Paying doctors with performance-based compensation improves the level of patient care, finds new research from the University of Cologne.

The study, conducted by Professor Daniel Wiesen and colleagues, investigated the effect of performance-based incentives on doctors in primary care.

Using a stylized experiment, they found that performance-based compensation improved the quality of treatment, which in turn led to better health outcomes. The size of this effect differs with patients’ severity of the illness.

The results reveal a strong association between incentives through payment arrangements in the experiment and real-world practice profits.

The study also emphasises the importance of the personal attitudes and motivations of primary care physicians: doctors who want to achieve the best result for their patients provide more patient-orientated services than those who are also driven by their annual profit.

“A plausible interpretation of this finding is that physicians with a more optimistic view on helpfulness and selflessness provide higher-quality treatment, the same goes for physicians with their patients’ health as the primary goal, regardless of any financial incentives,” says Professor Wiesen.

The study was published in the Journal of Health Economics.