Penetrating the "black box": financial incentives for enhancing the quality of physician services

Med Care Res Rev. 2004 Sep;61(3 Suppl):37S-68S. doi: 10.1177/1077558704266770.


This article addresses the impact of financial incentives on physician behavior, focusing on quality of care. Changing market conditions, evolving social forces, and continuing organizational evolution in health services have raised societal awareness and expectations concerning quality. This article proceeds in four parts. First, the authors place financial incentives in the context of broader forces shaping the quality of physician services. Second, the article reviews the literature on financial incentive effects on physician behavior. Third, a simple net income maximization model of physician choices is presented, from which are derived formal hypotheses regarding the effect of financial incentives on physician choices of quality per unit of physician service and the quantity of services per patient. The model is extended qualitatively to offer further hypotheses and research directions. Finally, gaps and limitations of the model and of the extant empirical research are articulated, and additional researchable questions are posed.

Publication types

  • Review

MeSH terms

  • Attitude of Health Personnel
  • Costs and Cost Analysis
  • Health Services Research
  • Humans
  • Income
  • Managed Care Programs / economics
  • Managed Care Programs / standards
  • Models, Econometric*
  • Physician Incentive Plans / economics*
  • Quality Assurance, Health Care / economics*
  • Quality Assurance, Health Care / methods
  • Reimbursement, Incentive / statistics & numerical data*
  • Social Responsibility
  • United States