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The American Journal of Managed Care February 2014
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Physician Financial Incentives and Care for the Underserved in the United States
Alyna T. Chien, MD, MS; Marshall H. Chin, MD, MPH; G. Caleb Alexander, MD, MS; Hui Tang, MS; and Monica E. Peek, MD, MPH
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Joshua P. Cohen, PhD; Abigail Felix, BA; and Magdalini Vasiadi, PhD
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Peter Cunningham, PhD; and Emily Carrier, MD
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Seth A. Seabury, PhD; Dana P. Goldman, PhD; Iftekhar Kalsekar, PhD; John J. Sheehan, PhD; Kimberly Laubmeier, PhD; and Darius N. Lakdawalla, PhD
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Kari L. Olson, BSc(Pharm), PharmD; Michele D. Wood, PharmD; Thomas Delate, PhD; Lisa J. Lash, PharmD; Jon Rasmussen, PharmD; Anne M. Denham, PharmD; and John A. Merenich, MD

Physician Financial Incentives and Care for the Underserved in the United States

Alyna T. Chien, MD, MS; Marshall H. Chin, MD, MPH; G. Caleb Alexander, MD, MS; Hui Tang, MS; and Monica E. Peek, MD, MPH
Financial incentives alter the quality and quantity of care that physicians provide. Understanding physicians' recent experience with incentives may help shape current payment reform efforts.
Objectives: To estimate: (1) the percentage of physicians whose compensation is variable; (2) the frequency at which performance incentives for productivity, care quality, patient satisfaction, and resource use were used to determine compensation; and (3) how much incentives differ for physicians who serve greater percentages of patients who are Medicaid-insured, racial/ethnic minorities, or who face language barriers, versus those who do not.

Study Design: Cross-sectional study of 3234 nationally representative physicians responding to the 2008 Center for Studying Health System Change’s Health Tracking Physician Survey (HTPS).

Methods: We examined the degree to which practices’ percentage of Medicaid revenues and physicians’ panel characteristics were associated with physicians’ financial incentives using x2 statistics and multivariate logistic regression (adjusting for physician specialty, practice type, and capitation levels, and area-based factors).

Results: Compensation was variable for 69% of respondents, was most frequently tied to productivity (68%), and less often to care quality (19%), patient satisfaction (21%), or resource use (14%). Physicians were significantly less likely to report variable compensation if the percentage Medicaid revenues was 50% or more (adjusted odds ratio [OR] 0.73, 95% confidence interval [CI], 0.57-0.95) or if physician panels were at least 50% Hispanic (adjusted OR 0.74, 95% CI, 0.56-0.99). However, physicians were significantly more likely to report use of all 4 performance incentives if percentage of Medicaid revenues was 6% to 24%.

Conclusions: Physicians report different types of financial incentives designed to alter care quality and quantity; incentive types differ by the degree that practices derive revenues from Medicaid or serve Hispanic patients. Further investigation is needed to understand how to align financial incentives with disparity-reduction efforts.

Am J Manag Care. 2014;20(2):121-129
  • Financial incentives alter the quality and quantity of care that physicians provide.

  • Understanding physicians’ past experience with financial incentives can help shape future compensation strategies.

  • There is a complex relationship between physicians’ experience of financial incentives and the degree to which practices derive revenue from Medicaid—pay based on performance is more prevalent when percent Medicaid is between 6% and 24%, but fixed salaries are more common when percent Medicaid is greater than or equal to 50%.

