Medicare
Physician Incentive Payments by Prepaid Health Plans Could Lower Quality of Care Gao ID: HRD-89-29 December 12, 1988Pursuant to a congressional request, GAO evaluated various types of physician incentive plans that health maintenance organizations (HMO) offered to control health insurance costs, focusing on the: (1) potential of these incentives to result in inappropriate service reductions; and (2) characteristics of those incentives posing the greatest risk to quality of care for Medicare beneficiaries.
GAO found that HMO: (1) received a fixed per-capita payment from Medicare to provide all Medicare-covered services; (2) typically deducted an amount from the Medicare payment for administrative costs and allocated the remainder to funds for primary, specialty, and institutional services; (3) primarily compensated physicians through salary, fee-for-service, or capitation arrangements; (4) offered such incentives as annual bonuses or physician financial liability for care, based on individual or group cost performance or overall HMO profitability; and (5) used credential checking, grievance procedures, membership surveys, physician practice profiles, and medical record reviews to ensure quality of care. GAO also found that incentive plan characteristics that most threatened quality of patient care involved: (1) shifting financial risk of patient care to physicians; (2) distributing incentives according to individual physician cost performance; (3) paying a percentage of HMO savings on patients; and (4) measuring physician cost performance over a short time period.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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