The impact of financial incentives on physician productivity in medical groups.
OBJECTIVE
To estimate the effect of financial incentives in medical groups--both at the level of individual physician and collectively--on individual physician productivity.


METHODS
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.


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


METHODS
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.


RESULTS
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-level financial incentive does not appear to be significantly related to physician productivity.


CONCLUSIONS
Individual physician incentives based on own production do increase physician productivity.
Conrad
Douglas A
DA
University of Washington, Department of Health Services, Seattle 98195-7660, USA.
Sales
Anne
A
Liang
Su-Ying
SY
Chaudhuri
Anoshua
A
Maynard
Charles
C
Pieper
Lisa
L
Weinstein
Laurel
L
Gans
David
D
Piland
Neill
N
D003430:Cross-Sectional Studies; D003625:Data Collection; D004526:Efficiency; D005249:Fees and Charges; D005260:Female; D006123:Group Practice / Q000191:economics*; D006801:Humans; D016018:Least-Squares Analysis; D008297:Male; D008329:Managed Care Programs / Q000191:economics; D009042:Motivation; D010816:Physician Incentive Plans / Q000191:economics*; D010820:Physicians / Q000191:economics / Q000523:psychology*; D010822:Physicians, Women / Q000191:economics / Q000523:psychology; D012456:Salaries and Fringe Benefits / Q000191:economics*; D012737:Sex Factors; D014481:United States