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The Impact of Financial Incentives on Physician Productivity in Medical Groups

Authors

  • Douglas A. Conrad,

  • Anne Sales,

  • Su-Ying Liang,

  • Anoshua Chaudhuri,

  • Charles Maynard,

  • Lisa Pieper,

  • Laurel Weinstein,

  • David Gans,

  • Neill Piland


This research was supported by a grant from the Health Care Financing and Organization (HCFO) Initiative of the Robert Wood Johnson Foundation.

Douglas A. Conrad, Ph.D., Professor, University of Washington, Department of Health Services, 1959 NE Pacific Street, Box 357660, Seattle, WA 98195-7660. Anne Sales, Ph.D., is an Assistant Professor, University of Washington, Department of Health Services, and is also with the Veterans Administration Puget Sound Health System, Health Services Research and Development Program. Su-Ying Liang, Ph.D., is a Research Assistant Professor, School of Pharmacy, University of California at San Francisco. Anoshua Chaudhuri is a Ph.D. Candidate, Department of Economics, University of Washington. Charles Maynard, Ph.D., is a Research Associate Professor, University of Washington, Department of Health Services, and is also with the Veterans Administration Puget Sound Health System, Health Services Research and Development Program. Lisa Pieper, M.B.A., and Laurel Weinstein, B.A., are Research Associates with the Center for Research, Medical Group Management Association (Englewood, CO); Neill Piland, Dr.P.H., is Director of the Center. David Gans, M.A., is Director, Survey Operations, Survey Operations Department, Medical Group Management Association.

Abstract

Objective. To estimate the effect of financial incentives in medical groups—both at the level of individual physician and collectively—on individual physician productivity.

Data Sources/Study Setting. Secondary data from 1997 on individual physician and group characteristics from two surveys: Medical Group Management Association (MGMA) Physician Compensation and Production Survey and the Cost Survey; Area Resource File data on market characteristics, and various sources of state regulatory data.

Study Design. Cross-sectional estimation of individual physician production function models, using ordinary least squares and two-stage least squares regression.

Data Collection. Data from respondents completing all items required for the two stages of production function estimation on both MGMA surveys (with RBRVS units as production measure: 102 groups, 2,237 physicians; and with charges as the production measure: 383 groups, 6,129 physicians). The 102 groups with complete data represent 1.8 percent of the 5,725 MGMA member groups.

Principal Findings. Individual production-based physician compensation leads to increased productivity, as expected (elasticity=.07, p<.05). The productivity effects of compensation methods based on equal shares of group net income and incentive bonuses are significantly positive (p<.05) and smaller in magnitude. The group-levelfinancial incentive does not appear to be significantly related to physician productivity.

Conclusions. Individual physician incentives based on own production do increase physician productivity.

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