There is wide consensus that the ways in which providers are reimbursed by third parties will affect their behaviour and, hence, the efficient use of limited resources and the performance of health systems. However, there seems to be little evidence on how payment to hospital-based doctors affects hospital performance. This paper reports a case study conducted in China on the effects of different types of bonus payment to doctors, with a focus on how bonus payment might have affected hospital revenue growth. This has been an increasingly important goal of public hospitals as they have gained increased autonomy. A set of longitudinal quasi-experimental data, and a set of cross-sectional data, both derived from 108 public hospitals, were used for the analysis. It was found that, when a bonus system was introduced, and when the bonus model switched from one with a weaker incentive to provide services to one with a stronger incentive, there was a consistent sudden increase in the rate of growth of hospital revenue. Bonus type was also associated with the size of hospital service revenue. The results highlight the potential risks of linking remuneration too closely with revenue generation, and the need to ensure adequate attention to mechanisms of control and accountability when hospitals are given greater autonomy.
Applied Health Economics and Health Policy (2003) 2 (2) 91-98