BMJ  2004;328:1328-1329 (5 June), doi:10.1136/bmj.328.7452.1328

Editorial

Financial incentives for doctors

Have their place but need to be evaluated and used to promote appropriate goals

George Bernard Shaw put it well. "That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair..."¹ The problem, according to Shaw, was that the profit motive and doctors' entrepreneurialism create the wrong incentives for good medical practice. The creation of the NHS solved the problem of perverse incentives. Or did it?

Certainly the NHS eliminates the need for practitioners to perform excessive medical procedures to achieve economic security. But all payment systems create incentives. They differ in strength, effect, and the activities they encourage. The NHS pays general practitioners in part by capitation to reward doctors who serve more patients. Since its creation the NHS has also provided distinction awards—salary premiums for a select group of practitioners—as a strategy to recruit and retain doctors who might otherwise choose careers outside the NHS, where they are compensated better. Critics have attacked distinction awards, arguing that the choice of doctors receiving awards reflects racial and sex bias (p 1347).² However, the larger issue is what part, if any, should financial incentives play in the practice of medicine. Are incentives desirable? Should some incentives be encouraged and others avoided?

The use of incentives for doctors has two main problems. Firstly, when society uses incentives to promote changes in clinical behaviour, it sends a signal that doctors should consider their self interest when making medical decisions. That may lead to better practice in the short run. However, calling forth the self interest of doctors compromises a patient centred ethos that is central to good medical practice. No compensation system will produce the results we want if it undermines the ethos that is necessary for professionalism. If the behaviour of doctors is motivated primarily by self interest we will need to monitor their behaviour carefully and adjust incentives precisely. A Nobel laureate in economics, Kenneth Arrow, recognised this and argued that there are limits to market incentives promoting desirable conduct and ethical codes are therefore important ways of promoting good conduct.³

Furthermore, many incentives for doctors create or exacerbate doctors' conflicts of interest, which compromise doctors' loyalty to patients and their exercising independent judgment.^{4 5} Traditional medical ethics holds that doctors should act in the interest of patients when making clinical decisions, not their own financial interest or that of their healthcare organisation. Doctors are also supposed to place the interests of their patients first, not those of society or third parties. However, many financial incentives reward doctors for behaviour that is not necessarily in their patients' interest. Paying a fee for service, Shaw explained, encourages provision of services whether or not they are beneficial. Many American managed care organisations use risk sharing incentives, which make doctors bear financial risk for the volume of services their patients use.⁶ Risk sharing makes doctors insurers as well as providers and gives them an interest in reducing services or dumping severely ill patients on to other practices.

Private firms also create conflicts of interest by using incentives to encourage doctors to prescribe, refer patients, or practise medicine in a way that furthers the firm's interests.⁷ For example, in the United States many magnetic resonance imaging centres and other freestanding medical facilities seek out doctors as limited partners with no role in management. This kind of ownership by doctors encourages doctors to refer their patients to these facilities, to share the profits that their referrals generate. Medical suppliers—such as pharmaceutical firms and manufacturers of medical devices—use financial ties to encourage doctors to prescribe their products. Suppliers pay doctors as consultants, to promote their products through public speaking and to serve on advisory boards. They also sponsor doctors' clinical research, their travel to medical meetings and lodging, and provide meals, gifts, and entertainment.^{8 9}

None the less, eliminating all incentives—the implicit and indirect as well as the explicit—is not possible. Nor would it be desirable. Incentives are a powerful management tool, which can be used to promote patients' welfare and improve the performance of a healthcare system. Used properly, an incentive to retain leading practitioners in the NHS makes sense. However, that does not mean that the current incentives used to do so are the right ones or that the distinction award system is properly implemented.

The challenge for health policy is to promote organisational norms that encourage good medicine. Incentives for doctors have their place when used to promote appropriate goals such as furthering high quality medicine, patient centred care, and efficient use of resources.^{10 11} The difficulty is to avoid or minimise the perverse side effects of incentives. That goal requires careful use of incentives, evaluation of their effect, and a fair dose of scepticism. Health policy makers in much of the world today embrace uncritically the use of incentives for doctors, ignoring their problems and risks. Instead they should treat incentives like drugs—a powerful product that can be beneficial but also dangerous. Society should control the use of incentives for doctors carefully to ensure that they are safe as well as effective in the way they are used.

Suffolk University Law School, 120 Tremont Street, Boston, MA 02108, USA (mrodwin{at}suffolk.edu)

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Papers p 1347

Competing interests: None declared.

References

1. Shaw GB. Preface on doctors. The doctor's dilemma: a tragedy. Baltimore: Penguin, 1913: 9.
2. Lambert TW, Goldacre MJ, Vallance E, Mallick N. Characteristics of consultants who hold distinction awards in England and Wales: database analysis with particular reference to sex and ethnicity. BMJ 2004;328: 1347-9.[Abstract/Free Full Text]
3. Arrow KJ. Social responsibility and economic efficiency. Public Policy 1973;16: 303-17.
4. Rodwin MA. Medicine, money and morals: physicians' conflicts of interest. New York: Oxford University Press, 1993.
5. Rodwin MA. Strains in the fiduciary metaphor: Divided physician loyalties and obligations in a changing health care system. Am J Law Med 1995;21: 241-57.[ISI][Medline]
6. Gold M, Hurley R, Lake T, Ensor T, Berenson R. A national survey of the arrangements managed care plans make with physicians. N Engl J Med 1995;3233; 1678-83.
7. Kassirer JP. On the take: how big business is corrupting American medicine. New York. Oxford University Press (in press).
8. Angell M. The truth about the drug companies—how they deceive us and what to do about it. New York: Random House (in press).
9. Krimsky S. Science in the private interest: has the lure of profits corrupted the virtues of biomedical research. Lanham: Roman and Littlefield, 2003.
10. Stevens S. Reform strategies for the English NHS. Health Affairs 2004;23: 37-44.[Abstract/Free Full Text]
11. Department of Health. General medical services (GMS) contract 2004. www.dhgov.uk/policyAndGuidance/HumanResourcesAndTraining/ModernisingPay/GPContracts/fs/en (accessed 11 Mar 2004).

Related Article

Characteristics of consultants who hold distinction awards in England and Wales: database analysis with particular reference to sex and ethnicity

Trevor W Lambert, Michael J Goldacre, Elizabeth Vallance, and Netar Mallick
BMJ 2004 328: 1347. [Abstract] [Full Text] [PDF]

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• Lee, Y.-C., Huang, K.-H., Huang, Y.-T. (2007). Adverse pharmaceutical payment incentives and providers' behaviour: the emergence of GP-owned gateway pharmacies in Taiwan. Health Policy Plan 22: 427-435 [Abstract] [Full text]  
• Abel, P., Esmail, A. (2006). Performance pay remuneration for consultants in the NHS: is the current system fair and fit for purpose?. JRSM 99: 487-493 [Full text]  

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