Institutional financial incentives in healthcare: a review of normative considerations

Institutional financial incentives(FIs) are used to improve the quality of healthcare services and patient outcomes. In spite of their growing use, empirical evidence regarding their impact remains inconclusive. Moreover, the normative implications of institutional FIs remain underexplored. This study aims to map the normative considerations and tensions in using institutional FIs in healthcare.

We performed a systematic review of reasons to identify and map the normative considerations in institutional FIs. Six databases, namely PubMed, Embase, Scopus, Web of Science, ProQuest Central and EconPapers, and additionally Google Scholar were searched. We included peer-reviewed literature in English on financial incentives or pay-for-performance in healthcare at the institutional level, and excluded grey literature, and studies on individual provider incentives.

Sixteen articles met the inclusion criteria, representing diverse disciplines such as health economics, medicine, law, public health and health policy. Two categories of normative considerations are identified: firstly, considerations at the macro and meso level (societal and institutional level), and secondly, considerations at the micro (departmental or individual) level. The key normative principles identified are effectiveness, utility, solidarity, distributive justice, procedural justice, professional values, conflicts of interest and proportionality. The tensions inherent in each normative principle are closely linked to contextual elements such as institutional characteristics, incentive design and performance measures: for instance, the type of performance measure used (process or outcome measure, relative or absolute improvement) impacts procedural justice.

This study is limited in including only English language literature. Notwithstanding this limitation, this review provides an overview of the normative implications of institutional financial incentives. As robust empirical evidence on the institution and societal-level effects of FI is lacking, these findings emphasize the need for further normative deliberation on institutional FIs and more caution while implementing institutional FIs as a policy measure.