The Effect of Practitioner Compensation on HMO Consumer Satisfaction


This paper has undergone peer review by appropriate members of Managed Care’s Editorial Advisory Board.

Purpose: To test the hypothesis that a health maintenance organization (HMO) consumer’s satisfaction depends on the way his or her health plan compensates practitioners.

Design: Consumer Assessment of Health Plans (CAHPS) survey data from 1999 and 2000 were provided by the Office of Public Insurance Counsel for the state of Texas. These data were combined with the Health Plan Employer Data and Information Set (HEDIS) quality measures of managed care health plans in Texas published by the Texas Health Care Information Council.

Methodology: The study fitted the CAHPS survey data to an ordered-probit model. The dependent variable was customer satisfaction with the health plan, using a rating scale from 0-10. The independent variables included the percentage of health plan practitioners compensated with capitated fees, the percentage compensated with a bonus or withholding incentive, and other health plan and consumer characteristics.

Principal findings: Consumer satisfaction with HMOs is negatively correlated with the percentage of practitioners who are compensated on a capitated-fee basis and positively correlated with the percentage of practitioners compensated with a fee-withholding incentive (e.g., a fraction of fees that are withheld until specific quality and cost-control goals are reached). Neither the percentage compensated under a bonus incentive system nor the percentage of general practitioners with board certification correlated with HMO consumer satisfaction.

Conclusion: A managed health plan’s method of practitioner compensation can affect participant satisfaction in a predictable manner.

Key terms: consumer satisfaction, capitated fees, fee-withholding