Bonuses for Doctors Pay Off for Patients

A study in Rwanda by Prof. Paul Gertler shows that financial incentives for medical providers improve service and health outcomes.

Everyone knows money talks. Prof. Paul Gertler found this to be the case in Rwanda, where, in conjunction with the national government, he evaluated a new and novel pay-for- performance model for the health care industry designed to increase access to high quality maternal and child health services.

He outlines his findings in his paper, “Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes,” co-authored by Christel Vermeersch, a World Bank senior economist.

"Instead of investing more in the current healthcare system, we can try to get more out of our existing resources. The problem in Rwanda and most of the world is that medical care providers’ deliver a quality of care that is below their capabilities and training," says Gertler, director of the UC Berkeley Clausen Center for International Business and Policy and the Li Ka Shing Foundation Chair in Health Management.

Gertler found that when providers were offered financial incentives, their compliance with clinical care guidelines increased by 30 percent and their productivity increased 20 percent. The study showed that these improvements resulted in large increases in child health outcomes as measured by increased height and weight of children treated by these providers. 

The Rwandan government offered health care providers payments for services such as institutional childbirth deliveries and emergency referrals to hospitals for obstetric services, new contraceptive user visits, referrals of at-risk pregnancies to hospitals, and referrals of malnourished children to higher level facilities for treatment. For example, a provider receiving $.55 for four standard prenatal care visits received $1.47 for providing higher quality care such as administering tetanus and malaria vaccines or detecting a high-risk patient and referring her to a hospital.

The pay-for-performance model is now being tried in Africa and parts of Latin America and is an important part of Obamacare, according to Gertler.  “One of the nice things about the Affordable Care Act or Obamacare is the plan to offer financial incentives for providers,” Gertler explains. “If we are going to make progress in reducing costs of Medicare and Medicaid, pay for performance can make the system more efficient and dramatically improve the quality of health care.”

See full paper.