Value of Combining Patient and Provider Incentives in Humanitarian Healthcare Service Programs

The below-par progress towards the Millennium Development Goals in many developing countries has been attributed to the low availability of good quality healthcare services and to the demand-side barriers to access. In this paper, we analyze an incentive design problem faced by a budget-constrained humanitarian organization managing a healthcare service program (e.g., maternal health or HIV services) with different emphasis on the two measures of quality – structural and process. Incentives offered to the healthcare provider (referred to as supply-side incentives) are aimed at improving the availability of good quality services and demand-side incentives are used to encourage patients to seek care. In many developing country health programs, incentive schemes tend to be purely supply-side focused or purely demand-side focused. However, our results suggest that by offering the right combination of incentives to the patients and the provider, program performance can be increased up to 12 times, on average, depending on the service offered. Even within the current practice of using one-sided incentives, there is significant scope for improvement by ensuring that there is better alignment between the incentive scheme and the service offered. In particular, pure supply-side incentive schemes perform better than pure demand-side incentive schemes in programs where there is a higher emphasis on structural quality. The opposite result holds true for programs that place a higher emphasis on process quality and in fact, pure demand-side incentive schemes are optimal when the program focuses exclusively on process quality.