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Background: Whether one seeks to reduce inappropriate utilization of resources, improve diagnostic accuracy, increase utilization of effective therapies, or reduce the incidence of complications, the key to change is physician involvement in change. Unfortunately, a simple approach to the problem of inducing change in physician behavior is not available., Comprehensive Clinical Guidelines: There is a generally accepted view that expert, best-practice guidelines will improve clinical performance. However, there may be a bias to report positive results and a lack of careful analysis of guideline usage in routine practice in a "postmarketing" study akin to that seen in the pharmaceutical industry., Financial Incentives: Systems that allow the reliable assessment of quality of outcomes, efficiency of resource utilization, and accurate assessment of the risks associated with the care of given patient populations must be widely available before deciding whether an incentive-based system for providing the full range of medical care is feasible., Decision Support: Decision support focuses on providing information, ideally at the "point of service" and in the context of a particular clinical situation. Rules are self-imposed by physicians and are therefore much more likely to be adopted., Conclusion: As health care becomes corporatized, with increasing numbers of physicians employed by large organizations with the capacity to provide detailed information on the nature and quality of clinical care, it is possible that properly constructed guidelines, appropriate financial incentives, and robust forms of decision support will lead to a physician-led, process improvement approach to more rational and affordable health care.

This paper analyzes use of hospital intensive care units (ICUs) by adult patients who are under age 65 and not covered by Medicaid; it allows for variation in indicators of the patient's condition, severity of illness, type of admission, emergency status, and degree of constraint on the total hospital ICU supply. We use data for Massachusetts and Florida in 1992. In neither state is there a significant difference in ICU admission rates between managed care patients and other privately insured patients. In Massachusetts, we find that the length of stay in the ICU is somewhat less for managed care and uninsured patients than for other privately insured patients. In both states, a hospital's ratio of total annual supply of ICU services to expected demand has a strong effect. In Massachusetts, the differences across payer groups in length of stay disappear for hospitals where the total ICU supply is relatively constrained.

Objectives: The purpose of this study was to examine the effects on immunization coverage of 3 incentives for physicians--a cash bonus for practice--wide increases, enhanced fee for service, and feedback., Methods: Incentives were applied at 4-month intervals over 1 year among 60 inner-city office-based pediatricians. At each interval, charts of 50 randomly selected children between 3 and 35 months of age were reviewed per physician., Results: The percentage of children who were up to date for diphtheria, tetanus, and pertussis and Haemophilus influenzae type b; polio; and measles-mumps-rubella immunization in the study's bonus group improved by 25.3 percentage points (P < .01). No significant changes occurred in the other groups. However, percentage of immunizations received outside the participating practice also increased significantly in the bonus group (P < .01). Levels of missed opportunities to immunize were high in all groups and did not change over time. Physicians' knowledge of contraindications was low., Conclusions: Bonuses sharply and rapidly increased immunization cover-age in medical records. However, much of the increase was the result of better documentation. A bonus is a powerful incentive, but more structure or education may be necessary to achieve the desired results.

A Cincinnati health system offers a real-world example of an organization that has implemented incentive programs designed to reward physicians for managing quality and cost.

Objectives: A randomized controlled trial evaluated the impact of feedback and financial incentives on physician compliance with cancer screening guidelines for women 50 years of age and older in a Medicaid health maintenance organization (HMO)., Methods: Half of 52 primary care sites received the intervention, which included written feedback and a financial bonus. Mammography, breast exam, colorectal screening, and Pap testing compliance rates were evaluated., Results: From 1993 to 1995, screening rates doubled overall (from 24% to 50%), with no significant differences between intervention and control group sites., Conclusions: Financial incentives and feedback did not improve physician compliance with cancer screening guidelines in a Medicaid HMO.

In the March 27, 1996, issue of the Federal Register, we published, at 61 FR 13430, a final rule with comment period that implements requirements in sections 4204(a) and 4731 of the Omnibus Budget Reconciliation Act of 1990 that concern physician incentive plans. In the preamble of that rule, we set forth dates by which prepaid health plans had to comply with certain of the rule's provisions. This document clarifies and changes some of those deadlines, and provides an opportunity for public comments on them. It does not otherwise change the requirements set forth in the rule. In addition this document corrects the March 27 rule's inadvertent reversal of the nomenclature change made by a previous final rule.

The 1970s and 1980s were decades of rapid growth in health care services and expenditures in Canada. Numerous government sponsored reports laid our principles for restructured health services delivery. These principles included directions such as community orientation, continuity of care and health promotion. The principles were similar, and so were the results: throughout Canada there has been limited action on these principles.

