Financial incentives and physician care quality in managed care organizations

¶ … 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

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.

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 spelled out and discussed so that there is no concern in the future about whether the researcher knew what kinds of problems might arise or what should be done about them if they did. In this way, any concerns that could come up and be problematic will be avoided and the information contained in the study can be accepted as being reliable, valid, and unique.

As has been mentioned, limitations are too often overlooked in studies, and it is often impossible to find all of the limitations that are contained in a study and spell them out for all to see. However, that does not mean that the limitations that are noticed should be overlooked. As long as they are legitimate, the more limitations that are discussed in the research the more significant the research will be found to be, since any weaknesses that it might have will be noted and dealt with. It is for this reason that this particular section will detail the limitations that this study faces.

The main limitation of this study, other than the biases of the researcher, is that the study is largely subjective. Some may not see this as a limitation, but others will view it that way, and so it is important to discuss it and clear up any concerns early on. Objective studies are analytical and deal with facts and figures. Subjective studies deal more with perceptions and feelings, as well as thoughts and beliefs. While both are good ways of studying things, the kind of study that is being performed often dictates which way the study is conducted.

For this particular study, being able to be objective and provide facts and figures about the doctors, MCOs, and incentives would have been good, and could have provided some very significant data that would be important for future study. However, when dealing with concerns like this where individuals answer surveys, and where the literature review is also used as part of the collected data, there are often few facts and figures that can be used and relied on with any degree of certainty. This is why the study is subjective - not because there are no figures provided, but because the figures provided are based on answers to Yes/No questions, and these types of answers are largely subjective and based on the perceptions of the individual answering the survey. As has been mentioned, not all will see this as a limitation or a weakness of the study, but it is mentioned here so those that do view it that way will be aware of it.

Assumptions

The assumption of this research is to establish that there is a relationship between physician behavior and the monetary incentives used by MCOs. A further assumption is that physicians do see this as an ethical problem. If a physician limits the amount of hospital admissions, testing, and specialist referrals, that physician can financially gain, but at what cost to the patient? At what cost to the moral and ethical code of the physician? These questions are at the root of the problem, and must be considered and analyzed.

Hypothesis

The main hypothesis of this research is that physicians do limit what they do for their patients when they see that they will achieve financial gain in this manner, and that this is detrimental to the care quality that these patients receive.

Managed care has had such a huge impact on both physicians and patients that many have not stopped to consider that, even though it may be financially better, the quality of patient care may not be the same as it was in the fee-for-service days, when the words 'managed care organization' were meaningless. The relationship between a physician and his or her patient is the foundation for modern medical ethics (LaPuma, 1996). To compromise that relationship to save a few dollars is terrifying, but it may be exactly what MCOs are doing. Clearly, there is a large ethical question here that necessitates further analysis.

In order to identify and consider the problem, various collected research articles have been examined, and can be found in the literature review that follows. Data sources under consideration came from the Kaiser Family Foundation, the AMA Council on Ethical and Judicial Affairs, and various academic journals. The summary of these relevant arguments, as well as the theoretical implications that could be found in them, allowed for some very important conclusions to be drawn about MCOs, physicians, and the ethical questions that they battle on a daily basis.

Chapter Two - Literature Review

In order to fully understand the literature being reviewed, it is important to understand the term 'care quality'. It will be defined in this section. Also discussed will be a comparison of the different types of payment plans that the MCOs use, such as capitation, fee-for-service, and salary. These will be considered in relationship to physician behavior. Additionally, the literature review will address the impact of care quality and payment on both physicians and patients so that the problem created by MCOs can be clearly seen and considered.

Without a clear definition of care quality, it is difficult to understand how financial incentives for physicians can translate to a loss of care for patients. Care quality has several definitions, depending on who is asked the question, but one of the best ones comes from Campbell (2000), who says that care quality is the ability to access effective care with the aim of maximizing health benefit in relation to necessity.

Care Quality Components

In Campbell's (2000) analysis, he suggests that there are two domains of quality, which he calls 'access' and 'effectiveness.' The most basic dimension of access to a health structure is physical or geographical access (Haynes, 1991). The patient and the physician have to be able to get together. If there is no physical meeting between physician and patient, there is no real way for the physician to assess the patient and that patient's health care needs. Without this assessment, the care quality that the doctor can provide to the patient is seriously limited, and could even prove to be more harmful than helpful if the physician misdiagnoses something or makes an inaccurate guess about what is wrong with the patient. Health care is really not the place for guesswork.

