Incentives and the management of physician behavior in health service organizations

The performance of a health services organization is affected by the cumulative behavior of physicians out of proportion to their numbers or the economic value of their services. Managers are challenged to optimize physician behavior and to change it in concert with the evolving expectations of health service customers. Incentives are the tools available for this effort. This article discusses the interrelation of physician behavior, physician needs, and the major classes of incentives: economic, noneconomic, and rules. While most organizations recognize and use financial incentives, few utilize noneconomic incentives systematically. Given the financial restrictions of advanced markets, managers should understand the role of rules and the value of noneconomic issues to physicians when developing incentive programs.