Physician Compensation Focused on Volume of Services Rather Than Value, Study Finds

Researchers collected data from 31 health system-affiliated physician organizations associated with 22 health systems in four states.

Despite the push to shift from fee-for-service to value-based payment (VBP) in U.S. healthcare, physician compensation remains overwhelmingly based on volume of services rather than value, a new research article says.

Over the past decade, public and private payers including Medicare have introduced alternative payment models (APMs) and VBPs to encourage healthcare providers to provide services based on value rather than volume. A primary goal is to shift healthcare providers away from providing care only when patients are sick toward more preventive and wellness-oriented care.

The new research article, which was published by JAMA Health Forum, is based on data collected from 31 health system-affiliated physician organizations (POs) associated with 22 health systems in four states (California, Minnesota, Wisconsin, and Washington). The study was conducted by the RAND Center of Excellence for Health Care Performance with funding from the Agency for Healthcare Research and Quality.

The study includes three key data points.

• Volume-based compensation was the most-common type of base pay for more than 80% of primary care physicians and for more than 90% of physician specialists.
   
• Although quality and cost performance financial incentives were used by health systems, the percentage of total physician compensation based on quality and cost was only 9% for primary care physicians and 5% for specialists.
   
• Increasing the volume of services provided was the most commonly reported method for physicians to increase their compensation, with 70% of POs having such an arrangement. Among these POs, volume-based incentives accounted for more than two-thirds of compensation.

"Performance-based financial incentives for value-oriented goals, such as clinical quality, cost, patient experience, and access, were commonly included in compensation but represented a small fraction of total compensation for [primary care physicians] and specialists in health systems, operating at the margins to affect physician behavior. Taken together, these findings suggest that despite growth in APMs and VBP arrangements, these value-based incentives were not commonly translated into health system physician compensation, which was dominated by volume-oriented incentives," the study's co-authors wrote.

The research found that physician compensation is geared more toward volume of services than value to drive health system revenue, the lead author of the study said in a prepared statement. "Despite growth in value-based programs and the need to improve value in healthcare, physician compensation arrangements in health systems do not currently emphasize value. The payment systems that are most-often in place are designed to maximize health system revenue by incentivizing providers within the system to deliver more services," said Rachel Reid, MD, MS, a physician policy researcher at RAND.