Effectiveness, on the other hand, is the extent to which care delivers its intended outcome or results in a desired process, in response to necessity (Campbell, 2000). This is the second part of quality. If access is not a problem, and the physician and patient get together, then the only thing left is to make sure that the treatment the physician prescribes is going to help the patient in the best way possible, with the least amount of discomfort. For treatment to be effective, the physician must know what is wrong with the patient, how to correct it, and what is the best treatment for that particular patient.

Not everyone responds the same way to treatment, and there may be a reason why a treatment that the physician would not normally use should be used on that patient. Managed Care Organizations can discourage this because the other treatment might be more expensive, for example, which would cause a problem for the physician -- does he do what is best for the patient, or does he get paid?

Payment Methods

There are several payment methods used by MCOs. The three main ones, which will be discussed further here, are capitation, salary, and fee-for-service. Capitation is a payment method where a physician is paid a specific sum of financial compensation for the ongoing care of an individual or group of individuals for a particular period of time. It is an agreed-upon estimate of the amount of financial compensation that will be required to provide that care (Berwick, 1996).

Under this type of payment method, physicians have a financial incentive to increase the number of patients that they treat, as long as the fee that they charge those patients is greater than the average cost of caring for the patients. In other words, the physician wants to treat a large number of basically healthy individuals, and only a very small number of unhealthy individuals. Anything else would not be cost-effective for the physician. This concern for the amount of financial compensation to be made off of each patient leads to a desire to reduce the average cost of care even further.

To reduce this cost, physicians will spend less time with patients and increase the number of specialty referrals that they make (Armour, 2001). They reduce the time they spend with a patient so that they can see more patients, and they refer patients to specialists so that they do not have to deal with a patient that is going to take up a lot of time. Once again, it simply is not cost effective for physicians working with MCOs to have very many unhealthy patients. Their goal is to have a large patient base that is very healthy.

As long as the patients have that particular MCO health plan, the physician still gets paid, whether he sees them every day or once a year. Because of this, a physician can make a lot of financial compensation off of these healthy individuals while not having to lose financial compensation on the unhealthy ones -- he refers them to a specialist instead, thereby keeping his costs down so he can get that bonus at the end of the year.

According to the Random House College Dictionary, 'salary' is "a fixed compensation periodically paid to an individual for regular work or services." The use of fixed payment reimbursement schemes (salary and capitation) is believed to be an effective means of containing costs and keeping them low, because the incentive for physicians to increase the quantity of their services is lowered (Armour, 2001).

The argument is that as long as a physician is getting paid a set amount, that physician will not have a desire to go 'above and beyond the call of duty' to treat his patients. Instead, he will do for them what he can, but he will take care not to go over the 'budget' he has set for each patient. He knows if he does that he will not receive much financial compensation. While most physicians do care a great deal about their patients, they also work for pay. Most would not do it for free. Managed Care Organizations take advantage of that knowledge by seeing that physicians get paid enough to want to work for the MCO, but not enough to overexert themselves.

In the standard fee-for-service approach, the monetary compensation is much more simple. The physician sets a price for each service, and the patients or their insurance companies pay that price. There are no negotiations (Kovner, 1995). Under fee-for-service reimbursement, in which physician compensation is primarily a function of the supply of services and procedures, physicians have an implicit financial incentive to increase the quantity of medical services, provided the demand for medical care is inelastic and the price is greater than the average cost of medical care (Armour, 2001).

Fee-for-service payment creates an incentive to increase service volume, while capitation may induce the physician to provide fewer services (Mitchell, 2000). Put another way, when a physician receives capitation, he gets paid per patient, not per each service performed on that patient. It does not matter if he does one test or 20. If they are all on the same patient, he does not get paid any differently for the amount of work he does. One patient -- one price. Fee-for-service, on the other hand, allows the doctor more freedom to treat the patient the way he thinks he or she should be treated, but sometimes greed can cause unimportant testing and procedures, especially if the patient is wealthy or has a very good insurance company.

In fee-for-service, the physician gets paid for each procedure, not for each patient. Because of this, the more procedures done on one patient, the more financial compensation the physician makes. What matters is not how many patients the physician treats, but how many procedures each patient undergoes and pays for. One procedure -- one price.

Physician Behavior

It has been suggested that clinical autonomy plays an important role in physician satisfaction and behavior. Under MCOs, the clinical autonomy of each physician may be compromised, since the physicians must often obtain approval before beginning care, prescribe only drugs that are authorized by the MCO, and follow specified treatment plans for given ailments (Eastman, 2000). As mentioned above, what is considered a good treatment for one patient may not be the right treatment for another one.

