Economic modeling of methods to stimulate quality improvement.
OBJECTIVE
This paper uses an economic model to compare three methods for stimulating quality improvement: payment incentives, competition for patients, and emphasis on professional ethics.


METHODS
Use an economic model to simulate the impact on quality distortions (risk selection) of differences in payment incentives, competition for patients, and emphasis on professional ethics.


METHODS
Health care policymakers in many countries seek to use incentives and competition to spur quality improvement. However, strong incentives often promote risk selection: insurers and providers financially benefit from distorting quality to attract profitable patients.


RESULTS
The analysis suggests that intense competition for patients and strong financial rewards for cost control can exacerbate quality distortions and compromise social solidarity.


CONCLUSIONS
Carefully regulated competition and mixed forms of provider payment (risk sharing) appear to be the best options. Moreover, designing competition, regulation, payment, and other forms of health policy to promote suppliers' professional ethics can help society to reap the quality and efficiency benefits of competition and incentives without sacrificing social solidarity.
Eggleston
Karen
K
Department of Economics, Tufts University, Medford, MA 02155, USA. karen.eggleston@tufts.edu
D000533:Altruism; D003258:Consumer Behavior / Q000191:economics; D004465:Economic Competition / Q000458:organization & administration*; D026690:Ethics, Clinical; D015273:Insurance Selection Bias; D018803:Models, Economic; D009042:Motivation; D011787:Quality of Health Care / Q000191:economics*