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Physician Financial Incentives More Likely to Target Quality Than Limiting Care

Most Physicians Don't Face Incentives Perceived to Conflict with Patients' Interests

News Release
January 22, 2002

Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.—Physicians are more likely to face direct financial incentives aimed at improving patient care than incentives that might curtail needed care, according to a study released today by the Center for Studying Health System Change (HSC).

Analyzing 1997 and 1999 national surveys of more than 12,000 physicians, the study examined the types of financial incentives used at the practice level to adjust physician compensation in practices of two or more physicians. In 1999, the study found that 24 percent of physicians faced incentives based on patient satisfaction surveys, 19 percent were subject to incentives based on quality of care measures and 14 percent faced incentives based on profiling that compares an individual physician’s use of medical resources to other physicians.

Financial incentives linked to patient satisfaction and quality of care are generally believed to encourage use of medical services, while incentives based on profiling are perceived as more likely to restrain use of services. Physician practices use financial incentives to align the interests of individual physicians with those of the group.

"Most physicians are not directly subject to the types of financial incentives that are commonly perceived to conflict with patients’ interests," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded solely by The Robert Wood Johnson Foundation.

The study’s findings are detailed in a new HSC Issue Brief, Physicians More Likely to Face Quality Incentives Than Incentives That May Restrain Care, available online.

Critics contend financial incentives can create a conflict of interest between physicians’ personal financial gain and their patients’ best interests, while supporters counter that incentives encouraging cost-effective care can help hold down overuse of services that fuel runaway costs.

Far more physicians—72 percent—are subject to productivity incentives than the 32 percent of physicians facing incentives based on satisfaction, quality or profiling. Satisfaction, quality and profiling incentives often are used with each other and almost always in combination with productivity incentives. The prevalence of financial incentives remained remarkably stable between 1997 and 1999, with a modest but statistically significant decline in profiling from 16 percent in 1997 to 14 percent in 1999.

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