When physicians are required to follow specified treatment plans they are stopped from using their own best judgment. Good judgment is what makes them good physicians, and their credibility is being undermined by MCOs that insist they know what is best (at least from a financial standpoint). Everyday decisions about work conditions are also controlled by the MCO, such as how many patients the physician needs to see and how many staff members he can afford to pay.

Another factor affecting physician behavior is professional dominance. It is the critical factor in the professional status of a physician. It has been argued that as long as physicians as a group remain dominant in the division of labor in health care, they will retain their status as professionals even if individual physicians lose some of their clinical autonomy (Eastman, 2000). The research suggests as well that retaining dominance is critical to physician satisfaction, and satisfied physicians will be more likely to be caring and concerned about their patients.

A dissatisfied physician is not going to give patients the care quality that a satisfied physician would provide, and so patients suffer not only from the lack of financial compensation their physician will receive if he treats them too much, but from his unhappiness with his job, as well. This can be dangerous for patients as well as physicians.

There are other elements to physician satisfaction, of course, and losing some dominance does not guarantee that a physician would be unhappy. However, the other elements; increased continuity of care, lower patient no-show rates, more efficient use of ancillary care, and reasonable charges for routine follow-ups; are sometimes compromised in the race to save financial compensation, as well.

Kaiser Family Study Theoretical Implications

The 1999 Survey of Physicians and Nurses was a research study conducted by the Kaiser Family Foundation. Both physicians and nurses see the growing influence of managed care as having primarily negative effects on health care. Physicians cited increases in paperwork, and nurses cited decreasing care quality as the down sides to MCOs. However, both physicians and nurses gave positive marks to health plans for preventative care and for practice guidelines and disease management protocols.

Physicians' views and experiences with managed care varied substantially by specialty and practice setting. Specialists (71%) were more likely to say that managed care had a negative impact on patients than primary care physicians (58%). The physicians who contracted with multiple health plans (74%) were also more likely than physicians who work mostly with single MCO contracts (52%) to report negative effects of managed care on patients.

Most health care providers see the influence of MCOs on health care, and they are not happy about it. Even though there are some good things to be mentioned about MCOs, most physicians and nurses see mainly negative effects. Consider the following data, taken from the Kaiser survey:

95% of physicians and 92% of nurses said that managed care has increased the amount of administrative paperwork for providers and patients.

86% of physicians and 82% of nurses said managed care has decreased their patients' ability to see medical specialists.

83% of physicians and 85% of nurses said managed care has decreased the amount of time they spend with patients.

72% of physicians and 78% of nurses said that managed care has decreased the care quality for individuals who are sick.

In reflecting on their experiences in medicine, 58% of physicians said spending too much time on administration and not enough time with patients was a "great concern." Other 'great concerns' cited by physicians were: not having enough clinical autonomy (47%), and not making as much financial compensation as they had planned (26%). Among the 'great concerns' for nurses were: inadequate staffing levels (69%), not enough clinical autonomy (33%), inadequate training to cope with changes (28%), and not making as much financial compensation as they had planned to (26%).

In another Kaiser Family Survey done in March of 2002, the surveyors looked at "Doctors' Opinions about their Profession." Being slightly more recent than the aforementioned survey, the March 2002 survey makes a good comparison to see if the views of physicians and nurses had changed in the three years between the surveys. In the 2002 survey, there were several important points made, which will be summarized here:

As for their opinions about their profession

87% of physicians believed overall morale has diminished greatly in the past five years.

53% of physicians would recommend practicing medicine to potential candidates.

45% of physicians stated they would not recommend the profession to potential candidates, citing administrative hassles (57%), and loss of autonomy (46%).

In a Kaiser study done in 1981, 50% of physicians said that they would recommend their profession highly. Despite the troubles with MCOs, the perceptions of whether the profession in general is 'good' or 'bad' has apparently not changed much in 21 years.

76% of physicians feel that managed care has a negative impact on their abilities to practice medicine.

95% feel that managed care has increase the amount of paperwork.

88% feel that managed care has decreased the amount of time spent with patients.

83% feel that managed care has made it more difficult for them to refer a patient to a specialist.

83% report that they have experienced an increase in their overhead costs since joining one or more managed care plans.

41% of physicians believe that managed care actually increased health care costs.

23% of physicians believe that managed care decreased health care costs.

34% of physicians believe that there has not been any effect on health care costs due to managed care.

Physicians in general believe that managed care has not been effective in reducing the use of inappropriate services.

A comparison of the 1999 and 2002 surveys shows that:

In 2002 a higher percentage of physicians felt mostly negative about managed care (41% v. 25%).

In 2002 a higher percentage of physicians felt that managed care decreased the amount of time spent with patients (88% v. 83%).

