Creating a parsimonious typology of physician financial incentives

In order to create an empirically derived parsimonious typology of physician financial incentives that will be useful for future research, we used data from the nationally representative 2004-2005 Community Tracking Study Physician Survey (N = 6,628). Linear regression analyses informed by economic theory were used to identify the combinations of incentives associated with an overall financial incentive to expand services to individual patients. The approach was validated using two nonparametric methods (CART analysis and data mining techniques) and by examining the relationship between the resulting typology and other measures of physician behavior including hours worked, visit volume, and specialty-adjusted income. Of the 6,628 physicians surveyed, approximately 25% (1,605) reported an overall incentive to increase services and 75% (5,023) reported either neutral incentives or incentives to decrease services. Men, who were approximately 75% of respondents, were slightly more likely to report incentives to increase services (P < 0.05). There were no differences in reported incentives according to specialty. We created two typologies (one with eleven categories and the other with a collapsed set of six categories) based on combinations of variables measuring ownership, base compensation methods, and financial incentives. The percentage with an overall incentive to increase services ranges from 6% for employed physicians compensated via fixed salary to 36.7% for owners in low capitation environments with either individual or practice level productivity incentives. The criterion validity of the typology was established by examining the relationship with adjusted physician income, hours worked, and visit volume, which showed generally consistent relationships in the expected direction. A parsimonious typology consisting of six mutually exclusive groups reasonably captures the continuum of incentives to increase service delivery experienced by physicians.