Physician Financial Incentives: Use of Quality Incentives Inches Up, but Productivity Still Dominates

Originally published by the Center for Studying Health System Change (HSC), 2007.

Quality Incentives Inch Up, but Productivity Still Drives Physician Pay

While the use of quality-based financial incentives for physicians was growing, productivity measures continued to dominate physician compensation structures, according to HSC research on physician financial incentives. The gap between the rhetoric surrounding pay-for-performance and the reality of how physicians were actually paid remained wide. Most physician compensation was still tied to the volume of services provided rather than the quality or outcomes of care.

Quality incentives, where they existed, typically represented a small fraction of total physician compensation, limiting their power to change clinical behavior. The research highlighted the tension between the health care system's stated goal of rewarding value and the payment structures that continued to reward volume. Transitioning from volume-based to value-based physician payment required not only redesigning compensation formulas but also building the data infrastructure needed to measure quality accurately, developing consensus on which quality measures to use, and overcoming physician concerns about the fairness and validity of performance measurement.

Sources and Further Reading

Center for Studying Health System Change, "Physician Financial Incentives: Use of Quality Incentives Inches Up, but Productivity Still Dominates" (2007).