Doctor Pay Incentives

Last year here at Diabetes Flashpoints, we discussed how changing the way Medicare pays for services — away from the current system of paying for individual procedures, and toward a system in which medical networks are paid a lump sum for each patient — has the potential both to improve outcomes and to lower the cost of care. For such a system to work, however, all doctors would have to join a network that can provide a full range of medical services. These networks, whose formation for purposes of Medicare payment was enabled by the Affordable Care Act (“Obamacare”), remain in their infancy, although they may take off in the future if Medicare provides the right incentives.


In the meantime, Medicare is trying to cut costs and improve outcomes another way: by basing part of doctors’ pay on the quality of their care, as measured by Medicare. According to an article published last week by Kaiser Health News, Medicare will begin quality-based payments in 2015 for doctors in large medical groups, those that comprise at least 100 medical professionals. In 2016 Medicare will move to cover doctors in medium-size practices — 10–99 members — and in 2017 it will cover all remaining doctors. Although the Affordable Care Act requires Medicare to institute quality-based pay incentives, the law gives the agency a great deal of freedom to design the program, other than requiring that the incentives be cost-neutral. This means that increasing the pay of some doctors must come from the pay of others.

Not surprisingly, many doctors don’t like the idea of having some of their pay withheld if Medicare calculates that they deliver below-average quality. In an April letter to the chairmen of two powerful committees of the US House of Representatives, the CEO of the American Medical Association outlined the group’s opposition to the kind of payment system that Medicare just announced. The letter states that “stable and predictable payment models are necessary to ensure physicians can plan for investments in capital improvements” that may be necessary to deliver the long-term cost savings that Medicare is seeking. Redesigning a medical practice to make it more efficient, the letter notes, cannot be done without ample planning, which costs money. Furthermore, given that doctor payments from Medicare have not kept up with the rate of inflation in recent years, the prospect of further reductions “will increase the migration of physicians into hospital settings, driving up overall Medicare spending in the process.”

Measuring the quality of care given by individual doctors, rather than hospitals or provider networks, is a daunting challenge, as noted in another Kaiser Health News article from earlier this year. Many doctors see a very unique population of patients, and some specialize in patients whose conditions are especially severe. Unless there were a way to account for difficult-to-treat cases, these doctors might end up being penalized when data show that their patient’s outcomes are worse than is typical. Furthermore, patients often see multiple doctors for the same condition or related conditions, making it unclear who is responsible for either positive or negative outcomes. One private insurance executive quoted in the article predicted that Medicare would ultimately find that evaluating individual doctors is impossible, and shift its focus to evaluating groups of doctors who work together.

What do you think — does quality-based pay for doctors sound like a good idea to you? Should doctors who accept Medicare patients be required to participate in quality-based pay programs, or should participation be optional? If you’re on Medicare, do you think that tying doctors’ pay to outcomes will have any effect — positive or negative — on the quality of your care? Do you think it’s possible to evaluate quality of care based on data that Medicare can access — such as patient age, income level, medical history, and medical outcomes — or is there an art to being a doctor that cannot be easily put into numbers? Leave a comment below!

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  • Joe

    It’s better than basing Doctor’s incentives on how many prescriptions for the “drug of the month” they write, whch seemed to be the SOP for corporate medicine at one point.

  • Lynn

    I can see my doctor already getting this kind of pressure from my private ins co. My appointment last week he showed me all the letters from the ins co that demanded that he write me Rx for statins, which I refuse to take. They think he is not doing his job because I am not filling Rx for that item. So, I will be filling them but not taking them so I can continue to see this Dr.
    Also, due to work I sometimes have to reschedule my appt and get off the every 3 months, so I was to do a 24 hr urine this appointment. The ins co had already sent him a letter that he should have ordered the test.
    This is getting ridiculous. I thought the doctors were supposed to be the ones trained to treat us not the insurance companies.

  • Mary G

    I agree with Joe. The “drug” model for doctor incentives has been a disaster!!! But, I wonder if people on Medicare will actually fare any better under this new proposed system…when there’s little incentive now and doctors will be subjected to even lower income potential??? Better medical treatment is still available only to those who can afford it and are willing to pay for it. Medicare recipients are still stuck with the “system” no matter whether treatment is based on arbitrary standard-of-care medical outcomes or quality-based pay as dictated by some committee. It’s all about the money…doctors will vote with their feet…and then what happens to the patients??? Would you stick around???

  • kim

    Will the doctors be allowed to refuse or fire those patients who continue unhealthy practices such as smoking, overeating, refusing to exercise, forgetting to take prescribed medications, forgo sunscreen, forgo screenings such as mammograms, colonoscopies, etc. against the doctor’s advice? These are huge problems in the United States right now. It would probably be much easier to have a practice with only motivated, compliant patients. You can lead a horse to water…..

  • Jean B.

    Gosh, why don’t we just bypass the medical people and just go directly to the Medicare system for our medical care? It sure sounds like the poor doctors that have all the expense and time put into a career have to treat the patient the way the “system” tells them! It just amazes me that we are controlled by a group of Medicare shirts and ties that may have little or no medical training tell the professional how to treat the patient! I have come to the conclusion that we live in a “throw away society” and this is just another way to get rid of the elderly and sick. Is this a means of “population control” from the government? I also agree with Mary and is all about “Money”!

  • BK CDE

    All good points! Some of these same issues have been faced by educators for some time—how to produce positive outcomes for your teaching if you do not get cooperation from the student and family is similar to the doctor whose patient refuses state of the art, evidence based care. The shirts and ties at Medicare may actually have some medical training or at least access to good data, but the ones who worry me are the legislators who want to make the decisions about our care for political rather than scientific reasons. The Affordable Care Act is at least a start and may have to be tweaked, but we needed to do it a long time ago. I am hoping the closer we get to single payer, the less we will have insurance companies telling us what to do, but maybe I am in la la land.

  • jim snell

    I believe the word is aco’s. Accountable care organizations.

    Dred lurks in my mind. These may not be bad but Medicare has been making too many changes at the moment and some would say to cut back funding to medicare. Others disagree. Time will tell.

  • joan

    I think that there is a lot of misinterpretation going on about what is or is not in the Affordable Care Act.

    I remember SSN going through many ups and downs when it first came into being. Everyone was so worried about what I do not remember. Which is the point, really. I think it is the same with the ACA [aka ObamaCare] wait and see; with a few tweaks here and there, the ACA will be more helpful and there will also be some hiccups to deal with no matter what.