INCENTIVE CONTRACTS FOR MATERNITY CARE
Manoj Mohanan (Duke), Grant Miller (Stanford)
[Funding: 3ie OW2, DFiD-India, World Bank - HRITF, and Government of Karnataka]
Given growing interest among various national and state governments to contract with the private sector, there is potentially important scope for including explicit rewards for good performance in these contracts. One important concern is that even if programs succeed in increasing medical attendance of childbirths and institutional deliveries, doing so may have little impact on actual health outcomes per se if the quality of medical care in rural areas is poor., Moreover, despite their promise for improving service quality and health, there is little rigorous evidence demonstrating the actual effectiveness of pay for performance incentives directly rewarding good health outcomes.  A central issue in designing performance incentive contracts is the trade-off between rewarding agents’ input use versus outputs: while the former imposes less risk, the latter rewards innovation in production. Providers can do more than they are currently doing, but do not have incentives that encourage them to perform as best as they know how to. Studies of quality of care in a range of settings in India and elsewhere have shown that healthcare providers know more about best practices than what they actually provide routinely.
In order to provide rigorous empirical evidence on the question of whether supply-side incentives (pay-for-performance) structured as input based contracts or output contingent contracts yield better performance from providers, we conducted a randomized study among private obstetric care providers in rural Karnataka. Eligible rural private obstetric providers were randomly assigned to one of the three study arms:
Output contracts that reward lower rates of post-partum hemorrhage, pre-eclampsia, sepsis, and neonatal mortality;
Input contracts that reward better provision of healthcare inputs based on WHO guidelines ; and
Control contracts that provide only information on best practices as other arms, but no financial incentives.
Newborn infants in Gujarat Hospital. Photo by Tulsi Patel
We tested empirically whether (a) input contract providers demonstrate improvements in quality of care, and if such improvements also result in improved health outcomes; (b) output contract providers achieve improvements in outcomes, and if such improvements are explained by changes in inputs into healthcare quality.
Our evaluation of the results of the experiment focuses primarily on the inputs and outputs for which providers were rewarded. Inputs include Pregnancy Care, Childbirth Care, Postnatal Maternal Care, Newborn Care, and Postnatal Newborn Care, while outputs include postpartum hemorrhage, pre-eclampsia, sepsis, and neonatal death.
We find that both output and input incentive contracts achieved comparable reductions in post-partum hemorrhage (PPH) rates, the dimension of maternity care most sensitive to provider behavior and the largest cause of maternal mortality. The incentive contracts resulted in over 20% reductions in PPH. Interestingly, and in line with the theory, providers with advanced qualifications performed better and used new health delivery strategies under output incentives, while providers with and without advanced qualifications performed equally under input incentives.
Different strokes for different folks: Experimental evidence on the effectiveness of input and output incentive contracts for health care providers with different levels of skills. April 2017 Under Review. [ERID Working paper # 245]
(Previous version: "The Costs of Asymmetric Information in Performance Contracts: Experimental Evidence on Input and Output Contracts in Maternal Health Care in India")
Manoj Mohanan, Grant Miller, Katherine Donato, Yulya Truskinovsky, and Marcos Vera-Hernández
Personality Traits and Performance Contracts: Evidence from a Field Experiment among Maternity Care Providers in India. American Economic Review (2017); 107(5): 506-10.
Donato, Katherine, Grant Miller, Manoj Mohanan, Yulya Truskinovsky, and Marcos Vera-Hernández
Pre-Analysis Plan (AEA Registry: https://www.socialscienceregistry.org/trials/179)
 Das J, Hammer J. (2014). Are Institutional Births Institutionalizing Deaths? World Bank Future Development blog. Retrieved from:
 Miller G and Singer-Babiarz K. (2014) "Pay-for-Performance Incentives in Low- and Middle-Income Country Health Programs," in Tony Cuyler (ed.), Encyclopedia of Health Economics, Elsevier, 457-466
 Miller G, Luo R, Zhang L, Sylvia S, Shi Y, Foo P, Zhao Q, Martorell R, Medina A, Rozelle S. (2012) Effectiveness of provider incentives for anaemia reduction in rural China: A cluster randomised trial. BMJ; 345: e4809.
 Mohanan M, Vera-Hernández M, Das V, Giardili S, Goldhaber-Fiebert J, Rabin T, Raj S, Schwartz J and Seth A., (2015). The Know-Do Gap in Quality of Care for Childhood Diarrhea and Pneumonia in India. JAMA-Pediatrics 169(4):349-357
 Das J, Holla A, Das V, Mohanan M, Tabak D, Chan B. (2012) In urban and rural India, a standardized patient study showed low levels of provider training and huge quality gaps. Health Affairs; 31: 2774-2784
 Leonard, K.L. and Masatu, M.C. (2010) Using the Hawthorne effect to examine the gap between a doctor's best possible practice and actual performance. Journal of Development Economics, 93(2): 226-234.