Effect of incentives on the use of indicated services in managed care

In managed care, financial incentives and utilization review create conflicts of interest for physicians. We sought to determine whether these incentives would lead physicians to deny indicated services. We surveyed internists practicing in areas with at least 30% penetration of managed care. Our questionnaire included four scenarios in which a test or referral is indicated according to clearly established practice guidelines. We randomly assigned physicians to receive one of five versions of the questionnaire, which differed only in the type of reimbursement incentive and utilization review that applied to the scenarios. We received responses from 710 (70%) of 1,009 internists. Although physicians underutilized services regardless of incentives in all scenarios, physicians whose questionnaires depicted full capitation said that they would order fewer services than physicians whose questionnaires depicted fee-for-service. In the scenario in which an x-ray of the lumbosacral spine is indicated for a patient with low back pain, 86% of physicians randomized to the full capitation version said that they would order the test compared to 94% in the fee-for-service version. Similarly, physicians randomized to scenarios requiring utilization review said that they would order fewer services than those randomized to scenarios requiring completion of an insurance form. Scenarios depicting managed care incentives caused consistent, modest underutilization compared to fee-for-service scenarioes, although physicians underutilized services under all financial incentives and utilization review. In response, physicians must develop better methods for detecting underutilization and devise programs to increase the provision of indicated services.