Do pay-for-performance incentives lead to a better health outcome?

Pay-for-performance approaches have been widely adopted in order to drive improvements in the quality of healthcare provision. Previous studies evaluating the impact of these programs are limited by either the number of health outcomes or of medical conditions considered. In this paper, we evaluate the effectiveness of a pay-for-performance program on the basis of five health outcomes and across a wide range of medical conditions. The context of the study is Lombardy region in Italy, where a rewarding program was introduced in 2012. The policy evaluation is based on a difference-in-differences approach. The model includes multiple dependent outcomes, which allow quantifying the joint effect of the program, and random effects, which account for the heterogeneity of the data at the ward and hospital level. Our results show that the policy had a positive effect on the hospitals’ performance in terms of those outcomes that can be more influenced by a managerial activity, namely the number of readmissions, transfers and returns to surgery room. No significant changes which can be related to the pay-for-performance introduction are observed for the number of voluntary discharges and for mortality. Moreover, our study shows evidence that the medical wards have reacted more strongly to the pay-for-performance program than the surgical ones, whereas only limited evidence is found in support of a different policy reaction across different types of hospital ownership. Finally, the evaluation found no evidence of a distortion of the hospital behavior aimed at inflating the performance evaluation, such as cream skimming behavior.