Dr. Robert Pearl: Financial incentives in healthcare don't work

Financial incentives in healthcare often do not work as intended, according to Robert Pearl, MD, the former CEO of Oakland, Calif.-based Permanente Medical Group, who points to a patient-satisfaction incentive program Kaiser put into place roughly 20 years ago.

In an op-ed for Forbes, Dr. Pearl states that Kaiser's solution to industry challenges 20 years ago was to implement a program that allowed thousands of KP members to mail in satisfaction surveys, and the facilities that hit or surpassed benchmarks received "huge payouts." However, leadership decided to scrap the program the following year and saw a significant decline in patient satisfaction and brand perception.

"In medicine, financial incentives rarely achieve their intended goals. It's not because they don’t work … it's because they work too well," he writes. "Monetary rewards always change doctor behavior, but rarely achieve the outcomes desired — something my predecessor learned the hard way when he tried to increase patient satisfaction."

Dr. Pearl points to the Hospital Readmissions Reduction Program, which was introduced under the ACA in 2010. Two years after implementation, hospitals with high rates of 30-day readmission for diseases like pneumonia, heart attack or heart failure would be financially penalized.

Dr. Pearl notes that while the program seemed to work for a time, it ultimately failed to address the underlying cause to motivate physicians to change their behavior — so if the incentives are ever removed, physicians are more likely to return to their previous behaviors.

He also notes that doctors were less likely to readmit patients with "borderline" severe relapses under the program, even if they could have benefited from hospital care.

"If you impose major penalties on hospitals for readmissions, doctors will begin seeing 'borderline' patients as less sick than they are. Consequently, patients don't receive the intensity of treatment they require. Some die unnecessarily. It's not that the doctors in these situations are evil or greedy. They all took an oath to protect the lives of their patients. What's happening here is a neurophysiological process that occurs subconsciously, and entirely beyond the doctor's awareness or control," he writes.

"Personal financial incentives do create change, but rarely the kind of change patients want or deserve. Physicians are intrinsically motivated to do their best for patients. With the right combination of leadership, resources and a mission-driven spirit, they can and they will," he continues.

To access Dr. Pearl's full op-ed, click here.

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