Incentives in primary care and their impact on potentially avoidable hospital admissions

Financial incentives in primary care have been introduced with the purpose of improving appropriateness of care and containing demand. We usually observe pay-for-performance programs, but alternatives, such as pay-for-participation in improvement activities and pay-for-compliance with clinical guidelines, have also been implemented. Here, we assess the influence of different programs that ensure extra payments to GPs for containing avoidable hospitalisations. Our dataset covers patients and GPs of the Italian region Emilia-Romagna for the year 2005. By separating pay-for-performance from pay-for-participation and pay-for-compliance programs, we estimate the impact of different financial incentives on the probability of avoidable hospitalisations. As dependent variable, we consider two different sets of conditions for which timely and effective primary care should be able to limit the need for hospital admission. The first is based on 27 medical diagnostic related groups that Emilia-Romagna identifies as at risk of inappropriateness in primary care, while the second refers to the internationally recognised ambulatory care-sensitive conditions. We show that pay-for-performance schemes may have a significant effect over aggregate indicators of appropriateness, while the effectiveness of pay-for-participation schemes is adequately captured only by taking into account subpopulations affected by specific diseases. Moreover, the same scheme produces different effects on the two sets of indicators used, with performance improvements limited to the target explicitly addressed by the Italian policy maker. This evidence is consistent with the idea that a "tunnel vision" effect may occur when public authorities monitor specific sets of objectives as proxies for more general improvements in the quality of health care delivered.