Performance pay, productivity, and strategic opt-out: Evidence from a community health center

Abstract

We use data from a health center serving primarily low-income patients to examine medical providers’ output responses to a change from a salary-based compensation plan to one that rewards providers for seeing more patients each month. Providers working for piece rates produce 18 percent more patient encounters, but only a small portion of this increase was due to individual responses to the incentives. The remainder resulted from changes in workforce composition and from providers’ strategic choices about when to join the piece-rate plan. The small incentive effect is consistent with experimental evidence that effort is less sensitive to financial incentives when individuals work for an organization whose mission is aligned with their values.