They are intended to stimulate and encourage individuals to work well and get better results. They might be monetary or non-monetary, and they can be applied to customers, individual providers, or institutions. The Pay-for-Performance scheme is one such model. It links payment to quality and efficiency of care.
The main objective of any financial incentive is to influence someone's behavior in a positive way. This could be in the form of money or something else. If you give someone money to do something then this will affect their behavior. It may not be what you want your behavior influenced by the cash reward, but it will still influence it somehow. For example, if you give someone $10,000 to go to the movies then they're going to want to see a lot of films!
In medicine, incentives can be used to encourage people to work harder, provide higher quality care, use best practices, etc. There are several models of payment that try to align financial rewards with important outcomes such as mortality rate, length of stay, or number of procedures performed. One such model is called "Pay for Performance". Under this system, hospitals are paid based on how many measures they achieve against specific targets. Measures include such things as patient mortality rates, readmission rates, and lengths of stay.
Incentives for improved performance in health care come in a variety of forms and ways. 15 examples include: 10% bonus if heart attack survival rate is 80% or more; $5,000 prize money for new methods of treating cancer; 2% discount on next year's premium for insurers who offer excellent coverage; and so on.
Health care incentives range from large scale government programs to small group practices that use financial rewards to motivate improvement in patient care. Financial incentives are used primarily at the provider level while quality assurance programs, which are aimed at improving the overall quality of care provided by a group or organization, utilize human resources strategies. Provider incentives may be direct or indirect. Direct incentives include salary bonuses and promotion based on performance against established goals. Indirect incentives include fee-for-service payment, which is based on the number of services performed, and capitation, which is paid regardless of actual service delivery. Provider groups can use their influence with providers to implement quality improvement initiatives or they can hire independent consultants to do it for them.
Conventional reimbursement models Fee for Service (FFS), Capitation, and Bundled Payments/Episode-Based Payments have traditionally been the three primary types of compensation in the healthcare markets. In addition to these traditional models, New Models such as Value-based Insurance Design (VBID), Patient-Centered Medical Homes (PCMH), Specialty Medicine Center (SCM), and Accountable Care Organizations (ACO) are becoming more common.
In FFS, providers are paid a set fee for each service they provide - this is the most common method used by hospitals to be reimbursed for services they render. The amount of payment depends on the type of service performed and the provider's agreement with the insurance company or government agency that is paying for the service. For example, a hospital may agree to accept $10,000 of liability if it treats a patient who has medical malpractice coverage. If the hospital does not have such an agreement with the patient's insurer, the hospital would not receive any money for treating the patient.
In VBID models, providers are paid based on how much value they provide to the health plan. This can be done through quality measures such as lowering readmissions or improving patient satisfaction scores. If providers do not meet these quality targets, they will not receive any payments from the health plan.