“That is a motivator, and I communicate that to the staff so that they're aware of it,” Spunt says. “But I also communicate to staff that we need to do it because it's the right thing to do.”
Dr. Bryan Becker, interim chief medical officer at the hospital, says the program is a starting point. If it finds success, hospital officials might eventually try to open discussions of incentives related to other clinical-quality goals as well.
At least 25% of hospitals already have some type of financial performance-incentive system for frontline healthcare workers, and that figure is expected to grow in coming years, says Debbie O'Brien, senior vice president of consulting and education services at healthcare performance-improvement company Press Ganey Associates.
The firm—which O'Brien acknowledges could profit from some incentive-planning services—has studied the practice and found that hospitals with incentive plans have better performance indicators on areas they target.
Jay Schuster and Pat Zingheim, co-founders of compensation consultancy Schuster-Zingheim and Associates in Los Angeles, say their research has found 67% of the 21 top-performing medical centers cited by U.S. News & World Report's “Best Hospitals” study in 2008 used financial incentives for nonexecutive workers.
Healthcare has long offered bonuses for executives whose hospitals meet goals for financial performance. But unlike C-suite incentives, the frontline employee plans tend to focus on clinical metrics instead of financial performance.
“They're not sharing any kinds of metrics of cost savings or anything like that. It was in the realm of improving the healthcare that they deliver,” Schuster says.
But the idea of bonus payments is not without skeptics and critics.
Two national health systems contacted by Modern Healthcare say they don't offer such incentives because meeting goals for patient safety and satisfaction is expected as part of employees' regular salaries, and they shouldn't need to be offered additional incentives.
Dr. Paula Santrach, chair of clinical practice quality at the Mayo Clinic, says the 21-hospital national system prefers to build systems and processes to achieve its quality and safety goals and not offer extra incentives.
For example, Mayo officials would build automatic prompts into electronic health records to remind providers to give aspirin to certain heart attack patients rather than offering workers money to improve that kind of performance.
“There's no extra payment,” Santrach says. “We think that providing high-value care is part of our professional responsibility and is something we strive to do every day.”
Another unit of the Illinois Nurses Association, representing nurses at Provena St. Joseph Medical Center in Joliet, specifically dropped a form of incentive payments from its most recent contract after what INA staff representative Rick Lezu called a “major disaster” in incentives negotiated in the union's previous contract.
Lezu says financial difficulties stemming from a lower-than-projected patient census figure led to efforts to roll back the planned incentives, which were based on subjective, individual performance evaluations. He says the rollbacks led to morale problems among the nurses, who felt that the changes were reflected in their performance evaluations.
Lisa Lagger, spokeswoman for 457-bed Provena St. Joseph, confirms that financial issues led to changes in the merit-pay agreement.
“In 2008, with the crumbling economy taking a toll on the healthcare industry, the INA indeed agreed to concessions related to merit increases. The pay-for-performance program was suspended at that same time,” she said in an e-mail.
However, Lagger says hospital officials continue to believe employees should be rewarded for achieving organizational goals.
“To our disappointment and despite evidence of progress made, we could not convince the INA of the value of merit-based performance in our most recent contract,” Lagger said via e-mail. “We continue to set clear expectations for our staff to ensure the best care of our patients.”
Mary Ann Holt, a registered nurse and a partner with IMA Consulting in Chadds Ford, Pa., says that in general, the experience with incentive plans for frontline employees can be viewed as either a carrot or a stick, depending on the culture of the employer.
“It depends on the environment,” she says. “In a culture that recognizes staff for a job well done … it is more of a carrot and people are more engaged. Where it's seen as more of a stick is those environments where you have an entitlement environment. It is really based on the culture of an organization and having a staff that understands that if you help the organizations get higher reimbursement, you will share in that.”
In that light, some observers see the CMS' value-based purchasing program for hospitals in Medicare as a major motivation.
The program will begin evaluating performance in October 2012, and the following January hospitals could see decreases in reimbursement if they don't perform well enough on 12 clinical-quality measures and an umbrella metric of figures in the Hospital Consumer Assessment of Healthcare Providers and Systems survey.
Ron Seifert, a vice president with consultancy Hay Group in Philadelphia, says some hospital executives see the programs as a way to tie the risks of declining reimbursement to potential variations in their costs.
“Almost 50% of your costs are people-related costs,” Seifert says. “And the question is, how do you convert more of that into variable cost? And if you can create more alignment between how we perform … and your cost structures, i.e., how we pay people, that's a good thing.”
But many say bonus programs can't be driven by financial considerations.
“It really should be primarily about: Is this going to help the organization and the individuals achieve the goals of quality and outcomes?” says Greg Stoskopf, director in the Human Capital/Total Rewards practice at Deloitte Consulting.
Proponents of the financial bonuses say the data prove their effectiveness.
At the University of California at San Francisco, data on the Housestaff Incentive Program concluded that $300 bonuses for residents and fellows in the graduate medical education program were correlated with a strong rise in goals, such as care coordination.
In July 2009, before the UCSF incentive program took effect, communication between residents and primary-care providers was documented in 55% of the hospital's discharges. Within six weeks, that figure rose to 80%, and exceeded 90% for the last three months of the year, according to the UCSF website.
But Christine Tande, a principal with consultancy Tandehill Human Capital, Warrenville, Ill., says the risk of some incentive plans is that they can create a short-term bump in improvement without really changing the processes or cultures in ways that lead to long-term results.
“You can't take an incentive plan if you want to have long-term value and throw it on top and make it the flavor of the month along with everything else,” she says. “Every behaviorist out there is going to argue that incentive plans don't work, because most people aren't motivated by money. And in the short term they are right.”
The Committee of Interns and Residents/ SEIU Healthcare has successfully convinced three hospitals where its members work in New York City to include performance incentives on several types of specific metrics starting in 2010. Heather Appel, communications director for the residents' union, says the idea came from the UCSF model.
At one of the hospitals, 591-bed New York Methodist Hospital in Brooklyn, residents will be receiving bonuses of a couple hundred dollars each because of improvements in patient-satisfaction scores. And at 784-bed Bronx-Lebanon Hospital Center, bonuses will be going out for improvements in lengths of stay.