Finance news
Five principles for helping bend the cost curve without compromising on the quality of care.
October 16, 2024
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Health care organizations have long tried to enlist physicians in their effort to control or reduce costs. One effective means for doing so is to create an incentive system that rewards physicians for their contributions. To design such a system, organizations should take into account these considerations: whether the incentives should be broad or narrow; whether they should be individual- or team-based; for how long to compensate; how much to compensate; and what mix of financial and nonfinancial incentives to offer.
Many of physicians’ daily decisions — such as their selection of drugs, devices, and technologies, and the amount of time they utilize resources such as operating rooms and hospital beds — have a significant financial impact on hospitals. By providing physicians with the appropriate incentives, hospitals and health systems can enlist them in the effort to manage costs while simultaneously maintaining or improving patient outcomes.
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Susanna Gallani is the Tai Family Associate Professor of Business Administration at Harvard Business School. Her research focuses on performance management systems in health care provider organizations.
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Derek A. Haas is the CEO and founder of Avant-garde Health, whose analytics software provides health systems, surgeons, and ambulatory surgical centers with comprehensive insight into their surgical care and empowers them to improve their profitability and care quality.
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