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Full reference:

Guida, S. et al Testing the myth of fee‐for‐service and overprovision in health care. Health Economics. 2019;28:717–722.

This week’s paper of the week is brought to you by Dr Tim Wilson, Managing Director


Bottom line

When it comes to improving value-based population health, nurturing a culture of stewardship reminds more important than clever design of payment systems. This study shows that the wrong payment system might increase over-provision of care. But importantly, because of an inherent culture of stewardship, patient value and system sustainability trump personal financial gain.

Summary from authors

We observe that decreasing the fee size has an effect on over-provision under both market conditions. We also observe that patients who are harmed by excess treatment are at little risk of over-provision. Finally, when subjects face resource constraints but still have an incentive to over-provide high‐profit services, they hesitate to do so, implying that the presence of opportunity costs in terms of reduced benefits to other patients protects against over-provision. Thus, this study provides evidence that the risk of over-provision under FFS depends on fee sizes, patients’ health profiles, and market conditions.

3V – Implications for value

Professor Sir Julian Le Grand described an important phenomenon that he described as Knights and Knaves.[1] When using incentives, especially financial incentives, to deal with self interested (or Knavish) behaviour, altruists (or Knights) might actually be insulted the attempt to “bribe them”. Oliver Williamson also described how the use of incentives through contracts increasingly encouraged people to think transactionally- “I will only do that if you pay me”. So, in moving to a value-based population health system it is critical to pay attention to how people might respond to changes in payment, especially clinicians of the future. Simple belief that fee for service is all bad, and alternatives like capitation payment are all good is naïve.

This paper used medical students and took them through a series of exercises related to payment size, the circumstances of an individual patient and the context in which they were working. They then asked them how they might treat the patient given these different incentives and circumstances. Through this simulation exercise they established these clinicians of the future:

  • Might over provide with fee for service; But
  • Not where it would harm the patient; and
  • Not where resources are constrained.

There are clear limitations to this paper. But there are lessons for those interested in build value-based population health systems. There is an inherent sense of stewardship in medical students, one that wants to promote patient value and system sustainability.

Once again, we are reminded that culture is more important than payment design. Yes, get payments right to support the right culture, but don’t make knaves of your clinicians, and find ways, other than financial, to promote the sense of stewardship already present.