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Interest in linking performance and reward comes despite theoretical analyses which suggest that the public sector may be particularly susceptible to many of the pitfalls of formal incentives. In 2000, in response to widespread dissatisfaction with waiting times for hospital care, the English government instituted an aggressive target based policy to reduce the very long waiting lists for non-emergency care in the National Health Service (NHS).Hospitals are multi-product organisations, so targets on waiting lists could lead to reductions of effort on less well monitored outputs. In addition, the performance measure – an absolute number of people waiting less than a certain amount of time – may have been manipulated by managers to give the appearance of hitting the target, whilst in reality not achieving them. This raises the concern – widely expressed by the public, political commentators and clinicians when the targets were announced (Kelman and Friedman, 2007) – that the use of a high powered incentive system to reduce waiting times might have ‘hit the target but missed the point’. This paper evaluates whether this was the case. Second, we examine whether this was at the expense of performance on other activities which were not subject to targets. Third, we ask whether hospitals ‘gamed’ the targets, by categorising patients in ways that meant they were not counted or by reshuffling patients on the list so that patients were treated in terms of list priority rather than medical need. Finally, we examine the impact of the policy
on quality of patient care.

Carol Propper, Matt Sutton, Carolyn Whitnall and Frank Windmeijer (2008) Incentives and Targets in Hospital Care:
Evidence from a Natural Experiment, CMPO Working Paper No. 08/205