The impact of financial incentives on physician productivity in medical groups

Health Serv Res. 2002 Aug;37(4):885-906. doi: 10.1034/j.1600-0560.2002.57.x.


Objective: To estimate the effect of financial incentives in medical groups--both at the level of individual physician and collectively--on individual physician productivity.

Data sources/study setting: Secondary data from 1997 on individual physician and group characteristics from two surveys: Medical Group Management Association (MGMA) Physician Compensation and Production Survey and the Cost Survey Area Resource File data on market characteristics, and various sources of state regulatory data.

Study design: Cross-sectional estimation of individual physician production function models, using ordinary least squares and two-stage least squares regression.

Data collection: Data from respondents completing all items required for the two stages of production function estimation on both MGMA surveys (with RBRVS units as production measure: 102 groups, 2,237 physicians; and with charges as the production measure: 383 groups, 6,129 physicians). The 102 groups with complete data represent 1.8 percent of the 5,725 MGMA member groups.

Principal findings: Individual production-based physician compensation leads to increased productivity, as expected (elasticity = .07, p < .05). The productivity effects of compensation methods based on equal shares of group net income and incentive bonuses are significantly positive (p < .05) and smaller in magnitude. The group-level financial incentive does not appear to be significantly related to physician productivity.

Conclusions: Individual physician incentives based on own production do increase physician productivity.

Publication types

  • Research Support, Non-U.S. Gov't
  • Review

MeSH terms

  • Cross-Sectional Studies
  • Data Collection
  • Efficiency*
  • Fees and Charges
  • Female
  • Group Practice / economics*
  • Humans
  • Least-Squares Analysis
  • Male
  • Managed Care Programs / economics
  • Motivation
  • Physician Incentive Plans / economics*
  • Physicians / economics
  • Physicians / psychology*
  • Physicians, Women / economics
  • Physicians, Women / psychology
  • Salaries and Fringe Benefits / economics*
  • Sex Factors
  • United States