Non-Financial Performance Measures in the Healthcare Industry: Do Quality-Based Incentives Matter?

John H. Evans, Andrew Leone, Nandu J. Nagarajan

Research output: Chapter in Book/Report/Conference proceedingChapter

7 Scopus citations

Abstract

This study examines the economic consequences of non-financial measures of performance in contracts between health maintenance organizations (HMOs) and primary care physicians (PCPs). HMOs have expanded contractual arrangements to give physicians not only financial incentives to control costs, but also to make the physicians accountable for the quality of patient care. Specifically, we examine how quality provisions in HMO-PCP contracts affect utilization (patient length of stay in the hospital), patient satisfaction, and HMO costs. Our results show that quality clauses are associated with a statistically significant increase in utilization (29 more hospital days annually per 1,000 HMO enrollees). Further, inclusion of quality clauses in PCP contracts also led to a significant increase in patient satisfaction, but no associated increase in HMO costs. Overall, these results suggest that quality clauses in PCP contracts can increase value by increasing customer satisfaction without significantly increasing cost.

Original languageEnglish (US)
Title of host publicationAdvances in Management Accounting
EditorsMarc Epstein, John Lee
Pages1-31
Number of pages31
DOIs
StatePublished - Dec 1 2005

Publication series

NameAdvances in Management Accounting
Volume14
ISSN (Print)1474-7871

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)

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    Evans, J. H., Leone, A., & Nagarajan, N. J. (2005). Non-Financial Performance Measures in the Healthcare Industry: Do Quality-Based Incentives Matter? In M. Epstein, & J. Lee (Eds.), Advances in Management Accounting (pp. 1-31). (Advances in Management Accounting; Vol. 14). https://doi.org/10.1016/S1474-7871(05)14001-5