Purpose- To develop an analytic framework to evaluate the use of financial incentives to improve clinical performance within a budget-constrained health care setting and to apply the framework to a case-study of family doctors (general practitioners (GPs)) in the UK.

Background- Introduced in 2004 as part of a new contract for GPs, the Quality and Outcomes Framework (QOF) seeks to secure higher quality primary care. The QOF operates through a system of financial incentives for GPs meeting specific performance indicators, of which there are approximately 150.

Methods- To assess the cost-effectiveness of incentive payments relating to 18 clinical indicators with a direct therapeutic effect, a review of the literature on the indicators was conducted. Where the net monetary benefit (NMB) of the indicator could be estimated, it was possible to quantify the maximum gain in NMB associated with increasing utilisation of the intervention (the value of perfect implementation). This was, in turn, compared with the incentives paid for the indicator to see whether the payments were a cost-effective use of resources. The framework also considered a method for prioritising new clinical indicators based on their value of perfect implementation and the constraints imposed on the incentive system (e.g. total budget or a finite number of indicators).

Results- The analysis shows that there are five key determinants of the cost-effectiveness of such payments: (i) the size of the incentive payment; (ii) the NMB of the medical service being incentivised; (iii) the rate of implementation without incentive payments; (iv) the effect the payment has on the rate of implementation; and (v) how the incentive payment is used by the GP. These determinants allow the setting of conditions whereby payments are and are not cost-effective. From the 18 indicators considered, cost-effectiveness estimates could be generated from the literature for 16 of them. Of these 16, the majority of the indicators had a sufficient NMB such that only in extreme situations would the payments not be cost-effective.

Conclusions- The framework developed allows the evaluation of incentive payments for performance indicators in terms of cost-effectiveness. It also provides a system in which possible new indicators can be ranked and prioritised for inclusion within a system of incentive payments.