Using quality and cost for employee incentives in a reengineered hospital setting

The Mount Sinai Hospital is reengineering its inpatient services to increase the quality of patient care and achieve greater operational efficiency. The central component of this redesign has been the establishment of "care centers," which are administratively and fiscally separate "hospitals within the hospital." To promote quality and financial goals set for each care center, a novel employee incentive compensation program was created. Performance on both quality and financial indicators determines the level of bonus payments to hourly employees. The incentive compensation plan was initiated in the first quarter of 1996. By achieving two of the three performance targets, employees earned a bonus of 6% of base salary for the first two quarters. Nurses and pharmacists did not accept bonus payments because of collective bargaining agreements. The early experience of the Cardiac Care Center has been highly favorable. Changes are planned to improve the process further.