How and How Much Should Physicians Be Paid?

The oldest medical ethical tension is one between a physician’s altruism and self-interest. But how much should a capitated managed care physician be paid?

The facts

Defined as a flat “fee per head per time,” capitation is a way of sharing financial risk, something that many physicians now want to do. A plan’s capitation rate may be adjusted for the age, gender, family size, demographics, projected medical costs and geographical characteristics of a patient population, and it ordinarily includes payment for certain services and excludes payment for others.

Other methods of compensation are also used in managed care–fee-for-service, discounted fee-for-service, relative value scale and straight salary. The results of patient satisfaction questionnaires about service (e.g., promptness, accessibility, sensitivity, communication skills) can modify a physician’s compensation. So can utilization of labs, drugs and procedures. Bonuses and withholds may be tied to individual volume targets and formulary compliance, or targets for the group as a whole.

Physicians are already forced to play off the cost of our own compensation against the resources we authorize for patients and their health care. Like most other workers, physicians do more of what they are paid to do, and are influenced by financial incentives. Unlike most other workers, however–or at least to a greater degree–physicians have professional ethical obligations that influence our compensation plans and terms.

The rules

In 1847, the AMA discussed issues of practice management and etiquette in its Code of Ethics. In 1995, the AMA’s Council on Ethical and Judicial Affairs answered questions on the gatekeeper role and financial conflicts of interest in managed care.

In March this year, the Department of Health and Human Services issued rules limiting physician rewards in Medicare and Medicaid managed care, and mandating stop-loss insurance for a physician loss of more than 25 percent of overall compensation. The rules also require HMOs to disclose publicly their financial incentives to limit treatment and referrals.

A few weeks ago, the Clinton administration suspended enforcement of the rules, according to the July 8 New York Times, because HMOs objected to them. Medical professional groups had celebrated the rules as a clear message to the public that managed care doctors are not for sale. The reasoning: Patients who emerge from an annual exam without lab tests shouldn’t have to wonder about their doctor’s motivation. Was their doctor actually trying to hoard monies to pay for another HMO patient? Or was their doctor trying to earn a bonus?

What kind of incentives are ethical? Negative incentives to provide care that utilize general considerations of cost, benefit and effectiveness data can be appropriate. Yet such incentives should not be used as micromanagement tools that reduce care below prudent, empathetic levels. Positive financial incentives and risk reduction to provide care can also be appropriate. These incentives, however, carry the potential for iatrogenic injury, patient inconvenience and extra cost.

What if we measured and rewarded quality care based on relieving the suffering of patients and the burdens on families? Or advance planning and improved aggressive care near death? Or maintaining functional status, and patient and family satisfaction? Benchmarks of quality should be used as financial incentives to improve compensation, benefiting both patient and physician.

What kind of incentives are unethical? Negative incentives that simply save the employer or HMO money put the doctor and patient in adversarial positions. Financial conflicts of interests can easily become distorted clinical judgments–and one can slide into the other easily. Positive incentives that create patient-based revenue but do not affect the health of patients are also unethical. Appointment cranking for monthly cholesterol levels or fully- billed daily blood-pressure checks are also possible abuses.

Withholds based on utilization and volume can pit physician against patient as do few other methods of payment, and do no one a favor. Too few physicians in too small a group caring for too few patients make balancing the mortgage versus an MRI an impossible decision.

Even while making it easier for physicians to make more money, the government just made it harder for managed care and managed care physicians to claim moral ground.

Medical practitioners have long been rewarded on the basis of their usefulness to the health of the community as a whole. Over at least eight centuries, physicians as a class have earned approximately four times the average societal wage, with many different societies’ approval and endorsement.

Are all doctors equal?

Although all physicians have matriculated through generally comparable curricula in generally comparable lengths of time, other important common values are different. Thus, physicians are not and should not be compensated equally in comparison with one another.

But what pay is fair for different individuals? Money alone? Nonmonetary forms of compensation should be considered as payment, such as time made available for personal and educational obligations, and for intellectual, emotional and humanistic challenge and fulfillment.

In physician payment, we must call upon a modern medical ethics that emphasizes fairness to patients as a whole and to physicians as a community. We are not isolated, free agents who are justified in gaining for ourselves whatever we can, without due regard for the interests of others in our community. We are members of a community of medical professionals and should be paid as members of that community.

Absent enforcement of the new HHS rules, an unregulated frontier of payment possibilities has just been officially sanctioned. Many physicians would prepare ourselves for some sacrifice as a profession on behalf of our patients as a whole if we were persuaded that greater access to care and investment in prevention would result. Yet few physicians are persuaded–a critical fact at a time when managed care’s credibility is poor except as a system of cost constraint.

MANAGED CARE August 1996. ©1996 Stezzi Communications

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