Payment Mechanisms to Improve Prevention Spending in Health Care Settings: A Policy-focused Evidence Brief

Decades of evidence indicate that preventative healthcare is both effective and value for money in improving population health long-term. However, health care organisations often focus on short-term factors. Leveraging funding mechanisms to promote prevention may facilitate higher implementation of prevention initiatives. The most common funding mechanisms include capitation, Fee-for-service (FFS) and Pay-for-performance (P4P). Here, we explore the policy relevant studies which explore payment incentives for improving long-term population health and under which circumstances these incentives should be encouraged. There are six key lessons for policy makers from the evidence base of how healthcare funding mechanisms can be best designed to promote long-term prevention: 1) spending on prevention is highly efficient and its beneficial effects are likely underestimated, 2) well-funded capitation models best incentivise preventative healthcare, 3) variable funding mechanisms, such as FFS and P4P, can be beneficial in increasing quantity focused preventative interventions- those with a uniform and straightforward approach, such as immunisation programs, 4) non-payment to hospitals may be effective in encouraging prevention, 5) Social Impact Bonds may facilitate prevention spending whilst mitigating financial risk away from the public sector, but come with complexity, 6) Return-on-investment tools can improve spending efficiency, but their impact on decision making is unclear. To most effectively incentivise preventative healthcare, capitation payments should be complemented by more variable funding models for specific preventative services. Alternative payment mechanisms, such as Social Impact Bonds and non-payment may have their place. Integrating equity into decision making shows promise in further improving outcomes. • Investing in prevention significantly improves population health outcomes and is cost-effective, but funding structures often prioritize short-term outcomes over long-term benefits. • Capitation models are most effective for incentivizing long-term, complex prevention interventions, while fee-for-service (FFS) and pay-for-performance (P4P) models can enhance quantity-based prevention efforts, such as immunisations. • Social Impact Bonds (SIBs) provide a financing mechanism to enhance prevention spending, though they introduce complexity and risks such as “cream-skimming.” • Return-on-investment (ROI) tools can improve spending efficiency, but their impact on decision-making remains unclear.