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Pay Me or Charge Me? How Best to Engage Me?

April 24, 2015

A couple of years ago, my clinical practice (Dermatology Associates at Massachusetts General Hospital) began sending patients a bill when they did not show up for an appointment.  Dentists do this with some frequency, but it’s unusual for a physician practice to do it.  Our reasoning was that we have many folks who insist they need to be seen right away and, despite a large, busy practice (we see more than 1,000 patients each week), we still have a long wait time for appointments.  Our practice used to overbook slightly (like the airlines) and count on a few no-shows.  Every now and then, everyone would show up for their scheduled appointments and we’d have to deal with understandable patient frustration at the long wait times in the office.

Since implementing the ‘bill for no-show’ policy, our no-show rate has decreased.  This is an illustration of the well-studied psychological concept that if you give something away it has no value.  People, it seems, were routinely making appointments with dermatologists all over town and taking the one where they got in quickest, not bothering to cancel the rest. Since we began informing patients of the consequence of not showing up, we’ve had more engagement around keeping appointments versus canceling.

In contrast, there is a famous project from the city of Ashville, NC, where a large, self-insured employer made history by implementing a system that waived co-pays for medications for certain chronic diseases. The poster child for success was type II diabetes.  So, it seems we have a case here of giving something for free and improving engagement.

Finally there are a few studies (among them research done at Partners Connected Health) showing that compensating patients with a small financial incentive can improve adherence.

All this makes my head spin.  The conventional wisdom seems to vary from asking people to pay to keep them engaged (‘skin in the game’), to giving something away to remove a barrier, to paying people for achieving a behavioral goal…. Is one of these based on better evidence than the rest?

Calendar: Medical Exam Reminder/ Doctor Appointment

Maybe there are other variables.  In the first example, the patient was motivated enough to call an office to make an appointment.  Presumably there was some anxiety or physical symptom of concern.  In this case, the patient already has skin in the game in that she wants to get a question answered or a problem solved.  This is important, especially as we deal with chronic illness. So much of early stage chronic illness is asymptomatic. In fact, the habits that lead to chronic illness (smoking, excess calorie intake, etc.) all have reward systems of their own.   When you are already motivated to achieve an outcome, we can probably expect that you would be willing to make a financial commitment as well (copay, missed appointment fee, etc.).

cHealth Blog_Kvedar_copay

The Asheville project was multifaceted and the biggest part of that intervention featured high-touch pharmacist involvement with patients. Maybe we could say that, in the case where you have a recurring, engaging interaction with a provider, the idea of waiving co-pays makes sense.  Our research shows that interaction with a care provider is a powerful stimulus to improve adherence. In that context, it may make sense to give medication away because the pharmacist is ever-present to remind the patient to take it.   In this case, the waived co-pay may indeed be perceived as a gift and a motivator rather than a communication that the medication has no value.

cHealth Blog_Kvedar_reward

The last example is most vexing to me.  I believe the preponderance of behavioral research shows that financial incentives are weak long-term motivators.  They get your attention early on, but over time they become expected and if taken away can have a significant negative ‘boomerang’ effect.

All of these are important to think through.  As health care providers take on risk for population health, we’re actively considering these matters.

One of the earliest forms of physician payments for achieving desired financial or clinical outcomes is ‘pay for performance.’  In this setting, the physician receives a bonus payment if you reach certain quality or efficiency targets.  Some of my more savvy colleagues have asked, wryly, over the years, “Why don’t we have pay for performance for our patients?”  What they are pointing out, of course, is the irony of being held accountable for health outcomes — many lifestyle related — for a population of individuals where you have no control over their lifestyle.

As we move in the direction of taking more risk, we are seriously considering how to incentivize patients to adhere to their care plans. This is a topic area where I have some instincts, but confess to not having the evidence to make a case for any of these tactics:

Charge patients to insure skin in the game?

Give them medicine and services for free?

Pay them to be adherent?

I’ll bet many of you know the obvious answer. Let us know.

13 Comments leave one →
  1. April 24, 2015 10:16 am

    Reblogged this on ffemtrock and commented:
    How to modify the behavior of patients? Should there be more carrots or more sticks?

  2. J Bollen, MD permalink
    April 24, 2015 10:19 am

    This doc is clearly from another generation to suggest that people who are ill don’t have any skin in the game? The number one reason for bankruptcy in the US are medical bills and more than 50% of patients pay for the entire cost of their care every year (they don’t even reach their deductible)

    When people are inside a silo or an old fashioned way of thinking it can be hard to to recognize that patients are only part of the health care system because they are ill or sick or injured – everyone else is PAID to be there so in fact they literally have their own skin in the game. Remember the average compensation for a dermatologist is $283,000 a year vs the average person $53,000 and the compensation for a patient is $0.

    The reason we have to resort to blunt tools like pay for performance is because the doctors that drive the vast majority of care in the US (which costs up to 4x as much as in places like Finland) have the 38th worst outcomes (except for trauma care) . In any other industry they would not simply be held accountable or fined but fired.

    It is also interesting that the language used is also out-dated – “adherence to the plan” really is code for “doing what the doctor wants you to do”.. without any consideration for the preferences, values of economic condition of the patient.

