Effect of Performance-Related Pay of Hospital Doctors on Hospital Behaviour: A Case Study From Shandong, China

With the recognition that public hospitals are often productively inefficient, reforms have taken place worldwide to increase their administrative autonomy and financial responsibility. Reforms in China have been some of the most radical: the government budget for public hospitals was fixed, and hospitals had to rely on charges to fill their financing gap. Accompanying these changes was the widespread introduction of performance-related pay for hospital doctors, termed the “bonus” system. While the policy objective was to improve productivity and cost recovery, it is likely that the incentive to increase the quantity of care provided would operate regardless of whether the care was medically necessary. The primary concerns of this study were to assess the effects of the bonus system on hospital revenue, cost recovery and productivity, and to explore whether various forms of bonus pay were associated with the provision of unnecessary care. [from abstract]