THE IMPACT OF PHYSICIAN ECONOMIC INCENTIVES ON ADMISSION RATES OF PATIENTS WITH AMBULATORY SENSITIVE CONDITIONS - AN ANALYSIS COMPARING 2 MANAGED CARE STRUCTURES AND INDEMNITY INSURANCE

The utilization of financial incentives to limit the use of health res ources by primary care physicians represents a common reimbursement st rategy by managed care organizations. These arrangements are virtually nonexistent with indemnity insurance. This analysis compares the hosp italization rates of patients with low-acuity medical conditions-ambul atory sensitive conditions (ASCs)-among three groups receiving care fr om primary care physicians. The physicians were compensated under diff erent reimbursement mechanisms, in which incentives for reduced resour ce utilization varied. The groups can be described as follows: (1) a c apitated for-profit group practice in which the physician partners hav e a relatively high economic incentive for lower utilization (group I) ; (2) physicians providing care under the auspices of three separate i ndependent practice associations, in which the associations are capita ted but the physicians are paid on a discounted fee-for-service basis (the associations also were included in this group) (group II); and (3 ) physicians who service patients whose care continues to be paid for by traditional indemnity insurance (group III), Financial incentives i n the third group cohort were believed to be low to intermediate, and the physicians were assumed to have had no economic incentives to rest rain their use of healthcare resources. Additional data analysis exami ned the role of emergency department utilization among patients in the groups. Group I patients ages 25 to 44 were admitted for ambulatory s ensitive conditions at a significantly fewer rate than were patients i n groups II or 111-0.8/1,000, 2.7/1,000, and 2.9/1,000, respectively, No difference was apparent in admission rates between patients in grou ps II and III. Overall emergency department utilization rates were low est in the group I capitated panel (70/1,000), much higher in the grou p II independent practice association panel (363/1,000) and highest in the group III indemnity panel (466/1,000). Each of these rates was si gnificantly different from the other. Both the ED utilization rate-and ambulatory sensitive condition admission rate may have been affected by differences in socioeconomic status among the patient panels in the three groups. The overall effect of this variable on the two admissio n rates could not be isolated.