Medicare: Physician Incentive Payments by Prepaid Health Plans Could Lower Quality of Care

GAO discussed health maintenance organizations' (HMO) physician incentive plans and identified certain actions that potentially threatened the quality of physician services to Medicare enrollees. GAO reviewed 19 HMO physician incentive plans, and found that incentive payments plans based on: (1) shifting financial risk of patient care from HMO to physicians could encourage physicians not to provide needed services; (2) individual physician performance had the greatest potential to adversely impact service quality because physicians could postpone or withhold treatment in potentially expensive cases; (3) a percentage of plan savings could threaten service quality because physicians receive higher incentives for fewer treatments; and (4) physician cost performance over short periods of time could tempt physicians to underprovide or delay services. GAO believes that Congress may wish to consider: (1) modifying Medicare provisions to permit certain HMO physician incentive awards; and (2) retaining prohibitions on arrangements that closely link financial rewards with individual treatment or expose physicians to substantial financial risk.