The effect of explicit financial incentives on physician behavior

Managed care organizations use explicit financial incentives to influence p hysicians' use of resources. This has contributed to concerns regarding con flicts of interest for physicians and adverse effects on the quality of pat ient care. In light of recent publicized legislative and legal battles abou t this issue, we reviewed the literature and analyzed studies that examine the effect of these explicit financial incentives on the behavior of physic ians. The method used to undertake the literature review followed the appro ach set forth in the Cochrane Collaboration handbook. Our literature review revealed a paucity of data on the effect of explicit financial incentives. Based on this limited evidence, explicit incentives that place individual physicians at financial risk appear to be effective in reducing physician r esource use. However, the empirical evidence regarding the effectiveness of bonus payments on physician resource use is mixed. Similarly, our review r evealed mixed effects of the influence of explicit financial incentives on the quality of patient care, The effect of explicit financial incentives on physician behavior is complicated by a lack of understanding of the incent ive structure by the managed care organization and the physician. The lack of a universally acceptable definition of quality renders it important that future researchers identify the term explicitly.