The Effects of Monetary Incentives on Physicians’ Effort and Patient Satisfaction: Understanding the Links between Monetary Incentives and Physicians’ Effort

Abstract

How monetary incentives promote physicians’ job performance in terms of patient satisfaction has been widely discussed. The incentive dilemma debate concerns whether monetary incentives reduce physicians’ intrinsic motivation at work and even lead to moral hazard. This study investigated monetary incentive policies in a hospital and analyzed how monetary incentives affect performance and behavior. By means of income composition grouping, a treatment group and control group were established, and the identification of the effect on performance was implemented using the difference-in-difference (DiD) method. The mechanism analysis was implemented using the event-study approach (ESA) and path analysis. The study found that (1) monetary incentives promote physicians to improve patient satisfaction, and the average effect is a two-point increment (p < 0.0001); (2) the effects are short-term; and (3) in contrast to many criticisms, the improvement in patient satisfaction was mainly from the effort in working during the monetary incentive policy. The results of this study contribute empirical evidence regarding the effects of monetary incentives and their mechanism and can help hospital management formulate incentive plans.