The Impact of Financial Incentives on Physician Behavior in Managed Care Plans: A Review of the Evidence

Abstract

This review examines the relationship between the financial incentives confronting physicians in managed care plans and the utilization of services. The primary conclusion of this review is that the financial incentives confronting physicians are a key element in explaining the lower utilization rates of enrollees in managed care plans. However, this conclusion is not definitive because it is based on studies that are subject to numerous sources of potential bias. To isolate the impact of financial incentives facing physicians on the performance of health plans, it is necessary to adjustor patient, physician, health plan, and market characteristics related to utilization, and most studies include little information about these characteristics.