title: Incentivising effort in governance of public hospitals: Development of a delegation-based alternative to activity-based remuneration.
abstract: This paper is a first examination of the development of an alternative to activity-based remuneration in public hospitals, which is currently being tested at nine hospital departments in a Danish region. The objective is to examine the process of delegating the authority of designing new incentive schemes from the principal (the regional government) to the agents (the hospital departments). We adopt a theoretical framework where, when deciding about delegation, the principal should trade off an initiative effect against the potential cost of loss of control. The initiative effect is evaluated by studying the development process and the resulting incentive schemes for each of the departments. Similarly, the potential cost of loss of control is evaluated by assessing the congruence between focus of the new incentive schemes and the principal's objectives. We observe a high impact of the effort incentive in the form of innovative and ambitious selection of projects by the agents, leading to nine very different solutions across departments. However, we also observe some incongruence between the principal's stated objectives and the revealed private interests of the agents. Although this is a baseline study involving high uncertainty about the future, the findings point at some issues with the delegation approach that could lead to inefficient outcomes.
authors.affiliation: Department of Public Health, Bartholins Alle 2, Aarhus University, 8000 Aarhus, Denmark; Department of Clinical Medicine, Palle Juul-Jensens Boulevard 82, Aarhus University, 8200 Aarhus N, Denmark; Health Economics, CFK - Public Health and Quality Improvement, Oluf Palmes Alle 15, Central Denmark Region, 8200 Aarhus N, Denmark. Electronic address: rs@ph.au.dk.
authors.forename: Rikke
authors.initials: R
authors.lastname: Søgaard
authors.affiliation: Manchester Centre for Health Economics, Institute of Population Health, University of Manchester, Oxford Road, M13 9PL Manchester, UK. Electronic address: soren.kristensen@manchester.ac.uk.
authors.forename: Søren Rud
authors.initials: SR
authors.lastname: Kristensen
authors.affiliation: COHERE - Centre for Health Economic Research, Department of Business and Economics, University of Southern Denmark, Campusvej 55, 5230 Odense, Denmark. Electronic address: mbe@sam.sdu.dk.
authors.forename: Mickael
authors.initials: M
authors.lastname: Bech
mesh_terms: D003718:Denmark; D006748:Hospital Departments / Q000458:organization & administration; D006779:Hospitals, Public / Q000191:economics / Q000458:organization & administration*; D006801:Humans; D007407:Interviews as Topic; D012051:Reimbursement Mechanisms / Q000458:organization & administration*; D012052:Reimbursement, Incentive / Q000458:organization & administration*; D013219:State Government
keywords: Delegation; Governance; Hospital management; Reimbursement; Remuneration