Will financial incentives and penalties improve hospital care?

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Abstract
Current financial incentive schemes The NHS quality and outcomes framework is an innovative example of a system which provides incentives to clinical teams. It attaches points to target levels of achievement on processes of care and clinical indicators of health outcomes. Rewards are linked directly to the number of points achieved. Although the framework produced rapid changes in behaviour, particularly with respect to improvements in processes,1 the system is costly. Total annual expenditure on the scheme is around £1bn (€1.1bn; $1.6bn), and the relation between some of its performance targets and population health improvements has been questioned.3 Evidence is also emerging that setting targets for some areas may have reduced performance in other areas of the service.4 Overall, the health outcomes may not have been sufficient to justify the substantial opportunity cost of the system. The new scheme that is being introduced for NHS hospitals, the commissioning for quality and innovation framework,2 will also offer rewards for meeting targets based on process measures and clinical and patient reported outcomes, but the incentives are aimed at hospital trusts rather than the clinical team. Implementation of the scheme will vary as each region is developing its own targets. NHS North West region is leading the process, and has already introduced its “Advancing Quality” scheme. The scheme has been designed in partnership with Premier healthcare alliance (a US organisation which analyses and disseminates clinical and financial information from US hospitals and other healthcare providers) and is modelled on a US pilot scheme, the Center for Medicare and Medicaid Services Hospital quality incentive demonstration, that Premier designed and implemented.5The US pilot scheme focuses on five clinical areas: acute myocardial infarction, heart failure, pneumonia, coronary artery bypass grafts, and hip and knee replacement surgery. Hospitals are obliged to report on an agreed set of quality indicators—for example, rates of prophylactic antibiotics for hip, knee, and coronary bypass surgery, the number of patients discharged on aspirin, and inpatient mortality for acute myocardial infarction and coronary artery bypass surgery. Hospitals are then given a composite quality score. The top 10% of performers are rewarded by an incentive payment of 2% of their annual Medicare tariff payments, and the second 10% get a 1% payment. After three years, hospitals which did not achieve a quality score above the ninth and tenth decile thresholds established in year one were threatened with a reduction in their tariff payments of 1% and 2% respectively. In the NHS North West scheme, which focuses on the same clinical areas, hospitals in the top two performing quartiles are offered 4% and 2% increases in tariff payments and there are no penalties for those with low scores.6 In a parallel programme, the Centers for Medicare and Medicaid Services listed a set of hospital acquired conditions, such as severe pressure sores and catheter associated urinary tract infections, that are “reasonably preventable.”7 These include some serious complications that should never occur in a safe hospital, called “never events.” Hospitals providing Medicare services had to measure such events in 2007-8, and since October 2008 treatment of these preventable complications has not been reimbursed by the purchaser.8 In the UK, the National Patient Safety Agency has drawn up a similar list of never events, and NHS primary care trusts are required to monitor and report them for services they commission.9NotesCite this as: BMJ 2010;340:c88

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