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Financial incentives for physicians may not be working as expected

By Joseph Burns

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 indicting that the financial incentive may not be sufficient to foster improvements in care.

In a study published in the July/August 2015 issue of the Annals of Family Medicine, for example, researchers report that physicians in ACOs and physicians outside of ACOs have similar payment arrangements. They are paid a mix of salary, bonuses for productivity and a bonus of 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,” the researchers said.

In other words, physicians don’t earn enough from the financial incentives 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 quality of care to make a difference in patient outcomes?

Improving quality is one of the principle goals of ACOs, as Carolyn Y. Johnson pointed out in reporting on the family medicine study for The Washington Post. “It’s one of the grand ideas that is suposed to revolutionize U.S. health care: reward doctors who keep patients well with fewer tests, procedures, and apointments,” she wrote in an article, noting that a revolution in how doctors are paid isn’t really changing how doctors are paid. But, she added, 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 also interviewed Mark Friedberg, M.D., a scientist at RAND who has studied physician compensation extensively. 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 summed up the research findings succinctly:

“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.

“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 PQRS.

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.

Among respondents to a survey in 2013 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.

AHCJ's core topic leader on insurance, independent journalist, Joseph Burns (@jburns18) has been covering health care since 1991 and writes frequently about health policy and the business of health care.