Saturday, August 4, 2012

Perverse incentives - Don't shoot the messenger!

I don't follow international badminton as closely as perhaps I should, but maybe we've all been a little guilty of that.  However, the recent disqualifications of Olympic players got my attention.  It seems that some top badminton teams were blatantly trying to lose their matches.

Puzzling, huh?  It is until you read about the tournament system and strategy around match play.  It seems that the top-ranked teams don't want to face each other until the finals, and so they conspire to throw preliminary games so that they are matched with less expert opponents.  This strategy improves their chances to make the finals, and end up with a medal of some sort.  When you think of it like that, it makes sense, except that it was so obvious to spectators and officials that the teams were flubbing games, that they were disqualified for not living up to the competitive Olympic spirit.

I wonder what the athletes were told before they left for London: Your country expects you to give your best in ever match, or Your country expects you to bring home a gold medal?  Even if it wasn't explicitly voiced, I suspect the second is strongly implied.

Commentators pointed out that the format of the tournament - round-robin - encouraged this type of "cheating" as athletes knew that this would be their best chance to win a medal.  So who is to blame?  Is it disingenuous of Olympic officials to expect athletes to give their all in every match when it could deny them a chance at a medal?  Why do the Olympics only recognize the three top teams with medals if grit and determination are more important?  This is a classic perverse incentive.

It made me think of the current fee-for-service remuneration system for physicians.  Provincial health insurance plans "reward" us for providing more visits and procedures, yet at the same time, we're told we need to provide better quality of care (which sometimes means doing fewer interventions...).  At present, our monthly billings are the only scorecard we have, yet health care commentators ask us to "give 110%" to patient-centred care.

If physicians can legally maximize their billings without compromising patient care, then it's only natural that we will do so.  (Note that there is a difference between passively "not compromising"- i.e. status quo - and actively optimizing care.  The latter is preferred, but needs an incentive...)  In the same way that the Olympic officials should consider the influence of tournament structure on player behaviour, officials responsible for maintaining the current physician incentive structure should do the same.

Leaving a dysfunctional structure in place is not a passive choice.  It is an active decision to avoid taking the steps to make a positive change.

Don't shoot the messenger!


  1. This is a story worth retelling, and I hope I add to your post by highlighting some of the perverse financial incentives at every level from the physician to the voter.

    1) Physicians are paid fee-for-service, and fee relativities are very slow to adjust since they maximize individual profits for the status quo. This cannot be avoided; after the fees adjust, then practice adjusts resulting in the 'new' status quo.
    The average indiviual physician has the incentive to leave the fees as they are.

    2) Health care payments are effectively finanical silos. The Ministry of Health portfolio responsible for compensating physicians typically excludes other medical services - and vice versa. In other words, if the physician recommends a course of drug treatment with daily visits by a home care nurse instead of a surgical intervention this a) reduces the costs for those patients for physician and hospital expenditures, but b) increases costs for pharamaceuticals and community nursing.
    In an environment with increased scrutiny of health expenditures, the "officials" facing the increased cost will prevent the change in practice due to their fiscal constraints and as increased capacity in the health system is likely to be filled with currently waiting patients, even the areas that may see the patient cost benefit are unlikely to push for the change if the overall expenditures do not decrease.
    The average Ministry / Health Authority executive has the incentive to avoid practice shifts that incur costs unless the savings are immediate and measurable.

    3) The Ministry of Health is a fiscal silo vis-a-vis other Ministries. To suggest that the Ministry of Education reinstate physical education as a mandatory class for every school student is an expensive undertaking beyond the responsibility of the Ministry of Health.
    Like their staff, the average Minister has the incentive to avoid practice shifts that incur costs.

    4) Many (most?) of the provincial governments have the fiscal constraint of Balanced Annual Budgets. This means that any increased cost now (regardless of savings tomorrow) is a barrier. To run a defecit is decried by the opposition and blasted in the media. Every four years the politicians need to publicly defend their actions.
    The average politician has the incentive to avoid increased costs today if the savings will not be realized in less than four years.

    All that said, properly identifying the problem is half-way to identifying the solution!

  2. Kishore, you are once again striking gold. Paying for volume, not quality, violates one of Deming's 14 principles of management. At a recent conference I attended the comment was that removing perverse incentives is the first requirement for a lean transformation. Physician engagement and leadership is inextricably linked to this problem. It is cause for hope to know we are focusing on continuous improvement as a system. This "high effort/high impact" change needs to happen.

    Joy Dobson