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Major Conference Themes
A Climate for Change
Both explicit and implicit in the conference discussions was the
perception that change in physician payment practices is inevitable.
Congress is increasingly demonstrating a will to insist that physicians
share the burden of restraining Medicare cost increases. State
Medicaid programs are exercising their new contracting ability to
experiment with new forms of payment. Private f irms and health
insurers are becoming more and more active in trying to limit their
outlays for health services. Physicians themselves are forming
Preferred Provider Organizations and in other ways seeking new
relationships with health care purchasers. Ferment on this issue is
apparent at all levels, and the fiscal pressures are rising.
Although there is an emerging consensus on the need for change,
there is not an accompanying consensus on what to do. Most
participants agreed that, in the short term, changes were likely to be
stop-gap measures to control costs, but that, for the longer term, more
fundamental reforms would be called for. The next few years will be a
period for developing a consensus around the nature of those reforms.
A Need f o r Cha nge
This theme was sounded by Paul Beeson in his opening remarks.
Quoting f ram a letter by Arnold Relman, editor of the New Enuland
Journal of Medicine, he said:
The method by which most physicians are paid now seems, on
a number of grounds, to be rather a poor reflection of
society's objectives for health care. It offers
considerable incentive for a greater use of health
resources than is necessarily cost-effective. It offers
little or no incentive for physicians to help restrain the
growth of expenditures for health care, growth which has
put enormous upward pressure on government health budgets
and on premiums charged by private insurance plans. It
provides large rewards for the provision of high-technology
procedures and little or none for preventive and cognitive
activities. While average earnings of physicians rank at
the top levels in our society, earning abilities differ
greatly among physician specialties.
Conference participants elaborated on this theme in their
discussions. Under the existing structure of physician fees, there are
large disparities among payments for different services. In general,
the rate of compensation per unit of physician's time is higher for
surgical and diagnostic procedures than, for example, for history-
taking. Fees seem to bear little relationship, if any, to the cost of
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producing services, to their medical value, or to consumer demand.
Rather, they are determined by long historical precedent and by the
payment practices of government programs and private insurers.
Not only are there disparities in payment levels among services,
but also the current system offers little incentive for physicians to
be prudent in their use of health resources. At a time of rapid
increase in the number of physicians and of more strenuous efforts to
hold down the growth in health care expenditures, physicians have
considerable financial incentive to provide more services and to choose
to provide services that yield greater fees. Thus our current payment
system contains perverse incentives that conflict both with cost and
quality objectives.
For a substantial portion of physician services that are covered by
insurance (approximately 63 per cent in 1982, according to the Health
Care Financing Administration), neither the physician nor the patient
bears any significant financial risk for decisions about the quantity
or kind of services utilized, and thus neither has reason to take into
account the financial consequences of one course of treatment as
compared with another. While protecting people against financial
catastrophe from illness, insurance coverage also insulates them from
health care costs.
Non-economic Influences on Physician Behavior
Physicians not only receive 20 percent of all hea 1th expenditures,
but also inf luence other expenditures through their medical decisions
such as ordering tests, prescribing drugs, and admitting patients to
hospitals. Because of their central role in health care, physicians
are seen as the key to containing costs, and payment methods as a
signif icant influence on physician behavior. However, conference
participants cautioned that economic incentives are not the only
factors inf luencing physician behavior. They actually may be less
important than other influences such as the physician's organizational
environment and practice milieu, peer pressure, and educational
background. Physicians also are influenced by their concern for
patients and, to some degree, by fear of malpractice litigation.
Conference participants felt that research is needed to sort out
the complex set of factors that influence physician behavior. Small
geographic area analyses have demonstrated enormous variations in
surgery rates, for example, but more work is needed to explain those
variations in terms of the relative influence of economic and other
variables on physicians' medical decisions.
Notwithstanding of the lack of firm empirical evidence on the
strength of the effect oF payment levels and methods on physician
behavior, most participants thought that re-examination of the current
payment structure at this time is important.
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Payment Objectives
One objective of reforming physician payments is cost control.
However, it was suggested that a more appropriate objective is to
establish payment mechanisms that provide incentives and compensation,
for effective, high quality, economical care. Conference participants
asserted that payment mechanisms should encompass a concern for the
well-being of patients, the development of an equitable system, and
cost consciousness. They criticized an approach that cuts payments in
the public sector and ignores the impact of subsequent cost shifts to
the private sector.
A number of other, more specific objectives were articulated:
o
o
o
o
o
fair compensation of the physician for his time,
talents, and the degree of risk involved
encouragement of the most appropriate level of care
encouragement of care in the most appropriate setting
encouragement of cost consciousness on the part of
patients and doctors
encouragement of good quality medicine
facilitation of equitable access to care
administrative simplicity.
Conference participants noted the potential conflicts and trade-offs
among objectives but did not try to resolve them in the short time
available.
Once the desired objectives are established, the structure of
incentives to attain them will have to be studied f ram the standpoint of
how physicians participating in group practice receive compensation--
salary, share of net receipts, etc.--which may be different from how the
patient or insurance makes the payment--fee-for-service, capitation
rate, etc.
Paucity of Data and Research Findings
Conference participants noted that' in terms of data and research
on physician payments, little is known in comparison with similar
information available about hospitals. Better data on the physician
components of hospital episodes are needed, as are studies linking
payment levels and mechanisms to various dimensions of physician
behavior. Demonstrations of the effects of alternative payment methods
on access, costs, and quality are needed before major reform of
physician payments is attempted.
Representative terms from entire chapter:
physician behavior
