Physician Compensation and Risk-Bearing Arrangements in Medical Groups: Impact on Physician Productivity

What are the consequences of alternative methods of compensating physicians in medical groups on physicians’ productivity? Researchers at the University of Washington examined this question by: 1) examining impact on physician productivity of different physician compensation and risk-bearing arrangements and 2) qualitatively assessing the detailed behavioral mechanisms by which those compensation and risk-bearing arrangements influence physician productivity. Data for the first part of the analysis--the evaluation of the effects of compensation method on physician productivity--came primarily from the Medical Group Management Association’s (MGMA) 1998 Compensation and Production Survey and their 1998 Practice Cost Survey. The respondent sample for these surveys was about 8000 physicians from about 500 group practices. The Compensation and Production Survey contains data on individual physician levels of production, annual compensation, compensation method, individual characteristics, ownership form, group size, and other necessary information. The key informant sample consisted of 40 medical groups in 4 states (WA, OR, CA and WI). The objective of the study was to help health care executives, researchers and payers who must craft (and evaluate) risk-bearing arrangements to better understand how financial incentives affect physician productivity, and to identify Abest practices@ with respect to compensation--those practices that encourage productivity while also discouraging overuse and underuse.