Regulation of Managed Care Incentive Payments to Physicians

Abstract

A large and growing number of physicians in today’s managed care market are paid for their services according to incentive schemes that offer financial rewards for the provision of less, and less expensive, medical care. Such schemes typically reward physicians for reducing their own costs of care and reward primary care physicians for reducing the number and cost of referrals for inpatient and specialty care. Consumers, fearful that such schemes will prompt physicians to deny them medically necessary care, have protested the implementation of such incentive plans. Various states are considering bills to ban or to limit physician incentive payments.Federal policy with regard to incentive schemes has been confused and contradictory. On one hand, regulators concerned with controlling health care costs and limiting the provision of unnecessary care have encouraged such financial incentives. For example, federal Stark regulations, which ban referrals tied to physician compensation, include explicit exceptions for incentive schemes.