Poorly Conceived Incentives in Health Care: The AM Discharge

There's no shortage of examples of well-meaning, but ultimately failing, incentives in health care, but here is a recent one that I've come across as an intern. In the community hospital we all rotate through, interns are paid $5 dollars if they manage to discharge 2 patients by 10 AM. Early discharges are valued by hospitals because they help with turnover and flow: overcrowding in the emergency room is kept to a minimum if hospital beds are available in the morning. But discharges take time: as an intern, we have to round on all of our inpatients in the morning, any new patients we inherit from the overnight team, and write a bunch of orders and notes. Discharges require thought, often irritating paperwork and emails, and all of that crowds out time for these other tasks. Furthermore, discharging people only means that you'll get more new patients later. For most of us, that's usually exciting, but its easy to see how this may seem like a penalty for keeping the hospital's best interests in mind.

In most places I've worked, there are no incentives for residents to get people out by noon, other than to avoid having to be gently reminded (over and over) by case managers and nurses to get the work done. Obviously, since the (opportunity) costs far outweigh the benefits, I'm sure most interns and residents are not in real rush to discharge people when they could being doing other things for their patients (or themselves).

Enter the hospital where I am now. They've ostensibly addressed this incentive compatibility problem by offering a small financial incentive for a certain number of pre-10 AM discharges. However, I think their $5 scheme is doomed to fail for two reasons. First, $5 dollars is not much money and most of us value our time far more than that. Second, and likely worse, such small incentives may actually make us less likely to move people out the door. Indeed, a number of experimental studies in behavioral economics and psychology have shown that small monetary rewards may reduce effort, either by reminding us that we get paid less than our peers in other fields or by demeaning us (or the task) with the size of the offer. Several of the interns I've spoken to have interpreted the incentive scheme in the latter light.

So what is the right kind of incentive? There are several, likely more effective, options. One is to increase the cash value of the incentive: perhaps the intern or resident at the end of the month (or year, to reduce sampling error as far as the medical problems and sickness of the patient) gets $100 or more for getting the most people out by noon. Perhaps even better is to take the monetary aspect out of it, altogether. As physicians, many of us value the altruism that goes with the field. Why not make the hospital brass-resident relationship center around that aspect and reward the intern/resident who discharges most effectively with some kind of public, visible and worthy commendation that he/she is a good doctor (at least one valued by the hospital for his/her attention to patient care and the realities of health care delivery on a larger scale)?

Can Tax Breaks Help Decrease Organ Shortages?

Despite advances in organ procurement, immune suppression (to prevent the body from rejecting a transplant), and surgical techniques, organ shortages and wait list numbers continue to grow in the United States. Calls for instituting organ markets (including ones from prominent economists) notwithstanding, ethical concerns have made outright payments for organs a non-starter policy in the American context. However, policymakers have recognized that those who wish to donate organs, particularly living donors, may face enormous costs in the form of lost wages, health care costs and travel and lodging fees. As such, efforts have been made to reduce these financial barriers to donation: in the last decade, 16 states have now passed laws to provide tax deductions to living organ donors, with many other considering similar legislation.

Have these policies been effective in increasing donation rates? In a new paper in the American Journal of Transplantation, Erika Martin, Anitha Vijayan, Jason Wellen and I explore this question using data on living organ donations and transplants for each state between 2000-2010. Our research design basically compares the change in donation rates before and after the enactment of a tax policy in states that passed these laws against the change in same time period in those states that did not (the differences-in-differences design). We found no evidence that these laws were effective in appreciably closing the organ shortage. At most, they may have led to 5% increases in donation rates (the upper bound of our confidence intervals) - not too bad, but not the panacea.

Why is this the case? First off, tax deductions don't put that much money back in your pocket. For an upper middle class family of four, the value of a deduction amounts to $500-$900. Nothing to sneer at, but still below the estimated (opportunity) cost of making a donation. We argue that tax credits (which have a higher cash value) or grants may work better. Second, in doing the research we ended up talking to organ donation activists in many states, many of whom had no idea these policies were in place! It's possible that a lack of awareness led to our null finding, as well. Finally, while we don't elaborate on this in the paper, our Figure 1 shows that states that passed these laws experienced increasing donation rates relative to the other set of states prior to the passage of the laws. So it's possible that states that were progressive enough to pass tax deductions were already doing other things to bump up donation rates.

Finally, while tax deductions may not lead to new donors, they may be helping people who would donate anyway. For example, a living donor who is compensated for his/her private costs because of the tax policy, perhaps as a result in less financial distress, certainly would benefit from the policy. We don't really have the data to examine this "intensive margin." On this point, I wouldn't yet write tax policies off.