This paper measures the extent to which medical groups experience external pay-for-performance incentives based on quality and patient satisfaction and the extent to which these groups pay their primary care and specialist physicians using similar criteria. Over half (52%) of large medical groups received bonus payments from health insurance plans in the period 2006-2007 based on measures of quality and patient satisfaction. Medical groups facing external pay-for-performance incentives are more likely to pay their primary care physicians (odds ratio [OR] 4.5; p<. 001) and specialists (OR 2.5; p=.07) based on quality and satisfaction. Groups facing capitation payment incentives to control costs are more likely to pay member physicians on salary and less likely to pay based on productivity (p<. 001 for primary care; p<. 05 for specialists) than groups paid by insurers on a fee-for-service basis.
Medicare, state Medicaid programs, and numerous private insurers are experimenting with physician incentive programs that offer financial bonuses for improved performance, as measured through indicators of clinical quality and patient satisfaction (Christenson, Leatherman, and Sutherland 2007; Young et al. 2005; Rosenthal et al. 2006; Robinson and Megerlin 2007; Rosenthal et al. 2004). Considerable debate exists as to whether these bonuses should be paid to individual physicians or to larger physician organizations. Payments to groups rather than individuals are attractive because valid measures require large numbers of patients (Hofer et al. 1999), good performance is due often to collaborative as well as individual effort (IOM 2007), and groups may be more likely than individuals to invest the funds in practice improvements (IHA 2006; Gaynor and Pauly 1990; Conrad et al. 2002). Conversely, payments to individual physicians target the performance rewards more precisely and are less likely to be diluted across the performance of multiple clinicians who may not exert substantial influence on each other's behavior.
This study measures the prevalence among large medical groups (20 or more physician members) of pay-for-performance bonuses from health insurance plans based on quality and patient satisfaction. We then examine the payment methods used by these medical groups for their individual primary care and specialist physicians considering the percentage of annual compensation paid based on quality and/or patient satisfaction, as distinct from physician productivity (visits and procedures) and other factors.
We hypothesize that medical groups facing performance-based payment methods from health insurers are motivated to create similar incentives for their member physicians to increase the probability that the groups will achieve the targeted level of performance and receive the increased payments. Furthermore, we hypothesize that physician organizations participating in formal, collaborative quality improvement programs will be more motivated than otherwise similar organizations to encourage high-quality performance by individual physicians, over and above any motivation deriving from insurers' pay-for-performance programs.
We do not have strong hypotheses concerning the association between medical group size (number of physicians) and reliance on performance-based payment. It is not known whether larger physician organizations, relative to smaller organizations, are able to use financial incentives more effectively than nonfinancial factors, such as culture and leadership, to drive quality improvement. Conversely, large physician organizations may possess better electronic and management systems for measuring performance than smaller organizations, and may be able to rely on performance feedback to physicians that reduces the need for financial incentives. For analogous reasons, it is not possible to develop strong hypotheses as to whether ownership of the medical group by a larger hospital system or health maintenance organization (HMO) would increase or decrease the likelihood of using financial performance incentives, compared to independent physician-owned medical groups. …