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Physicians Should Be Paid by Salary, Not Fee-for-Service, Economists Argue

Paying doctors to do more may lead to unnecessary tests and procedures

In an article published in JAMA, George Lowenstein of Carnegie Mellon University and Ian Larkin of the University of California, Los Angeles, outline the problems associated with the fee-for-service arrangements under which most doctors currently operate. Such compensation schemes, they argue, create incentives for physicians to order more and different services than are best for patients.

“Fee-for-service payments have adverse consequences that dwarf those of the payments from pharmaceutical companies and device manufacturers that have received the lion’s share of attention in the conflict-of-interest literature,” Loewenstein said. “Paying doctors to do more leads to over-provision of tests and procedures, which cause harms that go beyond the monetary and time costs of getting them. Many, if not most, tests and procedures cause pain and discomfort, especially when they go wrong.”

One commonly proposed solution to the problem involves requiring physicians to disclose their financial interests in specific procedures. However, the disclosure of conflicts has been found to have limited, or even negative, effects on patients.

Loewenstein and Larkin argue that the simplest and most effective way to deal with conflicts caused by fee-for-service arrangements is to pay physicians on a straight salary basis. Several health systems well-known for high-quality care, such as the Mayo Clinic, the Cleveland Clinic, and the Kaiser group in California, pay physicians salaries without incentives for the volume of services performed.

Moving more physicians to straight salary-based compensation might have benefits not only for patients, but also for physicians themselves, according to the authors.

“The high levels of job dissatisfaction reported by many physicians may result, in part, from the need to navigate the complexities of the fee-for-service arrangements,” Larkin observed. “Instead of focusing on providing patients with the best possible medical care, physicians are forced to consider the ramifications of their decisions for their own paychecks.”

Source: EurekAlert; May 9, 2017.

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