Do Incentives Increase the Quality of Care Provided by Physicians? Term Paper

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¶ … Incentives Increase the Quality of Care Provided by Physicians

The Impact of Financial Incentives on Physician Behavior

In order to understand the current problem faced by physicians regarding Managed Care Organizations (MCOs), it is important to take a look into the background of the concern. Before managed care came about, indemnity plans and fee-for-service plans were dominant in the area of physician reimbursement. Payment for the services rendered by a physician was made regardless of the diagnosis made or the number of tests run. Individuals expected to pay the physician when their appointment was over, or they expected to make their co-payment and let their standard insurance company pick up the rest of the bill.

Over-billing -- charging either too much for the service provided, or charging for services that were never provided -- was a problem, because there were not any safeguards in place to stop physicians from doing it. Without safeguards, physicians could bill insurance companies and patients pretty much however they chose to, and they rarely got caught or questioned about it. If they did, they would take away the charge, chalk it up to a 'billing error,' and do the same thing to the next patient. No one was the wiser.

Background of the Concern

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Managed care came about because of necessity. Not the necessity of the physicians, because they certainly did not want to be regulated by anyone, but the necessity of the individuals, who were having trouble paying their doctor bills because of the skyrocketing medical costs. Costs needed to be contained, and MCOs were able to do that. They did not appear because someone thought they should be there; they showed up because something had to be done, and MCOs were the best option that could be found.

TOPIC: Term Paper on Do Incentives Increase the Quality of Care Provided by Physicians? Assignment

There were several ways that MCOs worked to reduce the costs of treatment. The most important way was by using financial incentives. They worked like this: when a physician lowered the number of tests, treatments, hospital admissions, and referrals to specialists, that physician got a bonus, in the form of financial compensation from the MCO. When the physician had too many tests, referrals, etc., then that physician got a 'withhold.' In other words, that physician lost financial compensation, because the MCO would not pay the physician what they originally agreed upon if the physician was not under a certain quota when it came to tests, referrals, and the like.

Statement of the Problem

Physicians are spending less time with their patients under pressure from Managed Care Organizations. Therefore, since less time is being spent with the patients, the care quality offered by the physician is considered to be lower in a managed care environment. The financial incentives offered to providers are often very confusing and the physician quite often finds himself making much less financial compensation than that in a fee-for-service environment. Some Managed Care Organizations feel it is not their responsibility to provide incentives to providers, and it can be a struggle to finance such incentives so as to reward good behavior.

Conflicts and Capitation

There was one major problem with the MCO system. It created a conflict of interest for many physicians. The main concern was that the care quality was being compromised because physicians had to be careful how many tests they ordered and how many referrals they made. Because of the quota, there may have been individuals who needed more advanced care and did not get it. Not all physicians minded the system, of course, because there are some individuals in every profession who are only out for the paycheck. The physicians who were dedicated to helping their patients, however, soon took concern with the MCO system.

Managed Care Organizations began working on a way to contain costs, keep physicians happy, and keep patients happy as well. Capitation was one way to do this. In capitation, the MCO pays the physician a fixed amount per patient, regardless of the services that are rendered (Simon, 1997). This greatly helps to reduce healthcare costs, but it only works for physicians if the majority of patients do not necessitate much treatment. If the majority of patients require expensive treatments, a physician could end up spending more on a patient than he is getting paid from the MCO, which causes him to lose financial compensation in the long run.

A few patients like this are acceptable, but too many patients and the physician goes out of business -- he cannot survive on what the MCO is paying him. Capitation, however, when it works well, greatly outweighs the incentives of fee-for-service (Berwick, 1996). If the doctor treats many patients that do not necessitate much care at all, he will likely get paid more from the MCO than he would have charged those patients in the standard fee-for-service arrangement, so he actually makes more financial compensation by 'working for' the MCO than he would have on his own.

Capitation is designed to encourage physicians to provide only the treatments that are important and discuss wellness and prevention with their patients so that they do not have to see the doctor as often. Capitation is not well understood, however, and some physicians still have trouble figuring out just how it works and how much financial compensation they really stand to make under that system. This can be very frustrating for physicians, since they often make less than they expected to and by the time they get the financial compensation it is too late to change it. Not all physicians like the MCO system, and many physicians still work on a fee-for-service basis, because they feel that they provide better care to their patients that way, instead of being concerned about quotas.

Purpose of the Study

As for this paper, the purpose of this research is to examine the financial incentives and physician behavior that are present in managed care. How physicians balance their income and their concern for patients has become a modern ethical problem. This is important to examine, because the quality of life for many individuals could be affected. There are ways that physicians can make financial compensation over and above their base salary and capitation, or lose some of that capitation financial compensation. The main way is through the bonuses and withholds that were mentioned briefly earlier. There is a problem with bonuses and withholds. By using financial incentives for physicians, MCOs are attempting to influence the patient-treating behavior of those physicians (Armour, 2001).

Bonuses and withholds are given at the end of the year, when MCOs assess the performance of the physicians working with them and determine whether each physician has contained costs to the level the MCO had set. If the costs are in line with what the MCO expects, the physician gets a bonus. If the costs are too high, the physician has to deal with a withhold. Research is needed to determine whether these methods affect the quantity, quality, or mix of services provided by physicians. If they are found to be affected, how they are affected should also be examined (Mitchell, 2000).

Quite a bit has been written about MCOs, physician incentives, and the alleged ethical problem that they pose, but very little is known about the actual physicians and whether they really experience these cost-cutting measures as ethical problems, or whether the public just thinks they should, therefore they assume that they do (Mitchell, 1999).

Delimitations of the Study

While there is research that can help to substantiate the outcome of this type of study, there are still concerns to address. Variables can affect the way that a study is done and the type of information that it presents to the public. It is logical, however, that the information collected here can be easily generalized to physicians in other areas of the country and to other types of incentive programs which may arise in the future.

Limitations of the Study

As with any study, this one has some limitations that must be dealt with. All studies have their problems and limitations that surface, and tackling them and discussing them do not indicate weakness, but rather they show the strength of realization possessed by the researcher when looking at the chosen field for the study. It is with this in mind that the limitations of the study will be discussed here, so that it can be shown that the researcher had a full and complete realization of the problems inherent in doing a study like this with the resources that are available. Any biases that the researcher might have can also be considered a limitation.

Limitations to a study are often overlooked by the researcher, but this can pose problems for others that wish to use the research at a later date. Unfortunately, this happens quite often, and it makes research suspect when there are no limitations discussed. In an effort to avoid this, all limitations of this study that are recognized by the researcher will be clearly… [END OF PREVIEW] . . . READ MORE

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