Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes

In this paper we provide evidence on the effect of incentives on provider productivity and on health outcomes in Rwanda, where we nested a prospective field experiment into the national rollout of a P4P incentive scheme. P4P affects health care provision in two ways; first, through incentives for providers to expend more effort in specific activities and second through an increase in the amount of available financial resources. In order to identify the incentive effect separately from the increase in resources, the traditional input-based budgets of the comparison group were increased by the average amount of incentive payments to treatment facilities. As a result, while treatment and comparison facilities had the same budget, a portion of the treatment facilities’ budgets was determined based on their performance whereas the comparison facilities’ resources were not. This is important because if P4P achieves its results just from increased financial resources, then the same results could be achieved from a simple increase in budget without incurring the administrative costs associated with implementing the incentive scheme.