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Guidance for Structuring Team-Based Incentives in Healthcare
Daniel M. Blumenthal, MD, MBA; Zirui Song, PhD; Anupam B. Jena, MD, PhD; and Timothy G. Ferris, MD, MPH

Guidance for Structuring Team-Based Incentives in Healthcare

Daniel M. Blumenthal, MD, MBA; Zirui Song, PhD; Anupam B. Jena, MD, PhD; and Timothy G. Ferris, MD, MPH
Team-based performance incentives may improve healthcare team performance, but provider organizations face a number of structural, technical, and cultural barriers to adopting them.
Given this guidance, what are our options for structuring incentives for individuals and groups that will optimize patient health? Answering this question requires an understanding of the types of measured performance indicators available for incenting group and individual performance. Useful performance measures possess some common features, which are outlined in the National Quality Forum measure selection criteria, and include importance, validity, reliability, and feasibility.41 These indicators should be easy to understand and applied in a fair and objective manner. Furthermore, employees need to understand why part of their compensation is tied to the indicator. Additionally, employees must feel that they have control over their measured performance and can improve it if necessary.23,28,42 Good performance indicators for teams reflect the work of all, or at least a majority of, the team’s members, and should not be linked to the actions of only a few team members. Comprehensive sets of team performance indicators should include measures of teamwork quality, and customer or patient satisfaction.1,23,28

Applying these lessons to the vignette helps illustrate how measures can be used with incentives. Appropriate targets for incenting Mrs Smith’s care team include average A1C levels, blood pressure, and LDL levels for all diabetic patients. These commonly used measures are impacted by the work of the PCP, nutritionist, NP, and specialists who reinforce medication compliance, and nutrition, exercise, and weight loss goals. In contrast, hospital admission rates for all patients or certain subsets, another common quality measure, are more difficult for individual team members to see as being under their control, and might therefore be a less desirable target for team incentives. Other measures—including rates of pneumonia vaccination, yearly dilated eye exams, and screening for microalbuminuria—could be built into a composite measure which all team members contribute to achieving. Team-based performance incentives might also motivate Mrs Smith’s providers to address specialtyspecific and overall goals of care, including medication compliance, adherence to dietary recommendations, and regular exercise.26,27 Provider organizations could also tailor incentives toward less-traditional quality measures, including appropriate utilization of CT scans and trans-thoracic echocardiograms, and rates of discharge summary completion within 24 hours of discharge.

Individual-level and organization-level performance incentives also have a role in healthcare systems with teambased healthcare delivery models. Individual level incentives are particularly effective for encouraging individual skill building, and organization-level incentives promote attentionto organizationwide priorities. However, neither of these kinds of incentives directly encourages teamwork. Holding some, but not all, members of a team financially responsible for the group’s outcomes is problematic because the excluded individuals may be less motivated to improve team outcomes, and may resent their colleagues’ eligibility for additional compensation. For example, the NP in our vignette could feel frustrated if the PCP received incentive payments for meeting performance targets that the NP contributed to achieving. Conversely, team members who are eligible for performance rewards will feel frustrated if they are held accountable for team outcomes that they cannot control, a common problem with organization-level performance incentives.23,33

Implications for Health Systems Design and Management

Implementing team-based incentives alone without systematic efforts to redesign the work of care delivery to be highly interdependent is unlikely to result in transformational performance improvement. Indeed, in organizations dominated by individual provider care delivery models, instituting team-based rewards alone is unlikely to create highly functioning teams. Instead, team-based incentives are likely to lead to “free riding,” and other problems noted above, undermining the goals of using teams to deliver care.23 Providers will need to see that cooperation will improve work performance.

Conversely, team-based care delivery models should not rely solely upon team-based rewards. Rewards systems in teambased organizations combine significant team-based payments with rewards for individual and organizational performance.23 Ideally, team-based organizations will also have incentives and performance measurement systems that can account for the outcomes of multi-team collaborations.24

Barriers to Implementing Team-Based Incentives

Healthcare delivery organizations face 3 types of barriers to implementing team-based performance and rewards systems: structural, cultural, and technical. The most important barrier to effective team-based reward systems in healthcare is the complexity of healthcare itself. The vast majority of healthcare is not delivered in focused factories where processes are linear and team members are relatively easily tracked.43 The inherent complexity of human biology and illness results in the frequent requirement to care for individual patients along non-linear care paths, dramatically increasing the degree of difficulty for building effective team-based incentives. Thus, certain teambased aspects of a clinician’s work will likely always remain outside of a specific incentive system. In addition, team-based performance incentives will be easiest to implement, and most effective, when team composition is stable over time.23 However, some care teams have relatively rapid turnover, particularly in settings where healthcare professionals are being trained. Moreover, physicians and non-physicians often have different limitations on how financial incentives are managed in their compensation plans (eg, unionized nurses). Furthermore, equitably measuring and incenting inter-team collaborations— which are common in clinical settings—can be challenging.

