Doctor Pay Incentives

Last year here at Diabetes Flashpoints, we discussed how changing the way Medicare pays[1] 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[2] 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[3] 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[4]. 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!

  1. we discussed how changing the way Medicare pays:
  2. article published last week:
  3. letter to the chairmen of two powerful committees:
  4. article from earlier this year:

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