HCI3 Update from the Field: Incentives Drive Form and Function

Submitted by francois.debrantes@hci3.org on Friday, September 21, 2012 - 11:54

Newtown, CT – September 21, 2012

Blockbuster, Circuit City, and Kodak share a root cause to their decline and failure: they forgot that incentives drive function, and that function drives form – Why do we need a roll of film when we have digital cameras or smartphones that can automatically upload pictures to social media? Why do we need to go to a "big box" store when we can move through Amazon's web pages? Why do we need to spend time and fuel getting and returning DVDs when the mail carrier can bring it to our doors? The form didn't fit the evolved function, and the function evolved to respond to our needs – and our needs drive how we spend our dollars, and hence the incentives for those who fill those needs. Unsurprisingly, we're seeing this very same shift occurring in the delivery system when the incentives change. For example, we're currently witnessing some of Regi Herzlinger's "focused factories" spring up in the US around joint replacements. Surgeons have realized that their current wallet share of a joint replacement episode is about 10%, so why not go for more, and in doing so offer the patient a comprehensive, wing-to-wing, efficient and effective solution? And they're doing so by accepting performance risk in the form of bundled payments. Well-designed incentives are driving an improved function, which is leading to a reshaped delivery system. That's the way it works in all sectors of the economy.

What this means to you – Recently, Farzad Mostashari, the country's National Coordinator for HIT made the same point: without reformed incentives, the adoption and use of HIT will never reach its potential. Similarly, the leaders of the value-based insurance design movement are showing that patient-focused incentives, tailored to specific areas of care, are needed for patients to actively engage in more proactive care management. And we're pleased to announce that Dr. Mark Fendrick, one of those leaders, has accepted to serve on HCI3's Board. When we look around at today's big players in healthcare, it's difficult not to see a bunch of Kodaks, Blockbusters and Circuit Cities – organizations that are doomed for failure but refuse to acknowledge it. So the next time you're drawn into a conversation about the latest and greatest ACO or PCMH or Care Coordinator or Navigator or any of the other "forms" that are magically supposed to improve outcomes, ask about the incentives and the specific functions they're supposed to drive, and the evidence about the linkage between both (in other words does the person selling the form actually have any evidence that the incentives are going to lead to the desired functions and outcomes). And until you get a satisfactory answer, stay on the incentives, because like it or not it drives the rest.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org