Incentives and Morality for Health Care Leaders

Yesterday’s guest post (Should Health Care Leaders Set Wild Goals?) by Jeff Levin-Scherz explored the bright and dark sides of goal setting, including some of the research demonstrating perverse behaviors and outcomes that may result from setting “wild” goals. When Economic Incentives Backfire which appeared in the March 2009 issue of Harvard Business Review examines another dimension of the same issue -namely the economic incentives that organizations design to motivate employees to achieve goals and targets. This is more than a hot topic today with the AIG incentive bonus issue in the forefront of news and commentary around the country.

The author, Samuel Bowles, is a behavioral scientist at the Santa Fe Institute who reports briefly on evidence about how financial incentives influence moral sensibilities and behaviors. Or, conversely, how human nature influences the behavior of incentive programs. And the picture, similar to that for goals, is not always what you might predict in ways that are particularly relevant to health care leaders.

Unintended Consequences

Bowles demonstrates through examples that using the financial reward to promote the achievement of inherently ethical goals can actually backfire because of human behavioral peculiarities. As opposed to the investment banking and sub-prime mortgage fiascos in which the goals and incentives were similarly greed rather than morality based, he provides examples of financial incentives used to enhance such inherently ethical behaviors as blood donation or timely pickup of children from daycare which instead resulted in the opposite outcomes.

Women who felt good about donating blood voluntarily avoided doing so when a financial incentive was put in place. Elegantly demonstrated, the impact of providing the same financial incentive in the form of a charitable contribution resulted in a resumption of normal donation patterns.

Similarly, in the well known Israeli daycare example, obligating parents to pay a fine for picking up their children late actually resulted in increased lateness because the fine was perceived as alleviating their moral obligation to be on time


These examples set the stage for one of Bowles’ theses which is that there is a delicate balance between the moral sense and ethical behavior which can be disrupted by financial incentives. Too much emphasis on economic incentives can shame moral individuals into avoiding desired and ethical behaviors because the prospect of financial reward “cheapens” both the intent and the behavior.

A Fine Line: Mission versus Operational Incentives

In healthcare delivery, goals are presumed to be mission related. If Bowles’ behavioral theory is correct, the incentives created to meet those goals should similarly be mission consistent or there is a risk ofarearadoxical results. And here’s where the problem begins. As Jeff Levin-Scherz points out, a standard tool for promoting physician compliance with everything from productivity to quality measures is to link compensation to results. Perhaps this needs to be fine-tuned. With productivity, we may be OK. Productivity need not present a moral dilemma and it may be appropriate and ethical to increase compensation for efficient, productive providers who generate more patient care per unit resource – provided it is done safely and effectively. But are we completely on the wrong track with our approach to stimulating quality and safety practices themselves?

True, True, Unrelated?

Healthcare leaders who have been involved with provider compensation models know that physicians and other providers have never felt very good applying these standard business performance models as an incentive for meeting quality standards. We’ve always attributed this to arrogance and resistance – a disdain for accountability by a profession whose economic reward has historically been only tangentially related to quality and measurable outcomes.

But could we be way off base? Could it be that while arrogance and resistance may “go with the territory” of some of those who manage life and death daily, that they are not actually the reason physicians are averse to compensation based rewards for meeting quality metrics? Does it truly offend the moral and mission sensibilities of dedicated healthcare workers in a way that either attenuates their impact or that over time has the potential to change the current mission-driven health care workforce to one that responds primarily to economic incentives? Are we at risk for recreating Lehman Brothers and AIG in health care?

Heading for an Inverted Work Force?

For healthcare leaders, this is worth thinking about as the demand to meet the IOM’s 6 Aims increasingly drives health care system design. What incentives can we design to enhance quality and safety that actually promote the allegiance of a quality, safety, and mission-driven workforce and avoid the risk of unintentionally attracting a generation of Bernie Madoffs who see opportunity in the incentives, rather than reward in the mission of health care?