & Ellegård, Lina Maria & Kjellsson, Gustav, 2022. "Better Off by Risk Adjustment? Socioeconomic Disparities in Care Utilization in Sweden Following a Payment Reform," Working Papers 2022:15, Lund University, Department of Economics, revised 12 Mar 2024.
    3. Nicholas Benson & Jose Joaquin Lopez, 2024. "Surgeons' response to reimbursement changes for alternative procedures: Evidence from spine fusion in the U.S," Contemporary Economic Policy, Western Economic Association International, vol. 42(1), pages 41-55, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cadena, Brian C. & Smith, Austin C., 2019. "Performance Pay and Productivity in Health Care: Evidence from Community Health Centers," IZA Discussion Papers 12586, Institute of Labor Economics (IZA).
    2. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Kokot, Johanna & Wiesen, Daniel, 2024. "A new look at physicians’ responses to financial incentives: Quality of care, practice characteristics, and motivations," Journal of Health Economics, Elsevier, vol. 94(C).
    3. Attema, Arthur E. & Galizzi, Matteo M. & Groß, Mona & Hennig-Schmidt, Heike & Karay, Yassin & L’Haridon, Olivier & Wiesen, Daniel, 2023. "The formation of physician altruism," Journal of Health Economics, Elsevier, vol. 87(C).
    4. Massimo Finocchiaro Castro & Calogero Guccio & Domenica Romeo, 2024. "Looking inside the lab: a systematic literature review of economic experiments in health service provision," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 25(7), pages 1177-1204, September.
    5. Jeannette Brosig‐Koch & Burkhard Hehenkamp & Johanna Kokot, 2023. "Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics," Health Economics, John Wiley & Sons, Ltd., vol. 32(8), pages 1785-1817, August.
    6. Ge Ge & Geir Godager & Jian Wang, 2022. "Exploring physician agency under demand‐side cost sharing—An experimental approach," Health Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 1202-1227, June.
    7. Brosig-Koch, Jeannette & Groß, Mona & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2021. "Physicians' incentives, patients' characteristics, and quality of care: A systematic experimental comparison of fee-for-service, capitation, and pay for performance," Ruhr Economic Papers 923, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. Jeannette Brosig‐Koch & Nadja Kairies‐Schwarz & Johanna Kokot, 2017. "Sorting into payment schemes and medical treatment: A laboratory experiment," Health Economics, John Wiley & Sons, Ltd., vol. 26(S3), pages 52-65, December.
    9. Lagarde, Mylène & Blaauw, Duane, 2017. "Physicians’ responses to financial and social incentives: A medically framed real effort experiment," Social Science & Medicine, Elsevier, vol. 179(C), pages 147-159.
    10. Brosig-Koch, Jeannette & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Kokot, Johanna & Wiesen, Daniel, 2020. "Physician performance pay: Experimental evidence," HERO Online Working Paper Series 2020:3, University of Oslo, Health Economics Research Programme.
    11. Cox, James C. & Sadiraj, Vjollca & Schnier, Kurt E. & Sweeney, John F., 2016. "Incentivizing cost-effective reductions in hospital readmission rates," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 24-35.
    12. Fuhai Hong & Tanjim Hossain & John A. List & Migiwa Tanaka, 2018. "Testing The Theory Of Multitasking: Evidence From A Natural Field Experiment In Chinese Factories," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(2), pages 511-536, May.
    13. Nibene H. Somé & Rose Anne Devlin & Nirav Mehta & Gregory S. Zaric & Sisira Sarma, 2020. "Stirring the pot: Switching from blended fee‐for‐service to blended capitation models of physician remuneration," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1435-1455, November.
    14. Simon Reif & Lucas Hafner & Michael Seebauer, 2020. "Physician Behavior under Prospective Payment Schemes—Evidence from Artefactual Field and Lab Experiments," IJERPH, MDPI, vol. 17(15), pages 1-37, July.
    15. Wang, Jian & Iversen, Tor & Hennig-Schmidt, Heike & Godager, Geir, 2020. "Are patient-regarding preferences stable? Evidence from a laboratory experiment with physicians and medical students from different countries," European Economic Review, Elsevier, vol. 125(C).
    16. Waibel, Christian & Wiesen, Daniel, 2021. "An experiment on referrals in health care," European Economic Review, Elsevier, vol. 131(C).
    17. Cheo, Roland & Ge, Ge & Liu, Rugang & Wang, Jian & Wang, Qiqi, 2023. "Physician beneficence and profit-taking among private for-profit clinics in China: A field study using a mystery shopper audit," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    18. Bryson, Alex & Buraimo, Babatunde & Simmons, Rob, 2011. "Do salaries improve worker performance?," Labour Economics, Elsevier, vol. 18(4), pages 424-433, August.
    19. Daniel Jones & Mirco Tonin & Michael Vlassopoulos, 2018. "Paying for what kind of Performance? Performance Pay and Multitasking in Mission-Oriented Jobs," CESifo Working Paper Series 7156, CESifo.
    20. Peter Martinsson & Emil Persson, 2019. "Physician behavior and conditional altruism: the effects of payment system and uncertain health benefit," Theory and Decision, Springer, vol. 87(3), pages 365-387, October.

    More about this item

    Keywords

    Piece rates; Incentive pay; Medical providers;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:206:y:2022:i:c:s0047272721002164. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.