A client was struggling with an incentives problem recently, and it helped me connect some dots.

The insurance company was paying an immediate (let’s say) $100 bonus when a doctor did a risk assessment visit. This is where the doctor brings in a patient and documents their most important health problems.

This was positioned to my client as a win-win. When your doctors do the risk assessment, the health plan gets paid more, and you get paid more at the end of the year.

Here’s the tricky part. The insurance plan wasn’t paying the $100 free and clear. They were charging my client MORE than $100 for each visit in “program administration fees”.

Within my client’s team, the narrative became “the insurance company is taking $110 out of our left pocket and putting $100 in our right pocket”. By that logic, we should obviously cancel the program, right?

It’s not that simple.

In healthcare, it’s never that simple.

In this case, we needed to ask a better question. In fact, we needed to ask one of my favorite questions:

Compared to what?

  • Compared to doctors who had no risk assessment process, the $100 incentive performed WAY better.
  • Compared to building our own risk capture process, we determined that the $100 incentive might still be better. If the insurance company incentive costs less to administer than a homegrown process, or if the insurance company’s process captures more revenue,

As usual, there’s an uninteresting answer to this interesting question. The answer: it depends.

What interests me more than the structure or cost/benefit of this particular deal is how it illustrates a point about psychology and behavior change. In a recent podcast, I heard James Clear (author of Atomic Habits) mention this point:

Many “bad” habits have immediate rewards, but long-term pain.

  • Eating a piece of candy right now → immediate pleasure
  • A lifetime of eating candy → metabolic disease

Many “good” habits have immediate pain, but long term rewards.

  • Lifting weights right now → immediate pain
  • A lifetime of lifting weights → strong body and resilience against injury

Clear argues that this is a feedback loop problem. If you can get more immediate, more tangible rewards for your “good” behavior, you’re more likely to continue that good behavior. In other words, tighten your feedback loop.

Effectively, my client was paying the insurance company to pay the doctors immediately when they did something in their own long-term interests. What would that be like in a more day-to-day context?

  • What if your accountant gave you an Amazon gift card every time you contributed to your retirement account?
  • What if your personal trainer gave you a bite of chocolate protein bar after every tough set?
  • What if your librarian gave you $50 every time you finished a book?

Would it be worth it to pay those professionals to “administer” a rewards program for you? (Don’t look at me! Ask yourself: what would you be doing in the absence of a rewards program?)

Question to consider

How can you tighten the feedback loop on behaviors you want to encourage (in yourself, or in your team)?

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