The Influence of Year-end Bonuses on Colorectal Cancer Screening

Published Online: September 01, 2004
Brian S. Armour, PhD; Carol Friedman, DO; M. Melinda Pitts, PhD; Jennifer Wike, MBA, MPH; Linda Alley, PhD; and Jeff Etchason, MD

Objective: To estimate the effect of physician bonus eligibility on colorectal cancer (CRC) screening, controlling for patient and primary care physician characteristics.

Study Design: Retrospective study using managed care plan claims data from 2000 and 2001.

Methods: Data on 50-year-old commercially insured patients in a managed care health plan were linked to enrollment and provider files. The data included information on 6749 patients (3058 in 2000 and 3691 in 2001). Multivariate logistic regression models were used to assess the association between CRC screening receipt and physician bonus eligibility.

Results: From 2000 to 2001, CRC screening use increased from 23.4% to 26.4% (P < .01). Results from the multivariate logistic regression analysis revealed that the probability that a patient received a CRC screening was approximately 3 percentage points higher in the bonus year, 2001 (P < .01).

Conclusions: Bonuses targeted at individual physicians were associated with increased use of CRC screening tests. However, more research is needed to examine the effect of performance-based incentives on resource use and the quality of medical care. Specifically, there is a need to determine whether explicit financial incentives are effective in reducing racial disparities in the quality of patient care. This has particular relevance for CRC screening given that black patients are less likely to be screened, they have higher CRC incidence and mortality rates compared with other racial groups, and screening has been shown to be more cost effective in this population.

(Am J Manag Care. 2004;10:617-624)

Colorectal cancer (CRC) is the second leading cause of cancer-related death in the United States. The American Cancer Society (ACS) estimated that there would be 147 500 newly diagnosed cases of CRC and almost 57 100 deaths in 2003.1 In addition, CRC is expensive to treat, with costs estimated at $6.5 billion per year.2 Several national organizations have recommended fecal occult blood testing (FOBT), flexible sigmoidoscopy, colonoscopy, or double-contrast barium enema as effective screening options for persons aged 50 years and older.3-6 Despite an increasing body of evidence that screening of asymptomatic persons significantly reduces mortality,7-9 the percentage of individuals who have been screened remains low. Estimates from the 2001 Behavioral Risk Factor Surveillance System suggest that 23.5% of respondents aged 50 and older reported having FOBT in the previous year and 47.3% reported undergoing lower endoscopy in the last 10 years.3

An extensive review of the literature has documented various barriers to all types of cancer services, including screening, in different settings and populations.10 One explanation offered for the low rates of CRC screening is the growth in managed care organizations (MCOs). A type of plan that has flourished during the last 2 decades is the individual practice association. Individual practice associations have grown to dominate the health maintenance organization segment of managed care.11 The growth in individual practice associations may be attributable, in part, to their willingness to accept insurer contracts that include explicit financial incentives.12

Managed care advocates suggest that MCOs' use of implicit (capitation and salary) and explicit (bonuses) financial incentives are an effective means of containing healthcare expenditures. Although there are numerous articles examining the effect of implicit financial incentives on physician behavior, little is known about the influence of explicit financial incentives on the quality of patient care.12 Despite the paucity of empirical evidence, the use of financial incentives is considered controversial and has been the subject of intense public scrutiny and litigation,13 because it is generally perceived that physicians with managed care contracts face perverse financial incentives to limit access to services.12,14-16

To reduce public concern surrounding MCO cost-containment measures, several health plans are using explicit physician financial incentives to improve the quality of preventive care, including cancer screening. Whether bonuses are effective in improving the quality of preventive cancer services is an empirical question. However, it is difficult to evaluate how the structure and financing of MCOs affect access to and outcomes of cancer care.17,18 The reason is that managed care has rapidly evolved during the last 25 years, and little information is available on the new types of plans and physician incentive arrangements.12,16

Beginning in January 2001, a large managed care health plan operating in the southeastern United States implemented a year-end bonus program that was designed, in part, to improve CRC screening use among an individual practice association's primary care physicians (PCPs). The objective of this study was to estimate the effect of physician bonus eligibility on CRC screening, controlling for patient and PCP characteristics. From a policy standpoint, it is important to establish that MCOs' use of explicit financial incentives contributes to improving the quality of care. This is especially relevant in an area such as CRC screening, in which practice has been documented to be particularly deficient.3



