How Do Financial Incentives Affect Physicians' Clinical Decisions and the Financial Performance of Health Maintenance Organizations?

Abstract

Data from a survey of health maintenance organizations (HMOs) were examined to determine whether the use of financial incentives by HMOs changes physicians' behavior toward individual patients. A regression analysis of data was used to examine the relation between incentives and two measures of resource use, hospitalization rates and numbers of outpatient visits, and one measure of HMO financial viability, achievement of break-even status. Different methods of paying physicians resulted in differing rates of hospitalization. Numbers of outpatient visits were affected by physicians' financial risk for deficits, and by the percentage of HMO patients in a physician's caseload. An HMO's break-even status was influenced by its age, size, and type, by its physicians' HMO patient caseload, and by whether its physicians were placed at personal financial risks for the cost of outpatient tests. (KIE abstract)