Since 1999, physician's negative perceptions of managed care have increased. The 2002 survey did show, however, a more positive outlook from physicians who were contracted with only one MCO as opposed to physicians who were contracted with several MCOs. These physicians who are contracted with only one MCO were less likely to state that their administrative costs had gone up. They were also less likely to feel that the care quality that they provide to their patients had been compromised. It would seem, then, that the solution to the problem would be to just join less managed care plans, but life is seldom that simplistic. There are other considerations to be taken into account, and just joining fewer managed care plans will not necessarily solve the problem for most physicians.

Theoretical Implications

According to Miller (1999), "Managed Care Organizations use financial incentives to prompt physicians to recognize the cost consequences of their treatment recommendations and therefore to reduce the amount of care subject to insurance reimbursement." Miller (1999) goes on to say, "disclosure of incentives to constrain utilization can alert patients to the importance of informing themselves generally about managed care and advocating for their own interests."

While all of that may or may not be very accurate, the article covers the federal and state regulatory initiatives that are being addressed concerning disclosure of financial incentives. The arguments presented in the article cover the ethical responsibility of the physician; for example avoiding conflicts of interest and lack of informed consent.

A conflict of interest may arise when a physician has to worry about whether to treat a patient the way he feels would be most beneficial, or the way the MCO will pay him for. While it seems logical that any physician would do all he or she could to protect the patient and treat the patient properly, remember that doctors still have to get paid. If they do not, then they cannot continue to treat that patient or any others. Unless they feel that what the MCO is suggesting for treatment is going to actually be harmful to the patient, they will likely treat the patient in the way that is going to give them (the physician) the most financial compensation.

A lack of informed consent is basically a failure to tell the patient everything he or she needs to know to make the best decision possible. For example, if a patient requires surgery for a medical condition, but the MCO does not want to pay for that surgery, the physician may try another approach, knowing that surgery is what the patient really needs. The physician will not even mention surgery to the patient. This is unfair to the patient, who might have elected to have the surgery and pay for it some other way. Without telling the patient about all of the options available to him or her, the patient cannot make an informed decision about care, and this could cost them a lot more than money in the long run. The physician could also end up in trouble if the patient decided to sue because the medical condition got worse due to the physician's failure to give the patient all of the facts and options.

Various policy considerations are also evaluated in Miller's (1999) article. By advising patients at the beginning of treatment regarding financial incentives and alternative options, the patient can make a well-informed decision about their care, and the physician can avoid a lawsuit. "One potentially undesirable consequence of disclosure is that it will force physicians to focus on incentives in relation to individual patients to a greater degree than might otherwise occur" (Miller, 1999).

Proponents of disclosure by health plans say it is important so that the public can make informed choices about which plan they want to choose for their health care. Proponents also point out that by being up-front and honest from the beginning, MCOs and physicians might be able to increase the public's trust in managed care, which right now is very low.

Many individuals believe that MCOs are dangerous and that no one gets quality care if they belong to an MCO. While this is not the case, it is a mindset that the public has gotten itself into, and it will take work on the part of the physicians and the MCOs to convince the public that MCOs are safe and effective means of health care.

Ethics

The physician patient relationship is largely based on trust. It also gives rise to the ethical obligations that physicians have to their patients. All physicians should place their patients' welfare above their own self-interests and obligations to other groups (E-10.015, the Patient-Physician Relationship). In many of the studies that have been mentioned already, as well as this one, it is easy to see that managed care may hinder this ethical, trusting relationship that physicians and patients have.

With this knowledge comes the most important question: Can the forms of reimbursement incentives offered by MCOs create ethical problems? It has already been shown that incentives can create conflicts of interest for physicians. When there is a conflict of interest, judgments about things such as patient welfare could be influenced by other factors, such as monetary gain (Thompson, 1993). When too much of a physician's income is determined by how much he reduces treatments, hospitalizations, and referrals, the conflict of interest can too easily lead to unethical decisions (Devettere, 2000).

While managed care may be effective in helping to control the costs of medical services, it can also create new ethical problems for physicians that may impact providers, customers, and employees (Eastman, 2000). Patients depend on their physicians, sometimes literally for their lives. In putting this much trust in another human being, patients also assume that physicians would never choose monetary gain over proper care. When patients learn that this is not always the case, they are usually confused and unhappy.

As a result, the physician-patient relationship can be negatively affected because the trust between patients and their physicians may erode as patients learn that their physicians have an interest in reducing costs as well as in treating them (Devettere, 2000). Fidelity and altruism are supposed to govern the physician-patient relationship (LaPuma, 1996).

