Pay Model

Abstract

To an employee, pay is a primary reason for working. For some people, it may be the only reason. For most of us, it is the means by which we provide for our own and our family's needs. Few people refuse to accept pay for their work. Perhaps fewer would continue to work if they were told they would not be paid. But pay can also represent status or recognition of accomplishment to an employee. Compensation is a price for a factor of production. As such, it serves to allocate scarce human resources to productive uses. To the employer, compensation is the price paid for labor services. As an economic concept, compensation is governed by the same logic as any other purchase by a firm. An organization strives to get the greatest quantity and the highest quality for its money. By the same logic, the worker is selling labor services to obtain income and holds out for the highest price obtainable.

Table of Contents

Abstract2

Introduction4

Discussion and Analysis5

Measuring Quality7

Process Versus Outcome Measures of Quality9

Effectiveness10

Design of Financial Incentive Reward Programs11

Internal consistency13

External competitiveness13

Employee's contribution13

Administration of pay system14

Pay Techniques14

Significance of the pay model in the global scenario14

Unanswered Questions15

References17

Pay Model

Introduction

The linkage of financial incentives to quality and performance is a relatively new concept in healthcare. Pay-for-performance is a way to reward healthcare providers for higher-quality healthcare. In most industries, lower costs are achieved through greater production efficiency, and financial rewards accrue to firms that produce high-quality products more efficiently. In contrast, most physicians and hospitals are paid the same regardless of the quality of the healthcare they provide, producing no financial incentives for quality and, in some cases, disincentives for quality (Williams, 2004).

Performance has become a defining feature of modern government. The age of performance has produced commitment to, but not necessarily clarity about, the universal objective of organizational and government improvement (Talbot, 2005). Performance and performance management continue to be enigmatic concepts. There is a paradox too in that the adoption rate of performance approaches continues to expand despite the mounting critique. One limitation has been the failure to integrate performance and measurement within a broader system of management and within a conception of organizational life that invests practice with greater meaning.

In its 2001 report Cross the Quality Chasm: A New Health System for the 21st Century, the National Academy of Sciences, Institute of Medicine (IOM) drew attention to the poor quality of the nation's healthcare as well as factors contributing to poor quality, including the structure of the present healthcare payment system (Talbot & Lyn, 2001). The IOM noted that, for certain types of clinical situations, healthcare payment arrangements may actually produce disincentives for quality care. For example, in general, patients cared for under fee-for-service reimbursement systems receive more services that are under the discretion of the provider. The incentives result in overuse of services without regard to efficiency; services of high cost that are technically complex tend to be rewarded over those that are labor and time intensive, such as counseling regarding self-care of ...