Friday, 4th October 2019
Different Strokes for Different Folks: Incentive Contract Structure and Performance of Healthcare Providers
A central issue in designing performance incentive contracts is whether to reward the production of outputs versus the use of inputs: the former rewards efficiency and innovation in production, while the latter imposes less risk on agents. Agents with varying levels of skill may perform better under different contracts as well – more skilled workers may be better able to innovate, for example. We study these issues empirically through an experiment enabling us to observe and verify outputs (health outcomes) and inputs (adherence to recommended medical treatment) in Indian maternity care. We find that both output and input incentive contracts achieved comparable reductions in post-partum hemorrhage rates, the dimension of maternity care most sensitive to provider behaviour and the largest cause of maternal mortality. Interestingly, and in line with theory, providers with advanced qualifications performed better and used new strategies under output incentives, while under input incentives, providers with and without advanced qualifications performed equally.