One of the most momentous recent changes in the healthcare marketplace is the movement of physicians from the private practice of medicine to full- or part-time employment. As increasing numbers of physicians become employees of healthcare organizations, structuring competitive physician compensation programs to attract and retain physicians will become increasingly important for the financial well-being of healthcare organizations. Healthcare executives should use data from an adequate sample of competing physician employers in structuring physician compensation programs consistent with their organization's strategic goals and objectives.

In 1980 the Government of Indonesia proposed the introduction of a pay-for-performance system, the Functional Position System (FPS), for certain occupational categories of civil servants to provide a career development path and stimulate productivity (Government of Indonesia. Government Ordinance No. 3, 1980 Concerning Appointment to Civil Service Rank. Jakarta, 1980). The FPS, a bold pay concept in the civil service, links pay to skills and performance. In 1987, instructions were issued for doctors to be included in the system (Government of Indonesia, Credit Scores for Doctors. Circular Issued by the Ministry of Health and the Agency for Administration of the Civil Service No. 614/MENKES/E/VIII/1987 and No. 16/SE/1987). In this paper we evaluate how well the system-which in principle could be applicable to both developed and developing economies--can meet its stated objectives for Indonesian doctors working in the community, and for Indonesian health policy objectives as stated in the country's last five-year development plan "Repelita V" (Government of Indonesia. The Fifth Five-year Development Plan (Repelita V) 1989-1994. Jakarta, Indonesia, 1989). The FPS is particularly innovative in the Indonesian environment where wages are low and comparatively uniform, reflecting a philosophy of 'shared poverty', and vary primarily by seniority. The FPS has, however, several conceptual and practical shortcomings. The design of the reward system disregards effort or time inputs, as well as other inputs needed per unit of reward. Consequently, the FPS can not be used as an effective incentive system promoting professional excellence and health policy objectives. Practically, the system hardly provides an effective alternative for career development among community physicians.(ABSTRACT TRUNCATED AT 250 WORDS)

Physician geographic maldistribution is a problem in the United States health care system. Innovative strategies are needed to entice resident family physicians training in the larger, more numerous suburban and urban training programs to practice in rural areas upon completing their training. This paper describes a strategy used at St. Elizabeth Medical Center Family Practice Residency Program, Dayton, OH, to encourage rural practice. In the St. Elizabeth plan, the interested family practice resident moonlights in a rural practice provided by the local county hospital. The county medical staff covers the resident physician's practice during the frequent absences. The residency program faculty provide on-site supervision, telephone back-up coverage, and practice consultation. The county hospital provides billing services; the resident physician retains 100 percent of collections. The resident physician gains exposure to the knowledge, skills, and attitudes needed in rural practice. Upon completion of residency training, the physician remains in practice and is not required to pay back any expenses incurred by the hospital. Two resident physicians participate currently; three others have expressed interest in practicing in the community. A similar plan might work in parts of the United States where, like Ohio, training programs and rural communities are not far apart.

This paper examines programs used in the Atlantic provinces of New Brunswick, Newfoundland, and Nova Scotia to recruit and retain physicians in rural areas. The provinces have many similarities but have unique characteristics that have shaped recruitment methods. The total number of physicians in each province has grown at a faster rate than the population. Each has problems attracting physicians to underserved areas, although the magnitude of the problems vary. The data for this paper were gathered from documents available from various agencies in each province and a series of personal interviews conducted in the spring of 1993. The provinces have chosen different avenues in attempting to solve the maldistribution of physician resources, ranging from regulatory methods in New Brunswick to moves in Newfoundland to encourage graduates of the province's medical school to locate in the rural areas and lessen the dependence on foreign medical graduates. Nova Scotia, with fewer areas needing physicians, has been able to focus its efforts on selected locations. Reviewing the methods used in the three provinces provides an insight into the attempts to solve the shortage of physicians in rural areas.

The increasing complexity of managed care is changing the need for better information on medical costs and utilization. Because most claims systems have limited reporting and analysis capabilities, a better alternative is to transfer the data into the reporting systems described herein, in which a comprehensive analysis is conducted faster and at a lower cost. Virtually any type of analysis is possible.

A physician incentive program was developed at an established staff model HMO. Differential compensation, which augments a salary scale that reflects years of experience and service, is based on productivity and utilization of laboratory and x-ray services. Productivity is objectively measured on a relative-value-scale for time utilized for a range of types of visits. Laboratory and x-ray utilization is measured against recent historical practice patterns. A case mix adjustment stratifies for age in the adult patient encounters.

