P4P4P

"Businesses and insurers should be paying attention [to these findings] and incorporating them into their policies," said Pauly, who has worked with Volpp to study the effectiveness of monetary incentives for patients. Volpp and Pauly call the innovative approach "P4P4P" -- pay for performance for patients.

"The good news is that there's stuff that actually ... causes employees to change their behavior," Pauly said. For an employer, implementing a successful incentive program has the potential to create healthier, more productive employees. It also reduces health care costs down the road, Pauly explained. "There's two for the price of one here. It's a win-win."

Some employers have tried to implement P4P4P approaches, but they often design programs that miss the mark, according to Volpp. For example, an incentive program that offers employees $250 off their health insurance premium at the end of the year if they go to the gym once a week will probably fall flat. In the first place, a $250 discount off an insurance premium doesn't feel the same as a $250 check in hand. Second, people tend to focus on the present, so a small pay-off at the end of a calendar year won't be enough to inspire a couch potato to go to the gym in the dark of winter. "Those types of incentives are very poorly designed," Volpp said. "How the incentive is actually delivered is really important."

Volpp's studies draw heavily on lessons from behavioral economics: First, research shows that small rewards and punishments have greater impact if they occur immediately. Second, people are often motivated by experience of rewards in the past, the prospect of rewards in the future, and the possibility of receiving a large reward. Third, when making decisions, most people try to avoid regret, so they will be motivated to take action if it helps prevent a loss.

The studies on smoking, weight loss and medicine adherence were all designed with these lessons in mind. One similarity among them, for example, is the use of frequent, small rewards to encourage positive behavior.

The study on smoking cessation followed 878 employees of General Electric through an 18-month program to quit smoking. Half of the employees (436 people) were offered $100 to complete a community-based smoking-cessation program in their area, $250 if they had quit smoking at some point within six months after taking the course, and $400 if they remained smoke free for another six months after that. (Researchers verified that participants had kicked the habit by testing their saliva or urine.) The rest of the employees (442 people) were asked to enroll in a smoking-cessation program, and their progress was tracked in the same period to see if they quit. They were given no financial incentives.

The incentive group outperformed the information-only group at every step. More than one out of every seven participants in the incentive group enrolled in a smoking-cession program, compared with less than one out of 18 in the information-only group; 10.8% of the incentive group finished a smoking cessation program, compared with just 2.5% of the control group. After the first six months, 20.9% of the incentive group reported that they had quit smoking, compared with 11.8% of the control group. After nine to 12 months, the gap between the incentive and control groups had grown, with quit rates of 14.7% and 5% in the incentive and control groups, respectively. The final follow-up at 15 to 18 months found 9.4% of smokers in the incentive group remained smoke-free, while just 3.6% of those in the information-only group had managed to quit.

The results for the incentive group far exceed average quit rates: more than 40% of smokers in the United States try to quit each year, but only 3% make it for more than 12 months. "This study showed that these approaches can be quite effective in employer settings," said Volpp. "GE has announced plans to implement an approach similar to those for all 152,000 employees next year, which is pretty exciting."

Despite the groundbreaking results, Volpp isn't satisfied. Smoking is considered the leading cause of preventable death in the United States, killing roughly 438,000 Americans each year. According to the Centers for Disease Control and Prevention, each adult smoker costs employers $1,760 in lost productivity and $1,623 in excess medical spending annually. "We still have 85% that didn't quit," Volpp said, referring to the study's 12-month mark. "There's still a lot of room for improvement."

Volpp and his colleagues may find some support in legislation signed by President Obama on Monday that gives the U.S. Food and Drug Administration unprecedented control over tobacco products. The new law, for example, includes measures that will prevent tobacco companies from marketing their products to teenagers, lower the amount of nicotine in tobacco products, and define what labels are allowed and where they are placed.