Quality of Care: How Are Physicians Responding to Financial Incentives?

September 2015
By HCFO Staff

With the goal of lowering health care costs, many policymakers and health care delivery systems are looking to change the way doctors are paid by focusing on quality of care. One innovative approach has been to shift incentives from a fee-for-service (FFS) payment model to a pay-for-performance (P4P) arrangement, under which doctors are rewarded for improving their quality of care. In theory, the new payment model incentivizes doctors to keep patients healthy with fewer tests, procedures, and appointments. However, to date the financial incentives may not have triggered practices to change individual physician compensation policies. This disconnect may be inhibiting significant quality improvement.

A recent Washington Post Wonkblog article reports findings from a study by former HCFO grantee Andrew Ryan, Ph.D., University of Michigan, on physician compensation in accountable care organizations (ACOs).  In this study, Dr. Ryan and his colleagues found that even in care delivery settings designed to align financial incentives with quality improvement, only a small fraction of physicians’ pay is currently linked to quality of care.  Further, physicians care for a variety of patients, and there is wide variation in the way they are paid (salary, money from providing services, and quality). As such, it is difficult for one payment model to achieve widespread effects on the practice of medicine. 

In related HCFO-funded work, Dr. Ryan and his colleagues examined the impact of Medicare’s hospital value-based purchasing on clinical quality and patient experience and found no evidence of improved clinical process performance or improved patient experience in the first year of the program. In another HCFO-funded study, Douglas A. Conrad, Ph.D., University of Washington School of Public Health and Community Medicine, and colleagues examined the effects of a large-scale P4P program on clinical quality performance and found that rather than improving quality, the use of a payment incentive program was associated with a reduction in quality for most of the quality metrics compared to the use of a quality scorecard and public reporting alone. Taken together, the findings from these studies highlight the challenges not just in aligning financial incentives but in ensuring that these incentives are effectively translated to physicians who can improve care quality on-the-ground.

An ongoing HCFO-funded study by Timothy Hoff, Ph.D., and Gary Young, Ph.D., Northeastern University, aims to elucidate the physician experience with these evolving value-based payment models. Through in-depth interviews with providers and support staff at practices that vary along practice-level and financial dimensions, Hoff and Young will describe how and why primary care providers adapt to value-based payment arrangements and develop a preliminary typology of such adaptations to better predict, design, and implement payment reform. Their grant will conclude later this year.