The Theory of Value‐Based Payment Incentives and Their Application to Health Care

Abstract

Payment contracts that are "incentive compatible"-which directly encourage better care and reduced cost, mitigate gaming, and selectively induce clinically efficient providers to participate-will focus differentially on evidence-based care processes, will right-size and structure incentives to avoid crowd-out of providers' intrinsic motivation, and will align patient incentives with value. Future research should address the details of putting these and related principles into practice; further, by deploying these insights in payment design, policy makers will improve health care value for patients and purchasers.