Principles of behavioral economics are increasingly being applied in healthcare, especially as pay-for-value reimbursement models become more prominent. Behavioral economics could drive change where traditional marketing and economics are failing and help to drive down healthcare costs while improving outcomes.
Financial incentives alone are not enough to drive behavioral change
Employers frequently build financial incentives into workplace wellness programs to encourage healthy behavior. However, these programs infrequently take behavioral economics into account and their effectiveness is questionable. In a study published January in Health Affairs, researchers determined an incentive valued at $550 did not help employees in a workplace wellness program to reduce their weight.
The study, conducted by the University of Pennsylvania Center for Behavioral Economics and Health Incentives (CHIBE), included nearly 200 patients divided into four study groups. A control group received no incentive for hitting weight loss goals, a second group would receive a delayed health insurance premium adjustment beginning the following year, a third group would receive an immediate premium adjustment in their next paycheck, and a fourth group received incentives through a daily lottery unassociated with premiums.
After one year, there was no significant difference in average weight loss for participants in any of the groups. Overall weight loss was minimal across the board. These results don’t mean that incentive-based wellness programs can never work, according to Dr. David Asch, a CHIBE researcher and professor at the University of Pennsylvania.
Simply offering a financial incentive to encourage healthy behavior is hardly applying the principles of behavioral economics to healthcare, Dr. Asch told [email protected] “It becomes behavioral economics — and much more potent — when you use psychological tricks that require these little clever design elements.”
Using behavioral economics to design incentives can make them more effective
Behavioral economics suggests patients respond more strongly to incentives that are apparent immediately. In this study, incentives were somewhat hidden. For the delayed premium adjustment group, the financial benefit wouldn’t be apparent for months. Even for the immediate premium adjustment group, incentives were distributed with regular paychecks. To make a program like this more effective, researchers suggested sending a separate check to participants along with a progress report. The incentive is salient when it is distinct from regular compensation, according to researchers.
Another principle of behavioral economics suggests individuals react more strongly to incentives when they are framed as losses rather than gains. In a separate CHIBE study, published March 2016 by Annals of Internal Medicine, this theory held up.
In this study, participants in a workplace wellness program were tasked with walking 7,000 steps per day over a 26-week period. Participants were again divided into four study groups. A control group received no financial incentive, a lottery group that offered a possible prize averaging $1.40 each day the goal was achieved, a gain group that received $1.40 for every day the goal was reached, and a loss group in which participants were given $42 at the start of each month with the catch that they would have to return $1.40 for each day the goal was not reached.
Results to the study showed that the gain group and the lottery group performed similarly to the control group. Participants in these groups achieved the daily goal around 30% to 35% of the time. Participants in the loss group, on the other hand, achieved the daily goal 45% of the time.
For whatever reason, patients see losses as more potent than gains, Asch told [email protected]ton. “It’s consistent with theories of behavioral economics, but inconsistent with how a lot of employers or doctors think about the best way to take care of their patients.”
Behavioral economics is also being applied to influence provider behavior
Researchers are also looking at the ways behavioral economics can be applied to change provider behavior. Health systems are taking on more financial risk with the shift to value-based reimbursement models, but this hasn’t had much of an effect on provider behavior, according to a January article published by the Annals of Internal Medicine. Its authors envision several ways that behavioral economics could realistically be applied to influence provider behavior.
The principle of loss aversion applies to providers the same as it applies to patients. Authors of the Annals of Internal Medicine article point to the Massachusetts General Physicians Organization (MGPO) incentive program as an example. This quality improvement program issued advance incentive payments so that it would feel like a loss to not receive the payments in subsequent years. Although there were other components to the MGPO incentive program, an October 2013 article in Health Affairs asserted the application of loss aversion helped to drive the program’s eventual success.
People generally care about how they compare to their peers and providers are no different. For instance, Dean Clinic in Wisconsin found that providers were more likely to change their behavior when monthly performance reports identified physicians within a department compared to when they released anonymous rankings. Creating peer pressure helped to facilitate quality improvement, according to a December 2012 report from the Government Accountability Office.
If nothing else, ongoing research at the intersection of behavioral economics and healthcare show just how nuanced behavior can be. It also illuminates why it can be so difficult to encourage healthy behavior among patients and to implement quality improvement programs. Although behavioral economics won’t result in a quick fix for the healthcare system’s woes, it can be used to design programs that influence behaviors here and there. In the long run, that could make a big difference.
