Tag Archives: Payment

Payment by Results – a Null Result!

Reimbursement levels for medical care in large US hospitals are reduced by up to 2% if compliance with evidence-based clinical care standards falls below threshold levels. Does this result in improved care compared to control hospitals not exposed to the financial incentive? To find out, intervention hospitals were compared to control hospitals.[1] The ‘value based purchasing’ schemes were not introduced in a prospective experiment, and the controls (small rural hospitals) are very different in nature to those larger hospitals to whom the incentive applies. To mitigate potential bias, difference-in-difference approaches were used; hospitals were matched for previous performance; and the usual statistical adjustments were made. Adherence to appropriate clinical processes was increasing among both control and intervention hospitals before the intervention was implemented. Rates of adherence did not differ between intervention and control hospitals post-intervention. The clinical indicators related to three tracer conditions frequently used in studies of adherence to clinical standards – pneumonia, heart attack or heart failure. Patient experience measures also did not differ over intervention and controls, and while mortality was improved for pneumonia, it did not do so for the other conditions. The effect on pneumonia deaths was regarded as a chance finding (alpha error), given the null result on mediating variables (i.e. clinical process variables). Arguably these results were null because the incentive was low (only 2% of total reimbursement) and distributed over a large number of outcomes. Alternatively, doctors are largely intrinsically motivated and do not need financial incentives to moderate their performance. We will pick up on this issue in our next News Blog.

— Richard Lilford, CLAHRC WM Director


  1. Ryan AM, Krinsky S, Maurer KA, Dimick JB. Changes in Hospital Quality Associated with Hospital Value-Based Purchasing. N Engl J Med. 2017; 376: 2358-66.

An Interesting Report of Quality of Care Enhancement Strategies Across England, Germany, Sweden, the Netherlands, and the USA

An interesting paper from the Berlin University of Technology compares the quality enhancement systems across the above countries with respect to measuring, reporting and rewarding quality.[1] This paper is an excellent resource for policy and health service researchers. The US has the most developed system of quality-related payments (P4P) of the five countries. England wisely uses only process measures to reward performance, while the US and Germany include patient outcomes. The latter are unfair because of signal to noise issues,[2] and the risk-adjustment fallacy.[3] [4] Above all, remember Lilford’s axiom – never base rewards or sanctions on a measurement over which service providers do not feel they have control.[5] It is true, as the paper argues, that rates of adherence to a single process seldom correlate with outcome. But this is a signal to noise problem. ‘Proving’ that processes are valid takes huge RCTs, even when the process is applied to 0% (control arm) vs. approaching 100% (intervention arm) of patients. So how could an improvement from say 40% to 60% in adherence to clinical process show up in routinely collected data?[6] I have to keep on saying it – collect outcome data, but in rewarding or penalising institutions on the basis of comparative performance – process, process, process.

— Richard Lilford, CLAHRC WM Director


  1. Pross C, Geissler A, Busse R. Measuring, Reporting, and Rewarding Quality of Care in 5 Nations: 5 Policy Levers to Enhance Hospital Quality Accountability. Milbank Quart. 2017; 95(1): 136-83.
  2. Girling AJ, Hofer TP, Wu J, et al. Case-mix adjusted hospital mortality is a poor proxy for preventable mortality: a modelling study. BMJ Qual Saf. 2012; 21: 1052-6.
  3. Mohammed MA, Deeks JJ, Girling A, et al. Evidence of methodological bias in hospital standardised mortality ratios: retrospective database study of English hospitals. BMJ. 2009; 338: b780.
  4. Lilford R, & Pronovost P. Using hospital mortality rates to judge hospital performance: a bad idea that just won’t go away. BMJ. 2010; 340: c2016.
  5. Lilford RJ. Important evidence on pay for performance. NIHR CLAHRC West Midlands News Blog. 20 November 2015.
  6. Lilford RJ, Chilton PJ, Hemming K, Girling AJ, Taylor CA, Barach P. Evaluating policy and service interventions: framework to guide selection and interpretation of study end points. BMJ. 2010; 341: c4413.

