“The CMS, private payers, policymakers and provider systems are placing heavy reliance on using financial incentives to change provider behavior to improve quality of care and reduce costs. …Half of what the traditional Medicare program spends will be tied to rewards for quality and cost control by 2018. That will mean continued growth of accountable care and bundled-payment contracts. Other incentives that penalize or reward hospitals for quality and safety, known as value-based purchasing, will be linked to 90% of Medicare spending by 2018.”

“But researchers say much depends on properly structuring the incentive programs to achieve the desired results. Public policy inside and outside healthcare is strewn with incentive programs that have fallen short of producing the desired results. The consequences of poorly designed incentives can be higher spending and lower quality care. For evidence, look no further than Medicare’s fee-for-service payment model, which has been widely blamed for encouraging greater volume of services, causing higher spending and exposing patients to the risks of unnecessary and disjointed care.”