  • Fixed salaries are also more common when physician panels are greater than or equal to 50% Hispanic.
US healthcare spending continues to rise faster than the gross domestic product (GDP) and significant gaps persist between the care people should and do receive, particularly for persons from lower socioeconomic status (SES) classes and racial/ethnic minorities.1-3 Since the Affordable Care Act of 2010 (ACA), payment and delivery system reform efforts have intensified, and there is substantial interest in healthcare delivery systems (eg, accountable care organizations [ACOs]) in which physicians increasingly serve as employees.4-7 This may further catalyze efforts to restructure the types of financial incentives that physicians face (eg, a greater emphasis on cost profiling).4-7

Until now, payment and delivery system policy discussions have tended to focus on the incentives that flow between payers (eg, governmental and commercial health plans) and practices (which range in size from small solo practitioners to large multidisciplinary medical groups that may include a hospital system), and less attention has been paid to the types of financial incentives that physicians face as individuals through their compensation arrangements.4-7 Even less is known about how compensation may differ if practices derive a substantial proportion of their revenues from Medicaid-insured patients or if they care for greater percentages of patients with minority racial/ethnic backgrounds or non-English speaking patients, who are disproportionately medically and socially complex.8

The types of incentives that physicians face affect healthcare costs, quality, and disparities.9-11 Physicians who are paid fixed salaries tend to see fewer patients and perform fewer procedures than physicians who are paid according to productivity.12-15 However, paying physicians according to visit or procedure volumes can cause physicians to focus on services that can be delivered quickly (eg, acute care for self-limited problems like colds) and spend less time on those that require more time (eg, teaching patients how to manage their diabetes), even though the latter has a better chance of improving patients’ health.16 Tying financial bonuses to care quality (eg, pay for performance [P4P]) can be effective at improving care quality, but many are concerned that this strategy will yield negative unintended consequences (eg, unincentivized care will suffer).17-21 There is even concern that P4P could cause physicians to avoid caring for patients of lower SES or patients of minority racial/ ethnic backgrounds because it may be more difficult to improve care quality for these patients.18-21 It is important to understand the quickly evolving payment environment, especially as certain types of incentives may recede (eg, those for productivity) while others increase (eg, those for quality, patient satisfaction, and resource use).

Prior studies suggest that although the majority of physicians who receive variable compensation are paid for productivity, the use of productivity incentives may be declining, while performance incentives related to care quality, patient satisfaction, and resource use may be increasing (Table 1).20,22-30 These studies also demonstrate that practice and regional factors (eg, private practice vs health maintenance organizations [HMOs], the degree to which practice revenue depends on capitated contracts, whether practices are located in low-SES areas, and region of the United States) influence the types of financial incentives that physicians face.20,22,30,31

It is also unclear whether physicians who treat high proportions of underserved patients may be exposed to different financial incentives than those who do not. For example, there is anecdotal evidence that physicians serving vulnerable populations (eg, physicians affiliated with federally qualified health centers or academic medical centers) tend to receive fixed salaries.12,32-34 To our knowledge, there are no nationally representative data on whether the types of financial incentives that individual physicians face vary depending on the degree to which physicians care for Medicaid-insured patients, patients of minority racial/ethnic backgrounds, or patients who typically face language barriers when seeking medical care, after adjusting for other factors such as practice setting, for one, that may also influence the use of these incentives.33-36

Thus, this study aims to: (1) estimate the percentage of physicians whose compensation is variable (as opposed to fixed); (2) determine, for physicians whose compensation is variable, the frequency at which physicians experience 4 common performance incentives—productivity, quality, patient satisfaction, and resource use; and (3) assess the degree to which these incentives may vary for physicians whose practices serve more Medicaid-insured patients, whose panels comprise larger proportions of minorities, or whose panels include more patients facing language barriers, adjusting for specialty, practice, and geographic characteristics.


Study Design and Data Source

This is a cross-sectional study of physicians responding to the Center for Health System Change’s 2008 Health Tracking Physician Survey (HTPS). The HTPS is a periodic national survey of nonfederal allopathic and osteopathic physicians engaged in patient care at least 20 hours per week. Residents, fellows, and specialty physicians with limited patient contact in ambulatory settings (radiology, anesthesiology, and pathology) were ineligible for the survey. The HTPS utilized a nationally representative sample that included information from more than 4700 physicians and was conducted by mail. To our knowledge, the HTPS (and its predecessor, the Community Tracking Study) is the only nationally representative survey of active, ambulatorybased physicians that gathers this level of detail on physician compensation arrangements; alternate physician surveys do not.37-39 The response rate for this survey was 61.9%.36


Our first outcome of interest was the proportion of physicians that reported their compensation to be variable (as opposed to fixed). We defined physician compensation as “variable” if respondents answered “yes” to the survey item asking if a physician’s compensation was tied to any of the following measures: productivity, quality, patient satisfaction, or resource use; otherwise, physician compensation was considered to be fixed.