The ‘Robin Hood’ Hypothesis in 33 African Countries

Across low- and middle-income countries (LMICs), over 50% of total health care spending is derived from out-of-pocket expenses. Some of these are formal recognised tariffs in public health systems. However, a proportion are irregular or informal payments (bribes/kick-backs). It is hypothesised that these informal payments are used to subsidise the poor at the expense of the rich after the fashion of Robin Hood in English folklore. Enter results from a series of publically available repeated surveys called ‘Afrobarometer‘. Here public attitudes and experiences relating to democracy and governance are surveyed in 18 African counties. Nationally representative samples of over 25,000 individuals are selected randomly across participating countries. Afrobarometer provides the data for an important study [1] of the extent to which informal payments were elicited across people of different income levels (according to the Lived Poverty Index). Far from confirming the Robin Hood hypothesis, the authors find a higher occurrence of bribe paying among the poorest people across the countries studied – elasticity is negative in that the richer the person, the lower the probability that they will have paid a bribe on attending a health care facility. These results are similar to those obtained in a previous study in Hungary. There is some evidence that the problem is worse in cities where service providers are less likely to have known or have community affiliations with patients. This finding reminds me of the Bible scripture – “For whosoever hath, to him shall be given… but whosoever hath not, from him shall be taken away...” (Matthew 13:12).

— Richard Lilford, CLAHRC WM Director


  1. Kankeu HT, Ventelou B. Socioeconomic inequalities in informal payments for health care: An assessment of the ‘Robin Hood’ hypothesis in 33 African countries. Soc Sci Med. 2016; 151: 173-86.

More on Free Goods and Aid Dependency

In a previous News Blog we reported results showing that maintenance of communal lavatories was worse among people who had had a subsidy for lavatory maintenance withdrawn than among those who had never had the subsidy in the first place.[1] The ‘free good’ idea was at work here, whereby people can develop a sense of entitlement. A recent study involved providing free shoes for poor people.[2] Those who received the free shoes were more likely to feel that other people should provide family needs in general than those who had not been given free shoes – classic aid dependency. Handing out free shoes did not increase overall ownership of shoes, foot health or self-esteem; presumably because of ‘fungability’ – people used their shoe money for other purposes. Yet not all ‘free goods’ are bad – a recent paper co-authored by CLAHRC WM researchers showed that even very small user fees reduce access to services in Malawi and this hits the most vulnerable – children – the hardest.[3] Taken in the round this leads to the CLAHRC WM Director’s axiom – “ration health care, but not access to health care.”

— Richard Lilford, CLAHRC WM Director


  1. Garn JV, Sclar GD, Freeman MC, et al. The impact of sanitation interventions on latrine coverage and latrine use: A systematic review and meta-analysis. Int J Hyg Environ Health. 2016. [ePub].
  2. Wydick B, Katz E, Calvo F, Gutierrez F, Janet B. Shoeing the Children: The Impact of the TOMS Shoe Donation Program in Rural El Salvador. World Bank Econ Rev. 2016.
  3. Watson SI, Wroe EB, Dunbar EL, et al. The impact of user fees on health services utilization and infectious disease diagnoses in Neno District, Malawi: a longitudinal, quasi-experimental study. BMC Health Serv Res. 2016; 16(1):595.

Unintended Consequences of Pay-For-Performance Based on Readmissions

Introducing fines for readmission rates crossing a certain threshold has been associated with reduced readmissions. Distilling a rather wordy commentary by Friebel and Steventon,[1] there are problems with the policy since it might not lead to optimal care:

  1. The link between quality of care and readmission is not good according to most studies, so that there is a risk that patients who need readmission will not get it.
  2. In support of the above, less than a third of readmissions are for the condition that caused the previous admission (which is not to say that none are preventable, but it suggests that a high proportion might not be).
  3. Risk-adjustment is at best imperfect.
  4. And this probably explains why ‘safety net’ hospitals caring for the poorest clientele come off worst under the pay-for-performance system.

I refer it my iron law of incentives – ‘only use them when providers truly believe that the target of the incentive lies within their control.’

— Richard Lilford, CLAHRC WM Director


  1. Friebel R, Steventon A. The multiple aims of pay-for-performance and the risk of unintended consequences. BMJ Qual Saf. 2016.

Important Evidence on Pay for Performance

Evidence is accumulating that pay for performance does not perform. The problems are both endogenous (what happens to the particular performance targets at which the intervention is targetted) and exogenous (what happens to performance criteria beyond the designated targets).

First, the endogenous effects. Pay for performance does not seem to work (not even on its own terms) or its effects are short lived. Studies on both sides of the Atlantic have found that initially positive effects were short lived.[1] [2]

Second, a recent article highlights the negative exogenous effects of payment for performance.[3] The interventions particularly penalise hospitals at the bottom of the financial difficulty league, who tend to serve disadvantaged populations. They are unfair, since patients at these hospitals have greater morbidity (with more opportunities for error).[4] Their patients are not as mobile as better-off people, and so they cannot as easily ‘vote with their feet’. Worse, there is a substantial volume of psychological work showing that financial rewards/penalties are demotivating, especially to intrinsically motivated people. Specific targets sometimes work,[5] but burdensome lists of tick-box targets are often not effective in the long term, and can have negative spill-over effects.

