Blog Article

Who thought the Affordable Care Act would impact incentive designs too?

Posted by Michael Vaccaro

Michael Vaccaro

Well, it certainly seems so. Perhaps it is one of the unintentional ripples from the Affordable Care Act, but it seems to be a real one.

The intent of the Act, of course, is to expand medical coverage to a greater percentage of the US population, and to add emphasis to wellness, prevention of individual health issues arising, and smart use of medical interventions. Something this substantial also creates a larger number of rules to learn and assimilate — within an industry that already had a lot of complexity.

This means that industry players need their work teams to be doing new things to be successful going forward – and incentives are part of the means for encouraging success.
So this year, our incentive design team has worked with many different healthcare clients around the Act’s impact, from a variety of angles:

  • Healthcare providers want to make sure patient-oriented outcomes are motivated.
  • Insurers are taking on new roles in guiding people and businesses through their new alternatives and exchanges — and need to reward those new roles.
  • Pharmaceutical companies are changing the way they pay their commercial organizations to reach out to doctors, hospitals, and administrators. Read more here.
  • New forms of retailer and health clinic are thinking about establishing and rewarding their ongoing relationships with patients, instead of being “transactional”.
  • Healthcare startups want to motivate their teams to build successful and sustainable new businesses and merging companies are thinking about how best to standardize their incentive approach.

And so on.

We won’t guess what the ultimate shape of the new healthcare world will turn out to be. However – even though these different sorts of companies will touch that new world in different ways – we believe there are some common incentive design principles that all can build from in the next 2-3 years:

  1. Ask yourself what, specifically, you want your team to do? What behaviors and outcomes can they control? Build rewards around that. (It’s actually harder than you think).
  2. Be more flexible than prescriptive in the performance targets you set – for now, at least. For example, the link between goals and payouts shouldn’t be too precise, because opportunities may not turn out to be where you initially think.
  3. Consider some “common fate” measures. Our surveys show that use of team or companywide measures within incentive plans has risen in prevalence; and this is one way to both spread the risk of the uncertainties in any one part of the marketplace, and to also help people collaborate to solve problems.
  4. Consider a “rotating” element within the incentive plan, for which the short-term performance objective can change from time to time and adapt to circumstances.
  5. Simpler is better, especially in chaotic times.

It’s possible that these principles may lead to incentive plans that look a bit different than what everyone has been used to until now — but they will be well-placed as the healthcare market evolves.

 

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