P4P Physician Compensation Quality

Is physician compensation tied mostly to volume or value?

Alternative payment models (APM) are the new trend of the past few decades. High quality, efficient providers should be paid more; low-quality, less efficient providers should be paid less. These APM reimbursement arrangements, however, are typically paid at the health system level and it is unclear whether these incentives trickle down to individual physicians.

A paper by Reid et al. (2022) in JAMA Health Forum answers this question using information from the
RAND Health System Study, which conducted in-depth interviews with senior leaders across 31 physician organizations (POs) across 24 health systems in 4 states (California, Minnesota, Wisconsin, and Washington). Compensation arrangements for primary care physicians (PCPs) and specialists were separately recorded. Using this approach, the authors found that:

Volume-based compensation was the most common base compensation incentive component for PCPs (26 POs [83.9%]; mean, 68.2% of compensation…) and specialists (29 POs [93.3%]; mean, 73.7% of compensation…). While quality and cost performance incentives were common (included by 83.9%-56.7% of POs for PCPs and specialists, respectively), the percentage of compensation based on quality and cost performance was modest (mean, 9.0%…for PCPs and 5.3% …for specialists when included). Increasing the volume of services was the most commonly cited action for physicians to increase compensation, reported as the top action by 22 POs (70.0%) for PCPs and specialists.

In short, most physicians are paid based on value, but this payment is modest relative to the compensation paid that is linked to volume. My colleague Jason Markham has a nice post “Value-Based Compensation: Still Lagging” that provides some more details.

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