I have a very different approach to compensation. I think that the key is to change compensation schemes frequently. The reason is that any scheme can be gamed, and the longer you wait to change any given scheme, the more effectively the participants will have gamed it. That is one reason I think that “Pay for Performance,” the newest miracle cure for health care costs, will fail miserably. The doctors will be able to run circles around the bureaucrats. In the U.K., they already have–all of a sudden, 91 percent of doctors were receiving bonuses for being above average.
I can’t verify this ‘91%’ figure. Using pre-P4P measure as the measuring stick will lead to many physicians reaching the ‘above average’ mark in the post P4P mark. Much of this increase is due to better record keeping; some of it is due to better care.