Health Affairs, 22, no. 2 (2003): 16 doi: 10.1377/hlthaff.22.2.16 © 2003 by Project HOPE	New Online   Pay Cuts For Medicare Docs   Access To Care Woes   Public Coverage More Efficient   Empowering Consumers

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Incentives

PROLOGUE

Incentives For Quality

However, as Smith would have been quick to point out, not all markets are hospitable to his theory, and where incentives are not properly aligned with desired outcomes, any progress toward the common good will only come in spite of individuals acting in their own self-interest, not because of it. When it comes to quality, the patchwork U.S. health care system is dysfunctional by many measures, and certainly by standards that Smith would deem suitable for laissez-faire economics.

Any economist would point out that before a health care system can produce high-quality health care, purchasers must first have an economic reason to demand quality; until then, any expectations that the system will consistently deliver excellent care will be misguided, because caregivers will have no economic incentive to provide it, and plans will have no incentive to compete on that basis.

The two papers in this section take up these related topics of incentives and competition as they relate to health care quality, bringing into sharp relief the importance of these underlying elements for the proper functioning of health care markets. In the first paper Sheila Leatherman, Donald Berwick, Debra Iles, Lawrence Lewin, Frank Davidoff, Thomas Nolan, and Maureen Bisognano explore the so-called business case for quality. They ask the question: Does improving quality yield a return on investment? The question is important, for, as the authors state, "Without a business case for quality, we think it unlikely that the private sector will move quickly and reliably to widely adopt proven quality improvements."

In the second paper William Sage, David Hyman, and Warren Greenberg take their cue from the Institute of Medicine’s Crossing the Quality Chasm report, which emphasized the importance of economic incentives and market forces in preventing errors and improving quality. The authors provide a guidebook to the ins and outs of competition law, which they call "the forgotten stepchild of health care quality."

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