Are physician reimbursement strategies associated with processes of care and patient satisfaction for patients with diabetes in managed care

Although controversial, the use of financial incentives in health care has garnered increasing interest (Berwick 1995; Miller and Sage 1999; Bailit Health Purchasing LLC and Sixth Man Consulting Inc. 2001; Institute of Medicine 2001; Rolnick 2002; Fernandopulle et al. 2003; Maio et al 2003). For example, in a recent major initiative in the U.K., primary care physicians (PCPs) have entered into a government contract that will provide incentives for high-quality care (Roland 2004). To date, however, the literature on the effects of physician reimbursement incentives has largely been limited to conceptualization of the issues (Hillman 1990; Berwick 1996; Dudley et al. 1998; Glass, Pieper, and Berlin 1999; Goldfarb 1999; Tufano, Conrad, and Liang 1999; Robinson 2001; Conrad and Christianson 2004). With at least one notable exception (Keating et al., 2004), empirical studies have focused on quantity of services delivered rather than process measures or quality of care and have yielded conflicting conclusions (Dudley et al. 1998; Armour et al. 2001; Bailit Health Purchasing LLC and Sixth Man Consulting Inc. 2001; Conrad and Christianson 2004; Rosenthal et al. 2004). This study assessed the associations between the reimbursement strategies used for PCPs and the care processes and satisfaction of their managed care patients with diabetes and examined how this relationship may be confounded by physician organizational model. Diabetes and its complications are common, complex, and costly, presenting formidable challenges to the U.S. health system (Centers for Disease Control and Prevention 1997; American Diabetes Association 1998). Diabetes complications and comorbidities may be delayed or avoided altogether through timely and effective treatments, but unfortunately many of these treatments are not uniformly implemented in routine clinical practice (Marrero 1994; Martin, Selby, and Zhang 1995; Centers for Disease Control and Prevention 1997; Pan et al. 1997; Harris 2000). A better understanding of the factors influencing care processes across diverse health care systems, including the role of physician reimbursement strategies, is needed to close the gap between actual and optimal care. To that end, this study tested three hypotheses based on the theoretical and empirical literature previously cited. The first hypothesis is that processes of care are better, and hence satisfaction greater, among managed care patients with diabetes whose PCPs total compensation depends more heavily on fee-for-service (FFS) reimbursement than on salary or capitated reimbursement, because there are no cost containment incentives in a FFS system that might restrict the care received by the patient (Dudley et al. 1998; Armour et al. 2001; Institute of Medicine 2001; Robinson 2001; Grignon et al. 2002; Kuhn 2003; Conrad and Christianson 2004). The counter-hypothesis is that capitation is associated with better care processes because capitated plans reap any (short-term) financial gains that might result from better disease management. The counter-hypothesis is more compelling if patient disenrollment is lower, as the plan might otherwise be unable to recoup investments in patient health quickly enough. The second hypothesis is that processes of care are better, and satisfaction greater, among managed care patients with diabetes whose PCPs total compensation is based in part on quality or patient satisfaction (Bailit Health Purchasing LLC and Sixth Man Consulting Inc. 2001; Institute of Medicine 2001; Conrad and Christianson 2004). The third hypothesis is that processes of care are worse, and satisfaction lower, among managed care patients with diabetes whose PCPs total compensation depends on outpatient utilization, i.e., are paid more when their patients are less costly (Armour et al. 2001; Bailit Health Purchasing LLC and Sixth Man Consulting Inc. 2001; Institute of Medicine 2001). Again, a counter-hypothesis can be made if short-term investments in the patient's health are more than offset by longer-term reductions in cost, although such reductions seem more likely to show up in inpatient settings, where they would not contribute to the physician's compensation. An earlier study using the same dataset (Kim et al. 2004) found associations of diabetes care processes with physician organizational model (independent practice association [IPA] versus medical group [MG]) and hypothesized that these associations could be mediated by factors such as physician reimbursement strategies, but did not examine the role played by those strategies. We sought to build on this earlier work by estimating the association between reimbursement strategies and care processes, with and without controlling for physician organizational model.