With regard to cultural barriers, clinicians often resist changes in practice patterns and reimbursement systems. Objections typically include concerns about decreasing compensation, loss of control over work processes, and requirements for additional training. Clinicians’ lack of familiarity and training with teamwork may also contribute to their resistance.29,44 Generating broad support for team-based performance incentives may be particularly difficult in organizations that have traditionally valued individual work performance.23

Finally, effective incentive systems require reliable and valid performance measurement tools. Hospitals and clinics will need performance evaluation systems that equitably assess team performance without adding onerous administrative processes. While performance measurement and consistent performance feedback are essential for performance-based compensation and improvement, instituting these systems appears to be more challenging in healthcare than in other industries due to the high number of different outcomes that must be tracked in order to thoroughly monitor healthcare service quality.23,27,30

Overcoming Barriers to Implementing Team-Based Incentives

Provider organizations can take a number of steps to address the structural, cultural, and technical barriers to implementing team-based incentives outlined above. Structural barriers can be mitigated by reducing team member turnover and ensuring that clinical work spaces are appropriately designed for teams. For example, hospitalists could be assigned to work on specific hospital floors and training programs could assign residents to a team that rotates together from service to service. Increased geographic admitting—in which 1 clinician or team admits all patients to 1 care unit—would improve team consistency by ensuring that physicians and non-physician staff work together over time. Importantly, a strong teamwork culture has been associated with higher nurse retention rates.45,46 As for clinical work space, teamwork is facilitated by having space that allows the team to convene, and this may require some redesign and investment.

To address cultural barriers to team-based incentives, leaders of provider organizations should engage physicians and non-physician clinicians, in efforts to design team performance incentives and incorporate them into existing payment plans. Engaging clinicians in system redesign has been associated with increased provider support for redesign efforts.47-49 In addition, clinicians are more likely to support initiatives that clearly benefit their patients. Thus, leadership should review the evidence that teamwork is associated with higher quality care when engaging with clinicians. Ongoing education for clinicians about all aspects of the incentive program— including team training and performance assessment and feedback—is important for generating and maintaining clinician buy-in. As with any performance incentive program, the organization needs to maintain a process by which employees’ concerns can be addressed.

To mitigate technical barriers, provider organizations will likely need access to robust information technology (IT) infrastructures. Modern EHRs, order entry programs, and complementary data extraction and analysis systems will help monitor and assess clinical work processes, including the work of clinical teams. EHR and administrative data can be used to construct performance measures, identify incentive targets, study the success of existing incentives, and monitor for inconsistencies in how outcomes are measured and rewarded. IT can also be used for delivering team training and performance assessment and feedback to clinical teams.


While much remains to be learned about incentivizing performance in healthcare, the organizational behavior literature suggests that incentives systems should be used both to promote desirable work outcomes and to support and encourage particular work designs—including effective teamwork. Such an approach may yield valuable insights into how to better leverage teamwork to create true shared accountability for healthcare quality and spending.

Author Affiliations: From Massachusetts General Hospital (DMB, ABJ, TF), Department of Health Care Policy (ZS, ABJ), Harvard Medical School, Boston, MA; National Bureau of Economic Research (ZS), Cambridge, MA.

Funding Source: None.

Author Disclosures: The authors (DMB, ZS, ABJ, TGF) report no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design (DMB, ZS, ABJ, TGF); acquisition of data (DMB); analysis and interpretation of data (ZS, ABJ); drafting of the manuscript (DMB, TGF); and critical revision of the manuscript for important intellectual content (DMB, ZS, ABJ, TGF).

Address correspondence to: Daniel M. Blumenthal, MD, MBA, Massachusetts General Hospital, Department of Internal Medicine, Wang Ambulatory Care Center, 5th Fl, Ste 535, 15 Parkman St, Boston, MA 02114. E-mail:
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