Scandinavian Working Papers in Economics

DaCHE discussion papers,
University of Southern Denmark, Dache - Danish Centre for Health Economics

No 2013:5: Who to pay for performance? The choice of organisational level for hospital performance incentives

Soren Rud Kristensen (), Mickael Bech () and Jørgen T Lauridsen ()
Additional contact information
Soren Rud Kristensen: Centre of Health Economics, University of Manchester, Postal: UK
Mickael Bech: COHERE, Department of Business and Economics, University of Southern Denmark, Postal: Campusvej 55, DK-5230 Odense M
Jørgen T Lauridsen: COHERE, Department of Business and Economics, University of Southern Denmark, Postal: Campusvej 55, DK-5230 Odense M

Abstract: When implementing a pay for performance (P4P) scheme, designers must decide to whom the nancial incentive for performance should be directed. This paper compares department level hospital reported performance on the Danish Case Management Scheme at hospitals that did and did not redistribute performance payments to the department level. Across a range of models we nd that hospital reported performance at departments that operate under a direct nancial incentive is about 5 percentage points higher than performance at departments at hospital where performance payments are not directly redistributed to the department level. This result is in line with the theoretical expectations but due to the non-experimental design of the study, our results only have a causal interpretation under certain assumptions discussed in the paper

Keywords: Pay for performance; P4P; Hospital incentives; Incentive design; Team production

JEL-codes: L23; M52; O18

24 pages, June 15, 2013

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