Physician Compensation Method Does Not Affect Patient Treatment

Effects of physican compensation method on physician behavior and satisfaction in managed care organizations

Starting in February 1995, investigators at the University of Washington School of Public Health and Community Medicine, Seattle, conducted the Physician Compensation Research Project.

The project examined how the different methods used by managed care organizations (MCOs) to compensate primary care physicians affected the utilization and cost of health care services, as well as physician productivity.

This project was part of the Robert Wood Johnson Foundation (RWJF) national program Changes in Health Care Financing and Organization (HCFO).

Key Findings

  • Phase 1

    • Contrary to their expectations, the investigators found that the method of compensation for physicians—whether fee-for-service or salary—had a negligible impact on their treatment decisions for individual patients.
    • Instead, the principal drivers of the use and cost of health care services were enrollee and physician characteristics.
    • The use and cost of services were higher for female enrollees, older enrollees and enrollees with more benefits.
    • Use and cost of services were lower for enrollees who were cared for by older physicians or by physicians working under a utilization management program.
    • It must be noted that Washington State has a history of encouraging clinical efficiency even without financial incentives. Thus, it is not clear if the results of this study are generalizable since compensation mechanisms may be more likely to affect behavior in other locations.
  • Phases II and III

    • Their research showed that physician compensation methods that are tied to productivity do increase individual productivity.
    • In addition, they found that not-for-profit groups, multi-specialty groups, female physicians and physicians with fewer years of experience are less productive.
    • The investigators note that the medical groups studied may not be representative of all medical groups in the United States.