The impact of financial incentives on quality of health care

Purchasers of health care could offer financial incentives to plans or prov iders in order to increase quality. Unfortunately, the current health care market, in which quality is rarely measured and there is no risk adjustment , actively discourages both plans and providers from maximizing quality, re sulting in a poor overall level of quality, both in fee-for-service arrange ments and health maintenance organizations. Health plans and providers will not focus on quality until mechanisms to correct for risk differences amon g enrollees can be developed. Although such risk adjustment will be the mos t important stimulus for quality, it should also be linked to improvements in information systems and agreement on a minimum benefits package, quality reporting standards, and financial solvency requirements.