— Richard Lilford, CLARHC WM Director


  1. Jha AK, Joynt KE, Orav EJ, Epstein AM. The long-term effect of premier pay for performance on patient outcomes. N Engl J Med. 2012; 366: 1606-15.
  2. Kristensen SR, Meacock R, Turner AJ, et al. Long-term effect of hospital pay for performance on mortality in England. N Engl J Med. 2014; 371: 540-8.
  3. Woolhandler S and Himmelstein DU. Collateral Damage: Pay-for-Performance Initiatives and Safety-Net Hospitals. Ann Intern Med. 2015; 163(6): 473-4.
  4. Brown C, Hofer T, Johal A, Thomson R, Nicholl J, Franklin BD, Lilford RJ. An epistemology of patient safety research: a framework for study design and interpretation. Part 3. End points and measurement. Qual Saf Health Care. 2008; 17(3): 170-7.
  5. Combes G, Allen K, Sein K, Girling A, Lilford R. Taking hospital treatments home: a case study of barriers and success factors. Implement Sci. [Submitted].

Paying or Charging Patients?

Paying or Charging Patients?

The NHS is constituted to provide care that is free at the point of use. However, even in the NHS, patients sometimes have to contribute (make co-payments) – for example, a prescription charge is levied on patients who do not qualify for exemption. What about the reverse – paying patients to adopt healthy behaviours, such as adhering to recommended treatment? Pregnant women in some parts of France have been incentivised to attend antenatal clinics, for example,[1] while Theresa Marteau’s team has found that financial incentives were superior to other methods in increasing cigarette quit rates.[2] There are many examples of incentive payments in terms of cash or an opportunity to participate in a lottery in low-income countries.[3]

CLAHRC WM is very interested in the effect of individual incentives and co-payments on uptake of services. CLAHRC WM collaborator Ivo Vlaev is co-investigator for a trial on financial incentives for diabetic retinal screening with three arms – control; money payment; and participation in a lottery. We have identified two recent systematic reviews dealing with this topic – one on the effect of co-payments on utilisation of services in high-income countries; and the other on incentive payments in low-income countries. The former study finds that even small co-payments suppress demand. The latter study appears to be a mirror image with the reciprocal finding that small incentive payments stimulate uptake. More data are needed; so far our evidence base is financial flows from patients in high-income settings, and financial flows to patients in low-income countries. However, the evidence suggests that money flow in either direction is associated with high elasticity of demand. This concept of reciprocal responses as money is made available or withdrawn is represented in the figure. The origin is the point where the service is free at the point of use and there is no incentive payment. This origin is represented at around 50% uptake of service, but could lie anywhere between 0% and 100%, depending on the service concerned.

Graph showing Update against Incentive payment / Co-payment, with a  negative Sigmoidal curve passing through the origin at (0,0)
Figure: Representation of change in service utilisation by cost transfers

We would be pleased to hear from other scholars who wish to collaborate with us on populating the above graph. This would answer many questions, for example, is the graph symmetric, or is the graph steeper for incentive payments than for co-payments?

— Richard Lilford, CLAHRC WM Director


  1. McQuide PA, Delvaux T, Buekens P. Prenatal Care Incentives in Europe. J Public Health Policy. 1998; 19: 331-49.
  2. Ierfino D, Mantzari E, Hirst J, Jones T, Aveyard P, Marteau TM. Financial incentives for smoking cessation in pregnancy: a single-arm intervention study assessing cessation and gaming. Addiction. 2015; 110(4): 680-8.
  3. Lagarde M, Haines A, Palmer N. Conditional cash transfers for improving uptake of health interventions in low- and middle-income countries: a systematic review. JAMA. 2007; 298(16): 1900-10.

Oregon Experiment

In a previous blog I promised to disclose the results of the Oregon experiment on the effects of providing health insurance to previously uninsured people. To recap, in the USA all young and middle-aged adults below the poverty line are provided with national insurance called Medicaid. The state of Oregon wished to extend such insurance to a category of slightly better-off people, yet did not have enough money to provide insurance for all in this category. Eligibility was therefore determined by lottery, on the grounds that this would be a fair way to distribute a scarce resource – a reverse of the draft if you like. Of course, such distributional exercises constitute an unintended RCT if one can find out who was randomised to which condition and then follow them up. Baicker et al. did just that.[1] The results are politically sensitive (as you will see if you search the internet), but wisely the authors published the protocol before analysing the data.