There are four major ethical problems that involve the physician in a decision-making role: (1) undertreatment due to overt pressures of financial incentives; (2) breaches of patient confidentiality by the physician that are required by the managed care plan; (3) lack of disclosure to the patient of the financial incentives or overt pressures under which the physician functions; and (4) overuse of practice guidelines (Eastman, 2000).

In the Eastman (2000) study, ways to improve the moral tone of the physician's relationship to both the patient and the MCO were identified. By limiting the use of financial incentives, especially bonuses and withholds, used to manage physicians as they make decisions about treatments, admissions, referrals, how much time they have to spend with each patient, and other medical decisions, the quality of patient care and the confidentiality of the physician-patient relationship both improved (Devettere, 2000).

Another way to improve the moral tone of the physician's relationships with patients and MCOs is to increase and improve the care quality that the physician is able to give. The best way to oversee this change is with 'outcome data.' In other words, what were the patients' outcomes, and does this relate to the 'care quality' (i.e. time, attention, etc.) that the physician was able to give each patient. The key concern with care quality is that the sick necessitate it more than the healthy, and many still fear that MCOs will try to limit or reduce the care quality to cut corners and save money (Devettere, 2000).

Financial incentives really do not belong in patient care, but MCOs have found them a place, and there they remain. Regulations that prohibit MCOs from linking salaries and bonuses to care quality and amount of patients seen would also help with the ethics of the situation. Unless these financial incentives are linked to positive things such as improved care quality or better outcomes there will always be a financial interest at stake that will influence the decisions of even the best physician eventually. In developing policies to regulate financial incentives for physicians, there must be two worth and competing goals recognized -- to protect the quality of patient care, and to restrain medical care costs (Emanuel & Goldman, 1998).

Project Objectives

Identify the types of financial incentives related to physician behavior that are present in a managed care environment.

Identify whether certain payment and incentive methods affect the overall quantity, quality, or mix of services provided by physicians.

Establish that there is a relationship between physician behavior and the monetary incentives used by MCOs.

Methodology

This study will examine the problems that directly impact patient care and how, through the use of financial incentives, MCOs attempt to influence physician behavior. Through research and data, this study will establish the relationship between the use of financial incentives, physician behavior, and care quality. The data for this study will come from physician satisfaction surveys, peer review journals, and Web-based access to ethical concerns with managed care made available from 1995 through 2002. The criteria used for this study was (1) physician satisfaction data from 1995 through 2002; and (2) data on ethical concerns with managed care, such as under treatment.

A computerized literature search was performed using Medline and Pub Med to identify all citations concerning physician satisfaction, as well as member and physician satisfaction of the MCOs. A copy of the original article was obtained for each one of these that was identified. These original articles came from Modern Physician; Business and Health; Managed Care Executive; Archives in Internal Medicine; Journal of Health Politics, Policy and Law; and Journal of the American Medical Association. The Reference List of all retrieved review articles published from 1995 through 2001 were also examined.

The best data on physician satisfaction comes from the Kaiser Family Foundation studies done in both 1999 and 2002. In general, the majority of physicians and nurses surveyed felt that the growing influence of managed care has resulted in increased administrative paperwork, decreased ability of patients to see medical specialists, decreased time that physicians can spend with their patients, and decreased care quality for sick patients.

For financial incentives, various peer-reviewed articles were selected and used to obtain data. Articles used were from 1998 and 1999. This included articles from JAMA. The ethical insight for the study comes from the AMA Council on Ethical and Judicial Affairs. There is in-depth information on their Web site that discusses current ethical concerns and policies. In addition to the Web site, some of the ethical insight comes from peer-reviewed articles from the Journal of Health Politics, Policy and Law.

In order to perform the data collection, numerous articles, both on and off the Internet, needed to be examined. Only peer-reviewed articles in appropriate journals, as well as appropriate and legitimate Web sites, were used in the collection of the data, in an effort not to skew the data toward something that one particular researcher, physician, or MCO thought would be best.

The research performed for this study could be considered somewhat subjective, since there are differing opinions on what is ethical, and the behavior of physicians is not always reported accurately. For that matter, neither are the incentives. Earlier, it was mentioned that some physicians were believed to have reported their bonuses to researchers incorrectly, largely because they were not actually sure how much of their financial compensation came from bonuses and how much came from somewhere else.

Because of discrepancies like that one, and because of differing opinions, it is sometimes difficult to determine exact answers to questions of ethics and behavior. The purpose of this study is not to prove that MCOs are necessarily right or wrong, but to show that there is a correlation between how much physicians get paid, how they behave toward their patients, and whether that behavior is ethical as compared to what they would do in the same circumstances, for the same patient, if there was no financial incentive involved.

