Blog | Physician Compensation

Small study finds health systems lagging in providing value-based payment incentives to physicians

Blog | Physician Compensation

Small study finds health systems lagging in providing value-based payment incentives to physicians

Reducing the share of health system revenue that's tied to fee for service doesn’t appear to translate to increases in value-based incentives.

Despite the increasing proliferation of value-based payment (VBP) models, a new study finds that health systems generally don’t give physicians financial incentives to improve the value of care delivery.

Instead, “Health systems currently incentivize physicians to maximize volume, thereby maximizing health system revenues,” researchers with the RAND Corporation reported in JAMA Health Forum.

The researchers don't necessarily think better VBP incentives would flow from wider implementation of alternative payment models (APMs), saying their findings indicate that “despite growth in APMs and VBP arrangements, these value-based incentives were not commonly translated into health system physician compensation, which was dominated by volume-oriented incentives.”

What the study found

Examining data from 31 physician organizations affiliated with 22 nonprofit health systems in four states (California, Minnesota, Washington, Wisconsin), the researchers found that volume-based compensation was the dominant base-compensation incentive for both primary care physicians (PCPs) and specialists.

Specifically, 26 physician organizations included volume as a component of their PCP compensation model, with volume accounting for 68% of total compensation, on average. And 28 organizations included volume as an aspect of their compensation model for specialists, with volume comprising more than 73% of total compensation.

Meanwhile, the average share of compensation that hinged on value-related incentives was 9% for PCPs and 5.3% for specialists.

The “modest size of these quality and cost performance incentives for PCPs and specialists compared with the base compensation incentives suggest that their potential to change behavior is likely to be marginal,” the researchers wrote.

Among the 30 organizations that completed surveys, 21 said the best way for physicians to boost their compensation was to increase the volume of services (among various other options were improving coding, increasing panel size and improving clinical quality).

Why current VBP models may not affect compensation

The association between volume-based compensation percentage and the health system's percentage of revenue from fee for service was “very weak” and “nonsignificant,” the researchers said.

Such findings indicate that “value-based incentives were not commonly translated into physician compensation,” they added.

“It is challenging to translate risk-bearing payment arrangements and many measures of quality, utilization or value to the individual physician level for payment purposes owing to limitations in panel sizes and reliability concerns with measuring individual physician performance,” they wrote.

The researchers did note that the finding contrasts with some prior studies, which reported that factors such as capitation and managed care penetration in the market were negatively associated with volume-based physician compensation.

They also seemed to acknowledge the potential of payment models to improve the emphasis on value. One reason the current suite of APMs and other VBP arrangements may not dramatically affect compensation is that most of them are built on a fee-for-service chassis, they wrote.

“As arrangements like global payments and direct contracting gain additional ground, potentially shifting more PO [physician organization] reimbursement away from fee for service, it remains to be seen whether evolution in physician compensation will occur,” they wrote.

About the Author

Nick Hut

is a senior editor with HFMA, Westchester, Ill. (

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