The increasing pressure on resources available for health care in many countries has led to a re-examination of the way in which resources are allocated and committed. One important and innovative option is for managers and doctors to collaborate formally in decision-making. This paper draws on experience of this approach in the UK National Health Service, in the Resource Management Initiative and suggests that its success or failure depends on the nature and strength of the incentives to the two sides to collaborate.

As hospitals are challenged to recruit and retain qualified medical staff, they must continually consider the legal ramifications of their actions. Developing a physician-hospital alliance may conceptually be an excellent idea within a medical-service area, but rulings by the Office of the Inspector General and the Internal Revenue Service can challenge the decisions of hospital administrators and boards. Writing for the National Institute of Physician Recruitment and Retention, Roger G. Bonds and Michael R. Callahan address legal ramifications of physician-hospital alliances.

Health Maintenance Organizations (HMOs) have emerged as a major vehicle to reduce transaction costs associated with defining the limits of health insurance coverage and to provide appropriate provider incentives. This article explains the heterogeneous set of incentives used by HMOs to reimburse providers and performs empirical tests of their effectiveness. The empirical analyses reveal that utilization of health care services is reduced when (1) physician compensation is based on salary or capitation arrangements rather than some measure of output; (2) bonuses and paybacks are based on individual rather than group performance; and (3) when the HMO operates as a proprietary (for-profit) organization. Utilization is not significantly affected by incentives placed on the hospital. Finally, physician ownership of the HMO was found to lead to higher levels of utilization.

The public treatment of seriously mental ill patients continues to be frustrated by the lack of administrative and financial integration of state and community mental health services. Several states have initiated attempts to improve the cost-effectiveness of public mental health services through mechanisms that create financial incentives fostering community-based alternatives to psychiatric hospitalization. Examples of such mechanisms include capitation financing systems, performance contracts, regional mental health authorities, utilization review, and bed-targets. This paper reviews evidence supporting the need for and success of these efforts, and also addresses their limitations.

Now, more than ever, health care centers are forced to compete for physicians. There could be no greater argument in favor of establishing the position of Vice President for Medical Services. A physician executive is infinitely more qualified and better prepared to understand the probable reaction of different types of physicians when "loyalty" to the organization is the central issue. The Vice President for Medical Services seems best positioned to remind the Chief Executive Officer and the Board to keep sight of the legal, and moral, duty to "exercise reasonable care in the selection of a medical staff and in granting specialized privileges," including selecting practitioners who are "worthy in character and matters of professional ethics."

A Market Signal is a marketing activity that provides information beyond the mere form of that activity. Market Signals reveal levels of the unobserved. Signals occur in a variety of marketing phenomena: advertising, pricing, quality, competitive response to name but a few. In this paper we examine the use of market signals by hospitals and provide a set of recommendations by which hospitals can better utilize signals in the marketing of their services.

Southern Ohio Health Services Network was founded in 1976 as a non-profit corporation to address the lack of accessibility to primary care physicians in four rural southern Ohio counties. The majority of recruited physicians are obligated to fulfill service obligations as a result of NHSC scholarships. Author Stephen Wilhide, M.S.W., M.P.H., describes how the organization improved its physician retention rate through a carefully devised compensation program.

This paper will address the complex issues of effective cost management and declining inpatient volume. Utilizing a microcomputer-based physician incentive compensation program, it will show how a hospital developed a plan to increase inpatient hospital utilization and improve cost management. It will discuss the Internal Revenue, HCFA, and legal implications of the plan.

Do financial incentives used by health maintenance organizations (HMOs) to restrain the use of health care resources represent a conflict of interest between physicians' concern about their income and their concern about patients? To explore the contractual obligations of primary care physicians in HMOs, I mailed a survey to all 595 HMOs known to be in operation as of June 1986. In all, 302 of 595 HMOs (51 percent) responded. Sixty-seven percent of plans with capitation-based arrangements and 82 percent of plans with fee-for-service arrangements withhold a percentage of their physicians' income against potential deficits, but only 21 percent of plans with salaried physicians do so. Thirty percent of HMOs have other penalties in addition to this withholding. Eighteen percent of HMOs base the return of the withheld amount on the experience of individual physicians rather than on the collective experience of a group of physicians. For-profit HMOs are less likely to use salary-based payment, more likely to withhold a percentage of income, and more likely to base the return of this withheld amount on the experience of individual physicians. Most HMOs have mechanisms for sharing surpluses with participating physicians. I conclude that contractual arrangements in HMOs vary widely. Certain financial incentives, especially when used in combination, suggest conflicts of interest that may influence physicians' behavior and adversely affect the quality of care.