To show this correlation, the data from the Kaiser surveys as well as other Web sites and journals must be compiled into tables that demonstrate how financial incentives from MCOs cause physicians to show less concern for the welfare of patients by not spending as much time with them and not treating them with more expensive means that might not be covered by their MCO. Whether this is unethical is a matter for much debate, regardless of what the data shows, therefore there is no real way to measure it other than to show the fact that physicians feel that what they are doing is unethical or somehow wrong if they trade the quality of patient care for their own financial gain.

Population

The data for this study will come from multiple sources:

Physician Satisfaction Surveys to determine how satisfied Physicians are with Managed Care Organizations and the incentives they are provided to modify behavior.

A computerized literature search, which will use Medline and Pub Med to identify all citations concerning physician satisfaction, as well as member and physician satisfaction of the MCOs.

Peer review journals and web-based access to concerns with MCO's and the incentives they provide to physicians.

Peer reviewed articles selected and used to obtain data on the various financial incentives provided by MCO's. Articles used were from 1998 and 1999. This included articles from JAMA.

A research study conducted by the Kaiser Family Foundation to point out that physicians and nurses see the growing influence of managed care as having primarily negative effects on health care, such as increases in paperwork and decreasing care quality.

Importance of Study

There are several things that the study is designed to do. Among these are:

Conclude that MCOs are not helping physicians treat their patients any better than standard insurance.

Show that physician and patient satisfaction are critical topics not only for physicians but also for patients and health care administrators.

Establish that financial incentives do little to reward quality on the part of the plans and providers, and at least some care quality results are inevitable, therefore developing useful quality outcomes and process measures is needed in an effort to improve the care quality.

Determine effective ways in which financial incentives by MCOs could improve care quality.

Data Analysis and Findings

Analysis

According to the examination of the surveys, studies, and peer-reviewed articles, MCOs are not helping physicians treat their patients any better than standard insurance. If anything, patients are not treated as well, and physicians are noticing the difference. If physicians are noticing the difference in care quality, it seems quite likely that patients are noticing this difference as well.

Table 1 -- Kaiser Physician Satisfaction

Kaiser Survey Comparison of physicians who felt negatively about MCOs of physicians who had decreased time with patients

The table above shows the comparison data from the 1999 and 2001 Kaiser Survey. It is clear that, while the percentage of physicians who felt that they were spending less time with their patients did not increase significantly, it did go up. It is also clear that the percentage of physicians who were unhappy in general with MCOs went up drastically in just a couple of years. Physicians are increasingly unhappy about the care they are unable to give patients under the MCOs.

Because of this unhappiness, physicians may not do the same quality of work that they would do if they were happy. Work is supposed to be at least somewhat enjoyable, or the worker becomes despondent, upset, and generally unpleasant. Physicians who feel this way would not do much good for their patients.

To get into more of the specifics of the research findings, the financial incentives, physician behaviors, and physician ethics necessity to be considered as well. For example, the following table shows the relationship between 1999 and 2002 numbers for physician satisfaction.

Table 2 -- Physician Satisfaction Relationships

Spend less time with patients

Make enough financial compensation

Have high care quality

Feel pressured to take patients

Can refer patients to others

MCOs lower health costs

MCOs increase paperwork

From looking at the data in table two, it can be clearly seen that overall happiness with MCOs is declining. It can also be seen that financial incentives are becoming a problem for physicians. This is evidenced by the fact that less physicians (69%) felt that they made enough financial compensation in 2002 versus 1999 (72%). This indicates not only that physicians are unhappy with the financial incentives that the MCOs are offering, but also could be an indication that physicians are doing the right thing by their patients instead of giving them less-expensive treatments to make more financial compensation. No data was collected as to whether this was the case, or whether physicians are just feeling underpaid for the amount of work that they do.

As for the behavior of physicians, the data shows that physicians are feeling more and more pressure to take more patients, while at the same time saying that their care quality and time spent with the patients that they do have has gone down. This is a problem for physicians, as it contributes to low morale and feelings of worthlessness, but it is an even larger problem for patients, since they rely on what their physician tells them when they have a medical problem or question.

Because they have that trusting relationship with their physician they need to be aware of the fact that the physician, while not always happy about it, is working toward his or her own financial gain, and does not always get the opportunity to do everything he or she would like to do for the best interest of the patient.

