The Effect of Explicit Financial Incentives on Physician Behavior

Abstract

Managed care organizations use explicit financial incentives to influence physicians' use of resources. This has contributed to concerns regarding conflicts of interest for physicians and adverse effects on the quality of patient care. In light of recent publicized legislative and legal battles about this issue, we reviewed the literature and analyzed studies that examine the effect of these explicit financial incentives on the behavior of physicians. The method used to undertake the literature review followed the approach set forth in the Cochrane Collaboration handbook. Our literature review revealed a paucity of data on the effect of explicit financial incentives. Based on this limited evidence, explicit incentives that place individual physicians at financial risk appear to be effective in reducing physician resource use. However, the empirical evidence regarding the effectiveness of bonus payments on physician resource use is mixed. Similarly, our review revealed mixed effects of the influence of explicit financial incentives on the quality of patient care. The effect of explicit financial incentives on physician behavior is complicated by a lack of understanding of the incentive structure by the managed care organization and the physician. The lack of a universally acceptable definition of quality renders it important that future researchers identify the term explicitly.

A population-based analysis of incentive payments to primary care physicians for the care of patients with complex disease

“…28,29 Research to date, largely from the United Kingdom and United States, has provided mixed evidence of the effectiveness of these programs. 24,[30][31][32][33][34] Studies of Ontario's pay-forperformance initiatives showed modest improvements in delivery of some preventive services 35,36 and no change in management of patients with diabetes. 37 The Ontario picture is complicated by the fact that physician payment mechanisms were also modified, which may have influenced both care for patients with chronic disease 38 and uptake of incentives.…”

“…39 Most research in this area focuses on care for individual diseases, using the delivery of specific services as indicators of quality. 24,[30][31][32][33][34] Evidence of the effect of incentive-based programs on broader outcomes such as access to primary care, continuity of care, 40 hospital admissions [25][26][27][28][29]41,42 and overall resource use 30,34,43 has been inconclusive.…”

Payment incentives for community-based psychiatric care in Ontario, Canada

“…2 There is some evidence that the size of the incentive must be large enough to achieve behaviour response. [13][14][15][16][17][18][19] One study surveyed managers of health management organizations in the United States about how primary care physicians responded to financial incentives, and showed that bonuses of at least 5% of income would be sufficient to achieve behaviour change. 15 Other research has identified several factors influencing the impact of pay for performance, including incentive size, duration, group versus individual incentives and case-mix risk-adjustment techniques.…”

“…6 Although pay for performance has been widely implemented, there is equivocal and limited evidence regarding its effectiveness. 19,[22][23][24][25][26][27] A systematic review of the effect of financial incentives for primary care physicians found modest or no effects. 23 Lavergne and colleagues 4 evaluated pay-for-performance payments for primary care physicians in BC and found that incentives had no effect on visits or continuity of care, but were associated with increased rates of hospital admission.…”

Promising Practices: How Leading Safety-Net Plans Are Managing The Care Of Medicaid Clients

“…Health services research does little to resolve the debate: The literature on the impact of financial incentives on physician behavior is rather thin. 6 Regardless of their true impact on quality, plan managers believe that the programs are popular with providers (especially if there are only winners and no losers). Even so, most plan officials consider them a luxury that is feasible only in good financial times.…”