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

Jasmin Kantarevic and Boris Kralj ()
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Boris Kralj: Ontario Medical Assocation

No 6474, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: diabetes management; physician remuneration; pay for performance (search for similar items in EconPapers)
JEL-codes: I10 I12 I18 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2012-04
New Economics Papers: this item is included in nep-hea and nep-hrm
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Citations: View citations in EconPapers (3)

Published - published in: Health Economics, 2013, 22(12), 1417–1439

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Related works:
Journal Article: LINK BETWEEN PAY FOR PERFORMANCE INCENTIVES AND PHYSICIAN PAYMENT MECHANISMS: EVIDENCE FROM THE DIABETES MANAGEMENT INCENTIVE IN ONTARIO (2013)
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