Realising the promise of value-based purchasing: experimental evidence of medical device selection

Juri Matinheikki, Katie Kenny, Katri Kauppi, Erik van Raaij, Alistair Brandon-Jones

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose: Despite the unparalleled importance of value within healthcare, value-based models remain underutilised in the procurement of medical devices. Research is needed to understand what factors incentivise standard, low-priced device purchasing as opposed to value-adding devices with potentially higher overall health outcomes. Framed in agency theory, we examine the conditions under which different actors involved in purchasing decisions select premium-priced, value-adding medical devices over low-priced, standard medical devices. 

Design/methodology/approach: We conducted 2 × 2 × 2 between-subjects scenario-based vignette experiments on three UK-based online samples of managers (n = 599), medical professionals (n = 279) and purchasing managers (n = 449) with subjects randomly assigned to three treatments: (1) cost-saving incentives, (2) risk-sharing contracts and (3) stronger (versus weaker) clinical evidence. Findings: Our analysis demonstrates the harmful effects of intra-organisational cost-saving incentives on value-based purchasing (VBP) adoption; the positive impact of inter-organisational risk-sharing contracts, especially when medical professionals are involved in decision-making; and the challenge of leveraging clinical evidence to support value claims. 

Research limitations/implications: Our results demonstrate the need to align incentives in a context with multiple intra- and inter-organisational agency relationships at play, as well as the difficulty of reducing information asymmetry when information is not easily interpretable to all decision-makers. Overall, the intra-organisational agency factors strongly influenced the choices for the inter-organisational agency relationship. 

Originality/value: We contribute to VBP in healthcare by examining the role of intra- and inter-organisational agency relationships and incentives concerning VBP (non-) adoption. We also examine how the impact of such mechanisms differs between medical and purchasing (management) professionals.

Original languageEnglish
Pages (from-to)100-126
Number of pages27
JournalInternational Journal of Operations and Production Management
Volume44
Issue number13
Early online date14 May 2024
DOIs
Publication statusPublished - 14 May 2024

Keywords

  • Agency theory
  • Behavioural supply management
  • Experiments
  • Healthcare
  • Purchasing

ASJC Scopus subject areas

  • General Decision Sciences
  • Strategy and Management
  • Management of Technology and Innovation

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