The results show that the group offered insurance sought more services, engaged in more preventive activities, had lower expenses, and were more likely to avoid catastrophic payments than those not offered cover. There was no difference between groups in proportions with high blood pressure or elevated glycosylated haemoglobin and death rates did not differ (under 1% in both groups). Patients offered insurance were more likely than those not selected in the lottery to report improved health and the mental component of the quality of life score was improved.

Only two year follow-up data are available. A health economic analysis was not attempted. Despite the study size (over 12,000 people), the power to detect changes in rates of diseases, such as diabetes and hypertension, was low. What is not in doubt is that insurance relieves financial stress and the anxiety that goes with it. This study is relevant for two reasons. First, the results are of policy relevance world-wide. Second, it is a fine example of a high quality academic output from an entirely service-led intervention. Indeed, it conforms with the CLAHRC model, where the service dog wags the research tail.

— Richard Lilford, CLAHRC WM Director


  1. Baicker K, Taubman SL, Allen HL, et al. The Oregon Experiment – Effects of Medicaid on Clinical Outcomes. N Engl J Med. 2013; 368: 1713-22.

Improving Hospital Care: Not easy when budgets are pressed

In the last News Blog the idea of hospital culture was discussed. This has generated a lively debate, as you can see in the correspondence section of this News Blog. The responses are broadly supportive of the idea that hospital culture is over-emphasised. One of the problems is that culture is a rather slippery concept; clever, well-informed people can fall out over its meaning, just as the early Christian theologians would argue bitterly over whether Christ had two natures, one human and one divine, or one nature, both human and divine. So let’s move on to something less nebulous – money.

The rich world is emerging uncertainly from a nasty depression. The dependency ratio is widening as fertility rates fall below the optimum threshold discussed in a previous blog. Money is in short supply relative to need. Inevitably, the consequences fall unevenly across health facilities, such as hospitals. However hospitals are reimbursed, whether by insurance payments, capitation payments or block-grants, there are likely to be winners and losers in relative terms. In addition, hospitals have differing estate costs, economies to scale and so on. At any moment in time, some may have healthy financial reserves, while others are accumulating debt. What can managers do to improve financial health while also improving (or at least not damaging) patient care?

It is possible to achieve efficiencies in health care. Operations research and ‘lean’ processes can reduce waste – increasing use of day-case surgery for example.[1] However, much of the low hanging fruit may have already been plucked. The spectacular gains that can be achieved in many industries by ‘re-arranging’ work processes are not easily replicated in labour intensive industries, such as health. Also, quality control processes, such as computerised decision support,[2] and feedback and audit,[3] reduce the costs of having to care for patients with adverse events. They are frequently cost-effective and sometimes save health service costs overall by reducing the need to care for patients who have suffered from adverse events.[4] [5] However, few of these measures are cost-releasing in services where demand exceeds supply and many require up-front expenditure.

The largest call on money is the wage bill – it accounts for around two thirds of hospital expenditure.[6] It is hard to collect valid information on staff-patient ratios and care quality, but such evidence as there is suggests that quality of care is sensitive to nurse-patient [7] and doctor-patient [8] ratios. This is hardly counter-intuitive.

Managers may try ‘skill-substitution’ – essentially allocating tasks traditionally carried out by doctors to less expensive staff. Clinical officers have provided front-line diagnosis and clinical care for nearly 100 years in Africa, and a cadre of physicians’ assistants is being created in richer countries, especially the USA. However, the scale of substitution will be limited by numbers for at least a decade, by which time the demand for physicians and their assistants will likely have increased.

The corollary is that managers’ hands are largely tied – their ability to improve their financial position is limited – at any moment in time their budgets are largely or totally committed before they receive the money. Small differences in the financial health of organisations can make large differences at the margin, given the scale of the operation over many years.

Hospitals with a financial advantage at the margin would have somewhat lower ‘production pressures’ in serving their local population. They would be able to innovate occasionally, increase their quality assurance efforts a little, and develop new services from time to time. Gradually they would develop a brand and become more interesting places to work. They would find it easier to attract staff of the highest calibre, all the way up to the Chief Executive. In short, they would generate a virtuous cycle.

If hospital culture receives too much attention, money is afforded too little. The hapless ex-Chief Executive of the Mid-Staffordshire hospital, which was the subject of a series of enquires for providing sub-standard care, was accused of putting “money before patients” by not employing sufficient nurses. One has to ask the question about the financial viability of certain types of hospital. It is fashionable to blame poor care on poor management, but it may be a myth that managers make much difference in a hospital. It suits the chief executives of successful hospitals to perpetuate this myth, and applicants for chief executive jobs must feed the myth to convince the appointment panel of their miraculous powers.

