The Effects of Payment Method on Clinical Decision-Making

BACKGROUND: The influence of payment mechanisms on physician decisions is not well understood. OBJECTIVES: The objective of this study was to test 2 null hypotheses: 1) physicians' clinical decisions would not be influenced by payment incentives; and 2) physicians would have equal concern about medical decisions made under capitation or fee-for-service (FFS) arrangements. RESEARCH DESIGN: We conducted a physician survey in which patient insurance status (capitated or FFS) was randomly incorporated into 4 clinical scenarios using a Latin square design. SUBJECTS: We used a nationally representative random sample of family physicians in direct patient care. MEASURES: We used treatment decisions and physician "bother" scores (a measure of discomfort about decisions) in response to the clinical scenarios and adjusted for physician gender, age, board certification, income, practice location, practice mix, practice setting, geographic region, local area managed care penetration, and capitation or risk pool contracts in practice. RESULTS: Seventy-two percent of sampled physicians responded. Comparing decisions made under capitation to FFS, physicians were less likely to indicate they would perform discretionary care (relative risks RR range, .64-.82; P<0.001), but payment had no effect on selection of life-saving care (RR, 1.02, not significant). Physicians felt significantly more "bothered" when they made clinical decisions under capitated payment (P<0.001 in all scenarios), regardless of whether a treatment was discretionary or life-saving, and whether the decision was made for or against the treatment (P<0.001). CONCLUSIONS: Payment mechanism has significant effects on clinical decision-making. Reduction of resources spent for discretionary care might be achieved under capitated arrangements; however, physicians respond with greater levels of discomfort under capitation than FFS.