    Finally patients and employers have been “Paying” for doctors for generations and yet we also don’t have any ability to influence their behavior and they fail to follow the standard of care about 50% of the time.. Things as simple as giving a patient an anti-biotic for a cold are commonplace as are failing to provide basic care for diabetics.

    So how do we not simply incentivize (transactional) everyone on the care team (including patients) to co-develop high quality, cost effective, patient centered healthcare culture (process and culture)?

    • April 24, 2015 4:42 pm

      Thanks for your perspective. Your question about developing “high quality, cost effective, patient centered healthcare” certainly gets to the crux of the problem — and is exactly what we are trying to solve via connected health solutions. Every patient is different and, with technology, we have the ability to personalize messaging, interactions and experiences to best meet their individual needs and preferences. Putting the patient at the center of the care is the ultimate goal, and we believe requires sustained patient engagement, in order to succeed. Technology-enabled care strategies can effectively educate and motivate individuals to better self-manage their health and live active, healthy lifestyles

  3. April 24, 2015 12:40 pm

    We own a multi disciplined pediatric speech/occupational/physical therapy practice ( where we were also frustrated with no shows, especially when we can’t stack the deck but must have hard 30 min or 60 min sessions. We implemented the no-show penalty and it has reduced the losses. However, our biggest issue was with payors not paying for more than 2 therapy visits per month – covering all three! As a highly specialize medical needs practice, there is no way to rehab a patient in two or even one modality with only two visits a month. So, up until 6 years ago we were giving away free visits to those who could not offered, or their benefits did not cover, the extra needed time. As you can imagine, we were going broke doing that! So, we created a foundation to raise money ( to pay for therapy for any children in need seeing any therapist in town who would agree to a standard fee schedule (just above Medicaid). Talk about patient engagement, not only did the no-show fees work, but the opportunity for patients who comply with therapy orders to get free care – compliance shot through the roof. The financial incentives are all fine and good, but we also find that more automated communications reminding the parents of scheduled appointments and SMS notifications to also carry over therapy in the home with their own child at specific times in between appointments accelerated their rehad and discharge from therapy. If you want to learn more about that, check out DrJ

  4. April 24, 2015 4:44 pm

    very interesting perspective.

  5. Satish Gattadahalli permalink
    April 28, 2015 2:42 pm

    Dr. Kvedar. Are there credible studies — behavioral economics, etc– that draws strong correlation between financial incentives/disincentives and patient engagement toward a positive outcome? How about provider productivity and patient engagement? I think connected health/virtual care interventions can drive more use cases for health economists. Many thanks for your thought leadership and sharing your experiences.

    • April 28, 2015 7:40 pm

      Great questions. As I said, this is an area where I don’t know the literature well. I think it is a confusing space.

  6. April 29, 2015 7:42 pm

    Great article and questions.

    My colleagues and I have been involved in testing a unique incentive method for over 10 years, so we are very familiar with the subject and have some answers to your questions. We are currently involved in the largest “three-part aim” experiment of its kind ever attempted in the U.S. So what we don’t already know, we hope to learn, soon.

    Our team created a web-based incentive system that financially rewards both the doctor and the patient when they hold each other accountable for adhering to proven performance standards. For providers, performance standards generally involve declaring or demonstrating adherence to evidence-based medicine, or providing a reason for non-adherence. For patients, the performance standards involve declaring or demonstrating adherence to recommended treatments and healthy behaviors, or providing a reason for non-adherence.

    The key to the effectiveness of the system is that the doctor and patient earn their financial rewards if and only if they individually and separately agree to allow the other party to confirm or acknowledge his/her adherence or reason for non-adherence. This creates a powerful interpersonal check and balance that goes well beyond financial inducements alone. We call this process “mutual accountability.”

    Because of the known clinical and economical benefit of patient health literacy, we have found that the most effective performance standard is patient education by means of “information therapy.”

    In effect, doctors prescribe information therapy through our website with each office visit involving a covered patient, for which doctors earn a meaningful increase in compensation.

    In turn, patients receive an information therapy prescription letter at home. The letter directs patients to our website, where they can earn a refund on their office visit copayment by: 1) reading the prescribed content; 2) taking an open-book test to document their understanding; 3) declaring their adherence (or providing a reason for non-adherence) to what they’ve read; 4) agreeing to allow their doctor to see their knowledge score and declaration of adherence; and 5) rating their doctor’s performance against what they’ve read.

    What we have learned is that, by using relative small financial incentives to invoke the psychosocial motivators inherent to the doctor-patient relationship and to promote health literacy, the program has been able to demonstrate an increase in medication adherence and a decrease in hospitalizations, among other outcomes. As a result, independent researchers found that the program generated a sizable return on investment in multiple, multi-year trials.

    The State of Oklahoma is conducting the large-scale pilot project, previously mentioned. It involves a match-cohort study. The pilot is just now through its first year of a three-year trial, and all the process markers are right on target.

    So as I said earlier, we hope to have even more answers to your questions, soon.

    To learn more, I can be reached at


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