A systematic search across many countries of factors associated with successful services is needed. Throw culture in if you wish, but don’t forget the money. And for anyone serving on a hospital board, be leery of the slogan “put money before patients”; they may be synonymous.

— Richard Lilford, CLAHRC WM Director


  1. Cima RR, Brown MJ, Hebl JR, et al. Use of Lean and Six Sigma Methodology to Improve Operating Room Efficiency in a High-Volume Tertiary-Care Academic Medical Center. J Am Coll Surg. 2011. 213(1): 83-92.
  2. Nuckols TK. Smith-Spangler C, Morton SC, Asch SM, Patel VM, Anderson LJ, Deichsel EL, Shekelle PG. The effectiveness of computerized order entry at reducing preventable adverse drug events and medication errors in hospital settings: a systematic review and meta-analysis. Syst Rev. 2014; 3: 56.
  3. Cochrane Effective Practice and Organisation of Care Group. EPOC Website. 2014. [Online].
  4. Yao GL, Novielli N, Manaseki-Holland S, et al. Evaluation of a predevelopment service delivery intervention: an application to improve clinical handovers. BMJ Qual Saf. 2012; 21(s1): i29-38.
  5. Hoonhout LH, de Bruijne MC, Wagner C, et al. Direct medical costs of adverse events in Dutch hospitals. BMC Health Serv Res. 2009; 9: 27.
  6. Lafond S, Arora S, Charlesworth A, McKeon A. Into the red? The state of the NHS’ finances. London: Nuffield Trust. 2014
  7. Shekelle PG. Chapter 34. Effect of Nurse-to-Patient Staffing Ratios on Patient Morbidity and Mortality. In: Shekelle PG, et al. Making Health Care Safer II: An Updated Critical Analysis of the Evidence for Patient Safety Practices. Comparative Effectiveness Review No. 211. Rockville, MD: AHRQ; 2013. p. 372-84.
  8. Pronovost PJ, Angus DC, Dorman T, Robinson KA, Dremisizov TT, Young TL. Physician Staffing Patterns and Clinical Outcomes in Critically Ill Patients. A Systematic Review. JAMA. 2002; 288: 2151-62.

Paying for Health

The CLAHRC WM director has long been fascinated by the link between how health is paid for and access, quality, and satisfaction. The famous RAND RCT showed that fee-for-service systems resulted in more satisfied patients, but at the cost of over-servicing, compared with capitation payment.[1] This is consistant with economic theory. No changes in quality were detected. Subsequent sharp improvements in care quality in the public Veterans Affairs system vs. other American institutions has led many to speculate that the profit motive is inimical to quality.

So what happens when hospitals convert from not-for-profit to for-profit status? Joynt, Orav and Jha, conducted a controlled before and after study among no less than 237 converting hospitals and 631 matched control hospitals.[2] While the converting hospitals improved their financial margins, no significant changes were observed for adherence to quality standards, nurse to patient ratios, access for poor or minority patients, or mortality. The primary outcomes of interest were expressed as differences in differences, meaning that each hospital acted as its own control, thereby mitigating bias. The authors did not find any effect of time since conversion.

While on the subject of behavioural economics, a paper by Whaley and colleagues will also provoke readers.[3] This study concerns the effect of price transparency on utilisation rates for various services in an insurance-based system involving an element of cost-sharing with patients. The intervention was simple – making prices available online to prospective service users. Most people did not use the service, but given an insured population of half a million individuals, there were still plenty who did. These people were less likely to use a service (lab testing, imaging or clinician visit) than those who did not avail themselves of the pricing service.

Was this because they were already predisposed to parsimony? On the contrary: researchers looked at the behaviour of both groups before introduction of the online pricing service, showing that people who used the service had higher than average utilisation prior to the information service, and lower utilisation after it had been introduced. Making the service available seems to have made them more discriminating consumers.

— Richard Lilford, CLAHRC WM Director


  1. Davies AR, Ware Jr JE, Brook RH, Peterson JR, Newhouse JP. Consumer acceptance of prepaid and fee-for-service medical care: results from a randomized controlled trial. Health Services Research. 1986;21(3):429.
  2. Joynt KE, Orav E, Jha AK. Asociation between hospital conversions to for-profit status and clinical and economic outcomes. 2014; 312(16): 1644-52.
  3. Whaley C, Schneider Chafen J, Pinkard S, Kellerman G, Bravat D, Kocher R, Sood N. Association between availability of health service prices and payments for these services. 2014; 312(16): 1670-6.