The Effects of Compensation Models on Physicians’ Productivity, Quality, and Efficiency in Line with Saudi Vision 2030: Insights From Behavioural Economics

Saudi Arabia's HSTP of Vision 2030 intends to reward physicians for their contributions to productivity and value-based health outcomes. However, it lacked a reward and compensation policy. Linking rewards to physicians' performance necessitates reforming the existing payment model. Such reform requires understanding how and what incentives would influence behaviour and performance. Behavioural economics theories provide such insight; therefore, policymakers must use those theories to design effective incentive systems that motivate physicians, influence their behaviour, and prevent negative consequences. In this context, the study assessed the Saudi public sector physicians’ and physician leaders’ perceptions about the effects of compensation models on physicians’ productivity, quality, and efficiency performance, focusing on assessing the effects of transitioning from fixed salaries to a Pay-for-Performance (P4P) model on physicians' performance and behaviour, aligning with the aims of HSTP. Behavioural economics theories such as crowding theory, goal gradient, cognitive scarcity, mental accounting, and immediacy were used in this research to reflect the effect of monetary rewards as extrinsic motivators and highlight the impact of intrinsic motivators on changing physicians’ behaviour and driving performance to achieve transformation objectives. In this qualitative case study, the researcher gathered data via semi-structured interviews with 34 physicians and healthcare leaders from various public health sectors, emphasising diversity in specialities, experiences, and leadership positions to enhance transferability. The interview data were complemented with document reviews to ensure triangulation and validation. The findings revealed that the fixed salary model currently employed in the Saudi public health sector provides income security but lacks incentives for productivity, quality, and efficiency, leading to perceptions of demotivation and unfairness. Conversely, the FFS model, prevalent in the private sector, motivates productivity but lacks quality incentives, leading some physicians to prioritise financial gain over quality, thereby undermining intrinsic motivation. The study indicated that the negative intrinsic motivation resulting from compensation effects as an extrinsic motivator may lead to crowding out motivation and dissatisfaction. Moreover, it could negatively influence physicians’ performance in achieving desired productivity, quality, and efficiency. Consequently, neither the fixed salary nor the FFS models were congruent with the HSTP's aims to promote productivity and value-based healthcare. These shortcomings led to reforms in other healthcare systems, such as Turkey's shift from a salary-based model to a performance-based one and the US's transition from FFS to P4P, reflecting the current direction of the HSTP and emphasising the need for a defined reward and compensation policy. The study revealed that P4P would improve productivity and motivate underperformers. However, the results about P4P's impact on quality and efficiency were mixed and contradictory, varying from negative to successful and temporary to sustainable. Despite these results, most participants agreed that transitioning from fixed salaries to a P4P model could potentially enhance physicians' performance and behaviour, thus boosting productivity, efficiency, and quality, provided that a basic salary was included for income security. The study revealed that physicians might react differently to this change; for example, high-performing physicians were particularly supportive of this shift, welcoming a model that would appreciate their outstanding performance. However, the study identified several crucial factors that could shape physicians' reactions, such as low performance, difficult targets, and fear of income loss. In addition, concerns were raised about potential negative impacts on patient care and physician motivation due to system design and payment characteristics. Therefore, the study underscored the importance of addressing these concerns to successfully implement a P4P model aligned with HSTP objectives. This research provides policymakers and readers with in-depth information on physicians’ perceptions and reactions to different compensation models and the shift to P4P. Lastly, it suggested a comprehensive P4P system design and payment characteristics derived from findings, lessons learned from global health systems, and insights from behavioural economic theories. This comprehensive design will assist policymakers in establishing a compensation policy, driving performance change, and shaping the practical application of physician rewards in alignment with the HSTP of Vision 2030.