As for the ethical implications of the data that was collected, that depends on who one asks and what one sees as ethical. Not every individual, and certainly not every physician, views ethics in the same way. In other words, what one individual might consider unethical, another individual might not. With that said, there is an ethical code that belongs to the medical community, called the Hippocratic Oath. Physicians take it when they get their license to practice medicine, and they are bound by everything it says. When they break that Oath, they are engaging in unethical behavior as far as the medical community is concerned.

Because the Hippocratic Oath is so important, the data should be examined in light of it. Do the physicians, by spending less time with their patients and not giving care quality that is as high as it once was, break that Oath? If they do, then it is safe to say that the financial incentives of the MCOs have made physicians unethical. If they stay within the Oath, however, it would be difficult to convince a jury of their peers that they behaved in anything but an ethical and proper manner.

Unfortunately, even if they do not stray from the Oath, many patients will think that a physician who does not do absolutely everything he can for every patient is unethical. While this is not the case, it is a common belief, especially among patients who may be very sick and concerned that their physician could be doing more for them but simply is not. These kinds of patients seem to forget that the physician has hundreds of other patients that he has to take care of as well, and they seem to forget that the physician, while obviously a very caring individual to be in such a profession, would not be in that profession if he could not make reasonable financial compensation doing it. It is about caring for individuals, but it is also about making a living.

The problem with the MCOs, as shown by the data, is that they create a lot of little problems for physicians. It is not simply that physicians do not get as much time with their patients, or that they do not make enough financial compensation, or that they are worried about care quality. It is all of those little things and more, all rolled into one. This is why the data shows that financial incentives, physician behavior, and ethics are tied together. They are all part of the same basic problem with the MCOs.

Physicians are being forced to do something a certain way if they want to get paid, and often times they still do not make as much financial compensation as they expected to. So next time they try harder, which means less care quality and less time with patients, all in the name of trying to please the MCO. It becomes a vicious circle that the physician has trouble getting out of, and it is hard on the physician, the patients, and the other employees who work at the clinic or physician's office.

Physicians who sign up with more than one MCO have the biggest problems with this, because each MCO has different ideas about patient care, different rules about what treatments they cover, and different paperwork that needs to be filled out on the patient. This makes it extremely difficult for physicians to spend any more time with their patients -- they are too busy doing all of the other things that the MCO requires of them.

The findings in this study can be summed up in this way: various contractual arrangements promote a decline in physician satisfaction and in patient care quality. Through the evaluation of current MCO incentives it can be seen that ethical dimensions are compromised. There is clearly a need for the system to be reevaluated.

Conclusion

Physician satisfaction is a critical topic not only for physicians but also for patients and health care administrators. The context in which physicians practice has changed dramatically in the last twenty years. Whereas physicians twenty years ago may have rejected MCOs, physicians now seem to accept them as the rules of the game, at least in areas of the country where high percentages of the patient population belong to such plans.

Just because the physicians accept it does not mean that they like it however. Managed care is a necessary evil,' if you will. There are good points about managed care, and it is certainly better than not having any insurance at all. It does provide basic coverage, usually at a reasonable price, for millions of Americans. However, that does not mean that it is the best option, for either patients or physicians.

Although managed care seems here to stay, physicians will likely not be satisfied with the financial arrangements of it for quite some time, if ever. This can cause problems for patients, since they rely on their physicians to know what is best for their medical condition, and not give them something else instead, just because their MCO does not want to pay for something or the physician could make a higher financial compensation that way. That is where the ethical side of the concern comes into the discussion. When a physician gives a patient something he knows is not the best choice because the MCO will pay for it, is that unethical? That question is still being debated, but even if it is not unethical, that does not make it right.

Probably the most useful conclusion of the research is that participation in managed care does not have to lead to physician dissatisfaction. While the data reflects that it often does lead to dissatisfaction, it was also mentioned in the literature review that there were several things that physicians really liked about MCOs. These things can outweigh the bad for many physicians, and therefore they will be satisfied overall with the treatment and compensation that they receive from MCOs.

Given that financial incentives do little to reward quality on the part of the plans and providers, at least some care quality results are inevitable (Miller, 1997). The likelihood of obtaining meaningful patient outcomes through the evaluation of care quality leads to the fundamental question: how is quality measured? Developing useful quality outcomes and process measures is a difficult task, and much more research and reporting are needed on care quality process and outcomes measures for vulnerable groups (Miller, 1997).

In this research there was a focus on utilization, satisfaction, care quality, and the ethical ramifications. Much more work is clearly needed to address the concern at hand, however. This study, while giving insight into how financial incentives, MCOs, physician behavior, and ethics fit together, does not completely reflect the complexities of the relationship. It is a good beginning, and offers insight into the problem, but a much closer and more detailed examination of the concern is needed to truly understand the relationship and the problems that lie within it.

