Financial incentives for physicians may not be working as expected

Photo: Yuya Tamai via Flickr

Photo: Yuya Tamai via Flickr

One premise behind the formation of accountable care organizations is that physicians and other health care providers would have financial incentives to deliver high quality care at lower costs. But research is indicating that the financial incentive may not be sufficient to foster improvements in care.

A study published in the July/August 2015 issue of the Annals of Family Medicine, noted that physicians both inside and outside of accountable care organizations (ACOs) have similar payment arrangements. They are paid a mix of salary, bonuses for productivity and a bonus equivalent to about 5 percent of total salary for delivering quality care and other factors, the researchers said.

“Incentives for ACOs may not be sufficiently strong to encourage practices to change physician compensation policies for better patient experience, improved population health, and lower per capita costs,” according to the study.

In other words, physicians don’t appear to receive enough additional financial gain to make it a powerful incentive to focus on improving quality of care. For journalists, this point is important because health insurers and health systems often claim that by establishing new payment arrangements, physicians and other providers will be paid more for quality and quality scores will rise. The question journalists can ask now is this: Are physicians and providers being paid enough for focusing on the quality of care that would make a difference in patient outcomes.

Improving quality is among the principal goals of ACOs, as Carolyn Y. Johnson pointed out in her story about the family medicine study for The Washington Post. “It’s one of the grand ideas that is supposed to revolutionize U.S. health care: reward doctors who keep patients well with fewer tests, procedures, and appointments,” she wrote, noting that a revolution in how doctors are paid isn’t really changing how doctors are paid. Physicians in ACOs had only two percentage points more of their income linked to quality factors than doctors in traditional practices.

Johnson quoted the lead author of the study, Andrew Ryan, a health economist and associate professor at the University of Michigan School of Public Health. “I think it points to a potential problem: that these incentives aren’t getting translated to individual physicians,” Ryan told her. “So we’re expecting big things from them? I think it’s unreasonable to think that a two percentage point difference is really going to move the needle.”

In addition to Ryan, Johnson interviewed Mark Friedberg, MD, a scientist at RAND who has extensively studied physician compensation. Friedberg told Johnson that the work of Ryan and colleagues in the Annals of Family Medicine confirms the findings of other researchers. Essentially, “very few organizations are directly passing on financial incentives to physicians,” Friedberg told Johnson.

Few organizations pass on financial incentives to physicians and other providers because measuring health care quality is challenging. Patients need different levels of care from one year to the next, creating what Friedberg called statistical noise. “You’re going to be penalizing and rewarding physicians almost entirely due to noise,” Friedberg told Johnson.

In an article on the same study for Physicians Practice, Gabriel Perna got a terrific quote from Ryan that succinctly summed up the research findings. “Quality-based care gets a lot of attention in the policy world, but fundamentally, quality is just not that important to the way providers are paid,” Ryan said to Perna. “It’s just not. As a result, practices try to do the best they can to improve quality but they are not fundamentally focused around creating structures, processes and incentives to maximize quality.”

We also know from data on the Physician Quality Reporting System (PQRS) that only about 40 percent of physicians participated in the PQRS program, according to the most recent report on the program from the federal Centers for Medicare & Medicaid Services, which runs the system.

Almost 40 percent of physicians and other health care providers who see Medicare patients lost 1.5 percent of their Medicare pay last year because they didn’t participate in the PQRS program, Melinda Beck reported in The Wall Street Journal.

Beck also reported that CMS docked 257,000 providers 1 percent of their Medicare payment last year for not using electronic health record systems enough to meet the federal government’s “meaningful use” goals. CMS also fined hundreds of other doctors in large group practices 0.5 percent to 1 percent last year under the value-based payment modifier, which Beck called “a complicated cost-and-quality adjustment” program.

In a 2013 survey of 1,000 physician groups by the Medical Group Management Association, 83 percent of respondents found the three programs (PQRS, meaningful use and value-based payment) detracted from their ability to care for patients. “Doctor groups say the programs are confusing and time-consuming while offering little clinical benefit,” Beck wrote.

1 thought on “Financial incentives for physicians may not be working as expected

  1. Avatar photoNorman Bauman

    Here’s my question

    I discussed this on the AHCJ list, after I went to a meeting promoting World Thrombosis Day.

    The basic problem is that Centers for Medicare & Medicaid Services is trying to use financial incentives to improve costs and quality. But there is no evidence that financial incentives can work, and a lot of evidence that they don’t work.

    Here’s my advice. When you cover this story, ask the following question:

    What evidence do you have that this program actually improves clinically significant outcomes?

    A couple of good articles explaining the problem are Rajaram et al., “Concerns about using the Patient Safety Indicator-90 composite in pay-for-performance programs,” JAMA, 3 March 2015, 313(9):897, and Rajaram et al., “Hospital Characteristics Associated With Penalties in the Centers for Medicare & Medicaid Services Hospital-Acquired Condition Reduction Program”, JAMA, 28 July 2015, 314(4):375-383. (free).

    If a hospital monitors their infections aggressively, the hospital is penalized. If patients can’t afford to fill their prescriptions, the hospital is penalized.

    Good article in the New York Times yesterday:
    How Medicare Penalizes Hospitals for Being Too Careful
    APRIL 20, 2016

    Notice that Kate Goodrich, the Medicare spokesperson, didn’t give the NYT an interview. She just sent a statement.

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