The role of GP's compensation schemes in diabetes care: Evidence from panel data

•We investigate the impact of financial incentives on the quality of primary care.•We analyse diabetes care in the Italian Emilia-Romagna region between 2003 and 2005.•We focus on avoidable hospitalisations for type 2 diabetes patients.•We estimate a panel count data model using a negative binomial distribution.•Financial incentives reduce avoidable admissions, improving diabetes care quality. We investigate the impact of the implementation of Diabetes Management Programs with financial incentives in the Italian Region Emilia-Romagna between 2003 and 2005. We focus on avoidable hospitalisations for diabetic patients for whom GPs receive additional payments exceeding capitation. We estimate a panel count data model to test the hypothesis that those patients under the responsibility of GPs receiving a higher share of their income through ad-hoc payments, are less likely to experience avoidable hospitalisations. Our findings indicate that financial transfers may help improve the quality of care, even when they are not based on the ex-post verification of performance. The estimated effect indicates that, at sample averages, an increase of 100 Euros of the financial incentives paid to GPs (around 17% of the yearly payment received by GPs for diabetes programmes) is expected to reduce the number of diabetic ACSCs by 1%, around 100 cases when projected on the entire region.