The future of medicine will go through many changes. It will not just be MCOs and the physicians that work with them that will be affected, however, as the whole of medicine will continue to be changed by managed care organizations. Hospitals and other institutions such as hospice care, along with individuals like doctors and patients will continue to experience changes in both the quality and availability of medical interaction. The physician of the future will be involved in more leadership behavior than the doctor of today. Physicians are already taking on more responsibility than they did only a few years ago, and that load of responsibility will only grow larger as time progresses.

It was not long ago that physicians only had to worry about caring for the patient. While that is still foremost in a doctor's job description, now physicians have to spend more time dealing with other things such as executive and management style decisions. Really, this should not be important as it detracts from the time that the physician has available to spend with patients. Unfortunately, in today's world physicians making decisions on an executive or management level is an important part of life.

It comes along with all of the extra responsibility that physicians have inherited in the last few years. Perhaps one day managed care will be so firmly established, and procedures so solidly in place that physicians will no longer have to make some of the decisions that they are making now. Until that day comes, however, if it ever does, physicians will have to continue to spend much of the time they used to spend with patients dealing with the management and paperwork complexities of managed care.

Even though dealing with managed care seems like a very trying ordeal, physicians in the present-day seem to be handling it remarkably well. There is no doubt that it creates greater strain on the medical profession in general, and that there is much more in the way of paperwork and decision-making that physicians have to deal with. Just a few years ago, most of the physicians' day revolved around taking care of the patients that needed attention. Now, thanks to managed care organizations, much of the physicians' day revolves around the paperwork important to make sure that the rights of those same patients are being upheld as much as humanly possible.

But what physicians are doing is still very important. It is true that the time taken away from the physical needs of patients is a problem. It is also true that the time spent on the paperwork to make sure that those same patients' rights are upheld is important. Whether the physicians are spending time with the patient, or dealing with the managed care organization that the patient belongs to, they are fighting for the rights and happiness of the patient, and that is a really a physician's true job.

The review of the appropriate literature indicates that managed care organizations are here to stay. While this may or may not be a good thing, depending on whose perspective it is being judged from, managed care will not be going away. Implications for physicians include a lack of physical time spent with the patient and a great deal more paperwork to deal with, but also a slight shift in requirements for the medical profession. Many medical schools are now beginning to teach medical candidates about management and executive decisions that would have been pointless and irrelevant 20 years ago. Nowadays, however, they are vitally important to the job that a physician does.

It is likely that in the future even more responsibility will fall to physicians, as physicians continue to not only become busier but retire from the profession in larger numbers due to the high cost of malpractice insurance. This will work along with managed care organizations to give physicians more power. If the decline in the number of physicians continues, it is likely that physicians will have even greater power than they do now. Unfortunately, that power will come with a price. More power brings more responsibility, and more responsibility brings more stress and difficulties into a job that was previously seemingly rather enjoyable.

In order for physicians to continue doing a good job, managed care organizations need to understand that physicians must to be able to reserve the right to make some decisions. Managed care is causing physicians to lose their autonomy, and frustrated physicians make for frustrated patients, nurses, and office staff, and then no one gets along. In order to work with managed care, office personnel and hospital administrators need to get along with physicians. That way the chain of command and the chain of information will not be broken, and this will result in better care for the patients.

Care for the patients is ultimately what the whole area of medicine is about. It should never be about financial compensation, or any of the other things that individuals often associate with physicians, such as power, large egos, and prestige. While some physicians may have all of these things, it is also true that some physicians have none of these things. Some physicians work in tiny clinics in remote villages, and they do not get rich. At least not in material wealth.

What they do, however, makes them far richer in many ways than American physicians who drive expensive cars and live in large homes. These physicians do not get many of the luxury items that other physicians have access to, but they work as hard if not harder than the other physicians. Hopefully, salaries and benefits for these physicians will rise as responsibility does, but experience shows that this is often not the case. The physicians of today have much greater responsibility than their counterparts of 50 or even 20 years ago, but their salaries in relation to the cost of living are virtually the same. Great strides have been made in many fields but medicine is not one of them.

Unless managed care organizations can show some flexibility in working with physicians, and unless physicians can continue to be advocates for patient care while still dealing with the management aspects of the job that have been forced upon them by these organizations, the future of patient care, and consequently patients' rights, looks rather bleak. While not entirely the fault of managed care, these organizations have contributed largely to many of the other problems that have started a decline in the rights of patients, such as excessive paperwork accountability for physicians, and the refusal to cover certain important tests or medications that physicians feel would be important to help a particular patient make a full recovery or have a good quality of life for their remaining days.