Financial Incentives for Providers of Health Care: The Baggage Handler and the Intensive Care Physician

There is a substantial amount of evidence on financial incentives for providers. As a result, a number of evidence-based theories can be propounded that might help inform where they can be expected to do more good than harm in health care. They can be exemplified by comparing baggage handlers with an intensive care physician.

  1. Incentives can produce beneficial effect where the agent (person at whom incentive is targeted) can reach the objective under their own volition.[1] Where the agent does not have a solution, there is a high-risk of perverse behaviour. Clinical process measures have an advantage over outcomes in this respect.[2] The ITU physician does not know what to do with a high SMR (standardised mortality ratio) – it is not sensitive or specific and does not point to where any problem might lie.[3] But baggage handlers know exactly what to do to improve timely loading and avoid delays in aeroplane departure – take shorter breaks and work faster.
  2. Team incentives are better than individual rewards when outcomes depend on team performance.[4] Baggage handlers should be rewarded in teams – the social forces within teams can be relied upon to improve individual performance. Rewarding ITU physicians would be invidious and demotivating to other members of the team if hypothecated on performance of the ITU. Rewarding the physician for extramural work is, of course, a different matter altogether.
  3. Financial effects are ineffective when the task is heavily cognitively loaded or dramatic. The drama and intellectual challenge for the medical care in the ITU saturate the motivation centre. Without wishing to denigrate their work, this is unlikely to be the case for baggage handlers.
  4. The effect of financial benefits appears ephemeral in an environment where there are other pressures for compliance/improved performance. In modern health care performance measures, especially if shared among collaborating colleagues, seem to be important motivating factors.[5] Like financial incentives, they may induce gaming, if used for punishment and reward.

Readers are asked to contribute other examples, or to disagree with the above conclusions.

–Richard Lilford, CLAHRC WM Director


  1. Gupta N, Shaw JD. Let the Evidence Speak: Financial Incentives are Effective! Compensat Benefit Rev. 1998; 30(2): 26-32.
  2. Lilford R, Mohammed MA, Spiegelhalter D, Thomson R. Use and misuse of process and outcome data in managing performance of acute medical care: avoiding institutional stigma. Lancet. 2004; 363(9415): 1147-54.
  3. Lilford RJ, Pronovost P. Using hospital mortality rates to judge hospital performance: a bad idea that just won’t go away. BMJ. 2010; 340: c2016.
  4. DeMatteo JS, Eby LT, Sundstrom E. Team-Based Rewards: Current Empirical Evidence and Directions for Future Research. Res Organ Behav. 1998; 20:141-83.
  5. Weaver SJ, Lubomksi LH, Wilson RF, Pfoh ER, Martinez KA, Dy SM. Promoting a Culture of Safety as a Patient Safety Strategy: A Systematic Review. Ann Intern Med. 2013; 158 (5 p2): 369-74.

4 thoughts on “Financial Incentives for Providers of Health Care: The Baggage Handler and the Intensive Care Physician”

  1. The title of your latest blog reminded me of a book I am currently reading entitled ‘Freakonomics’ by S.D. Levitt & S.J. Dubner. Where a rogue economist explores the hidden side of everything. An interesting read where the authors provide answers to questions such as: ‘What do schoolteachers and sumo wrestlers have in common?’, ‘Why do drug dealers still live with their mums?’ and ‘Where have all the criminals gone?’

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s