Our second set of outcomes was the performance measures to which compensation could be tied: productivity, care quality, patient satisfaction, and resource use. For example, we defined compensation as varying according to “productivity” if respondents answered “yes” to the question that asked if their practice took their personal productivity (eg, number of patients seen or procedures done per clinical session) into account when determining their pay. We did the same for questions related to physicians’ performance on clinical quality measures (eg, rates of preventive care services), satisfaction surveys (completed by their own patients), or pattern of using medical resources relative to their peers (ie, resource use or cost profiling). The 2008 HTPS did not ask these questions of solo practitioners, nor did it include questions about the size of the variable component of compensation.

We used 4 predictor variables to assess the degree to which physicians provided care to Medicaid-insured patients or patients with minority racial/ethnic backgrounds: (1) percentage of practice revenue derived from Medicaid, and the percentage of patients in each physician's practice who (2) were Hispanic, (3) were African American, or (4) faced language barriers when seeking healthcare (ie, the percentage of each physician's patient panel that had a “hard time speaking with or understanding because you speak different languages”). The validity of physician report of the racial/ ethnic composition of their patient panels has been previously established.40 In each of these cases, since the data were skewed, we defined categories based on those providing care to 5% or less, 6% to 24%, 25% to 49%, and 50% or more of the demographic group of interest. Alternative categorizations (eg, <50% vs >50%) yielded substantively similar results. There was no co-linearity between these 4 variables (Variance Inflation Factor: 1.17) and less than 0.5% of the responses were missing.


In multivariate analyses, we adjusted for 5 major factors known to be associated with physician compensation: (1) physician specialty (primary care, medical sub-specialty, or surgery); (2) practice type (1-2 physicians, >3 physicians, group model or staff model health maintenance organization [HMO], hospitalbased practice, medical school and other [eg, community health centers, municipal boards of health]); (3) the proportion of practice revenue that was capitated or prepaid (none, 1%-24%, or >25%); (4) an area-based marker of SES (the median household income of the zip code in which the practice was located using the 2004 Area Resources File [ARF]); and (5) regional location (North, Midwest, South, West).9-16,18,19


We used descriptive statistics to provide the percentages of our 2 outcomes of interest, stratifying by the degree to which physicians served patients insured by Medicaid, patients who were of minority background, or patients who faced language barriers. We then examined bivariate and multivariate associations between our financial incentives of interest and our covariates using x2 statistics and logistic regression models. We used a separate multivariate logit model for each type of performance measure (ie, productivity, quality, satisfaction, and/or resource use incentives). In our multivariate models, we included covariates that may contribute to variation in financial incentives: physician specialty, practice type, proportion of practice revenues from capitation, area SES, and regional location.22,41 We retained all covariates in the adjusted model because of their conceptual significance, regardless of the statistical significance of their bivariate association.42 We applied survey weights to account for the complex sampling strategy of the HPTS (ie, known differences between probability of selection, response, nonresponse, and location) in accordance with HTPS technical recommendations.43

We conducted our analyses using STATA 9.0, and all reported P values are 2-sided. The Institutional Review Board (IRB) at the University of Chicago reviewed the study protocol and deemed it exempt from official review.

Role of Funding Source

The funding sources had no role in the design or conduct of the study; collection, management, analysis or interpretation of the data; or preparation, review, or approval of the manuscript for publication. None of the authors have any conflicts of interest to declare.


National Estimates: Variable Compensation and Types of Performance Incentives

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