NCPA - National Center for Policy Analysis

Physicians' NEJM Study: Financial Incentives Affect Managed Care Quality

November 19, 1998

Bonuses or other financial incentives given to doctors by managed care organizations for speeding up office visits and restricting care compromise the quality of care, says a survey of California doctors reported in the New England Journal of Medicine. But the survey also found incentives based on patient satisfaction and quality improves the quality of care and patients' satisfaction.

According to the two-year survey of 766 primary care physicians, which included independent doctors who had contracts with Health Maintenance Organizations and salaried doctors working for the HMO Kaiser Permanente:

  • Financial incentives to control costs were part of the compensation of 38 percent of the doctors.
  • Of the 291 doctors subject to cost control incentives, 28 percent "reported that they felt pressure to limit what they told patients about treatment options."
  • More than half, or 57 percent, felt pressured to restrict their referrals to specialists -- and nearly a third of these said the pressure was severe enough to compromise the quality of care.

And 75 percent of all the doctors, or 575, said they felt pressured to see more patients.

By contrast, 10 percent of the independent physicians and 31 percent of the Kaiser doctors said the quality of care was an incentive. Patient satisfaction was a compensation criterion for 11 percent of the independent doctors and 45 percent of those at Kaiser.

Source: Kevin Brambach, et al., "Primary Care Physicians' Experience of Financial Incentives in Managed Care Systems," New England Journal of Medicine, November 18, 1998, and Peter T. Kilborn, "H.M.O. Fiscal Incentives Linked to Doctors' Discontent," New York Times, November 19, 1998.


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