Managed care health plan claims data for 2000 and 2001 for all commercially insured persons aged 50 years as of January 1, 2000, and January 1, 2001, were retrospectively linked to enrollment and provider files to examine the association between CRC screening rates and year-end bonuses. The patient data included enrollment information, demographic characteristics (age and sex), ZIP code, and CRC procedure codes. Several patient characteristics, including race, income, and educational attainment, are associated with CRC screening receipt.19-25 Because these variables were not collected by the health plan, we imputed this information using patients' 5-digit ZIP codes, which were linked to the Census 2000: Summary File 3 of the US Bureau of the Census.26 Race was defined as the percentage of the population in each ZIP code that is black. Income was defined as income per capita by ZIP code. Educational attainment information was used to create 3 variables that categorized the patient's neighborhood as follows: percentage with less than a high school education, percentage of high school graduates, and percentage of college graduates.

The provider data included PCP characteristics such as sex, year of medical school graduation, medical specialty, and whether the provider was eligible for the year-end bonus. Primary care physician experience was measured in years and was calculated by subtracting the date of a provider's medical school graduation from the date of his or her patient's screening. For patients not screened, physician experience was calculated by subtracting the year of medical school graduation from the midpoint in the year (July 1) 2000 or 2001.

The selection criteria used to determine PCP bonus program eligibility are proprietary. Therefore, to avoid potential bias associated with selection of PCPs into the bonus program, we excluded providers and data on the patients of those providers who were ineligible for the bonus program (data on patients of PCPs ineligible for the bonus are available from the author). We also limited our sample to 50-year-old patients who were continuously enrolled in the health plan in calendar years 2000 and 2001.

The Centers for Medicare & Medicaid Services procedure coding system and Current Procedural Terminology codes were used to identify CRC screening procedures, including the following: FOBT, flexible sigmoidoscopy, colonoscopy, and double-contrast barium enema (a list of procedure codes used is available from the author). For persons reaching age 50 in 2000 or 2001, the CRC screening procedure codes were used to identify enrollees who received a CRC screening. Furthermore, if there was documentation of flexible sigmoidoscopy or colonoscopy in a prior year, the PCP was also given credit for a CRC screening. Screening rates for the bonus program were calculated 120 days after the close of the bonus year to minimize problems associated with time lags in the filing of claims data.

Statistical Analysis

Bivariate statistical tests (χ2 and t tests) were used to compare descriptive statistics across years. A multivariate logistic regression model was used to estimate the effect that PCP bonus eligibility had on CRC screening use. The dependent variable was an indicator variable denoting whether a patient received a CRC screening. To examine the effect of the bonus, we used the year of bonus eligibility to approximate the effects of bonuses on the likelihood of CRC screening. Independent variables were patient sex (female),27,28 race (black),28-30 per capita income,31 and educational attainment.31-33 In addition to the variable denoting the year of bonus eligibility, we included the following PCP characteristics: sex (female)34 and years of experience.35,36 The independent variable "years of experience" was squared to capture any potential nonlinear effects of physician experience on CRC use. The inclusion of the squared term in our model was based on theory, statistical significance, goodness of fit, and biasness.37,38 We included a term to assess the interaction between female patient and female provider. Previous research has shown that female patients treated by female physicians were more likely to receive mammograms and Pap smears.39 This interaction term allowed us to determine whether this finding extends to CRC screening. Finally, an indicator variable that distinguished PCPs with an internal medicine specialty from other specialties was included to control for any unobserved differences in CRC screening rates between specialties.

All analyses were performed using SAS software, version 8 (SAS Institute, Cary, NC). This study was approved by the Institutional Review Board of the Centers for Disease Control and Prevention.


Sociodemographic characteristics of the patients are shown in Tables 1 and 2. At the ZIP code level, we estimate that 28.2% of the population was black, and per capita income averaged $24 508. Approximately 16% of the population had less than a high school education, 54.5% were high school graduates, and 29.2% had attended college. Approximately 53% of the patients were female, and approximately 20% of all patients had a female PCP. Physician experience averaged 19.6 years. Slightly more than half (52.1%) of the patients' PCPs listed internal medicine as their specialty.


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