Wall Street Incentives and Physician Payments

Payment incentives have been in the news a lot lately. There is a vast public outcry against bonuses awarded to top executives of banks which hemorrhaged billions in 2008, and many have been asking “shouldn’t they just do their jobs for their pay – never mind for ridiculous bonuses?”

There is a parallel debate about incentive pay for physicians, and I'd like to point out a journal article last month suggesting that we should get back to professionalism as a motivation to provide high quality care, rather than incentive payments.

Pam Hartzband and Jerome Groopman in New England Journal of Medicine last month use illustrations from the behavioral economics literature to suggest that the monetization of health care leads to decreased medical professionalism and could lead to a decline in the quality of care. They use an example where offering paltry compensation (50 cents for helping move a couch) leads to less participation than no reward at all. However, the behavioral economic literature is also replete with examples where meaningful incentives, financial and otherwise, do drive behavior. In health care, we know that self-referring physicians have higher utilization , and high marginal profit rates are associated with oversupply. The authors themselves note that increased social status, decreased on-call time, and enhanced incomes have led many aspiring physicians away from careers in primary care.

Hartzband and Groopman argue against a system where caregivers are “constantly primed by money.” Indeed, this is the fundamental argument against the fee for service payment system predominant in the US. Paying for bundles of care (or capitation) would allow innovation to improve efficiency, whereas the current payment system rewards increased volume and intensity of services rather than coordination of care. Financial systems alone will not alone lead to defect-free, affordable health care; however, it will be achieve a high performance health care system without better-aligned financial incentives. We need payment reform and strengthening of communal relationships to improve quality, access and cost-effectiveness of health care.