Do Financial Incentives Trump Clinical Guidance? Hip Replacement Treatment in England and Scotland

This post provides an overview of Dr Irene Papanicolas and Professor Alistair McGuire’s OHE Lunchtime Seminar on the effect of financial incentives on hip replacement in England.

On 29th April 2015 the OHE welcomed LSE’s Dr Irene Papanicolas and Professor Alistair McGuire to present a lunchtime seminar on the impact of different payment policies on activity for hip replacement.

Dr Irene Papanicolas revealed up front that yes, financial incentives do appear to have trumped clinical guidance in the English NHS, at least in the case of hip replacement.

Dr Papanicolas went on to explain that since 2005 Scotland and England have followed different healthcare financing policies. Case based payment systems were introduced in England, but not in Scotland. This creates a natural experiment in which Scotland can be used as a control to test the effects of the introduction of case based payment in England.

Papanicolas and McGuire focused the discussion on uncemented and cemented hip prostheses. They noted that clinical guidance suggests that the two procedures have similar clinical outcomes and that there is no long term evidence to recommend one over the other. As the cost of the cemented prosthesis is cheaper on average, the cemented procedure is recommended.

However, in England, the uncemented procedure has a higher reimbursement value than the cemented procedure, even when accounting for average costs. This creates a financial incentive for hospitals to perform the uncemented procedure.

Using a difference in difference methodology, and controlling for hospital and patient characteristics, Papanicolas and McGuire showed that the English NHS experienced much higher relative uptake of uncemented hip replacements than Scotland after case based payments were introduced.

The authors concluded that choice of hip replacement procedure in English NHS hospitals was influenced by financial incentives, rather than by clinical guidance or evidence.

OHE would like to thank Dr Irene Papanicolas and Dr Alistair McGuire for their contribution to the OHE seminar programme.

View the slides for this presentation below.