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This article addresses the impact of financial incentives on physician behavior, focusing on quality of care. Changing market conditions, evolving social forces, and continuing organizational evolution in health services have raised societal awareness and expectations concerning quality. This article proceeds in four parts. First, the authors place financial incentives in the context of broader forces shaping the quality of physician services. Second, the article reviews the literature on financial incentive effects on physician behavior. Third, a simple net income maximization model of physician choices is presented, from which are derived formal hypotheses regarding the effect of financial incentives on physician choices of quality per unit of physician service and the quantity of services per patient. The model is extended qualitatively to offer further hypotheses and research directions. Finally, gaps and limitations of the model and of the extant empirical research are articulated, and additional researchable questions are posed.

Two proposals for cost containment in US health service systems are evaluated in terms of their incentives for quality maintenance & improvement. The expenditure-ceiling model is viewed as having extensive regulatory mechanisms conducive to quality control; however, provider resistance & other political barriers to peer coordination & accountability are identified that apparently reduce its potential for real reallocation. The competitive market approach, on the other hand, is widely regarded as underproviding services; nonetheless, strong provider incentives to quality are identified, eg, elimination of ineffective resources use. Means of developing the competitive model further are examined. Modified Author Summary.

This study examines all 81 health maintenance organization (HMO) mergers that occurred in the United States from 1985 to 1992. The primary emphasis is on describing organizational factors that are associated with mergers, identifying market environments in which mergers are more likely to occur, and analyzing the financial status of merging HMOs. Overall, the study presents an up-to-date portrait of mergers in this important health care industry. We found that HMO mergers are relatively rare, but, over time, a substantial proportion of HMOs and their enrollees are affected by mergers. Ouranalys is suggests that some financially weak HMOs might have failed if they had not merged into stronger plans. This finding gives qualified support to the failing-company antitrust defense for HMO mergers. However, mergers between large, financially sound HMOs may have anticompetitive effects on consumers of HMO services.

Cost-benefit analysis; focuses on a proposed primary health care project to be funded predominantly by the U.S. government; based on conference paper.

This paper discusses competitive‐bidding systems for indigent medical care. Theoretical and empirical research which applies to the specific characteristics of these systems is limited. In particular, it is not clear which set of bidding rules would result in the lowest program costs for the state. Effectively implementing competitive bidding is difficult, given the ambiguity of available research results, since such bidding creates the appearance that policymakers have relinquished budgetary control.

This article utilizes benefit-cost analysis to evaluate a hypothetical rural hospital closure. The estimated benefits were found to be extremely sensitive to assumptions concerning the nature of hospital marginal cost curves and less sensitive to the proportion of the hospital bill assumed to be paid directly by consumers. The net benefits of a hospital closure were largest in the case where hospital alternatives were small, under-utilized facilities. The analysis suggests that when evaluating medical delivery system change, benefit-cost techniques can be useful to policymakers in structuring the problem and identifying key assumptions. However, theoretical considerations in combination with data and resource requirements will limit its usefulness as an applied health-planning tool.

Over the past decade, there has been a substantial increase in the use of financial incentives by private employers and public programs to encourage healthy behaviors, wellness activities, and use of preventive services. The research evidence regarding the effectiveness of this approach is reviewed, summarizing relevant findings from literature reviews and from recent evaluations. The article concludes that financial incentives, even relatively small incentives, can influence individuals' health-related behaviors. However, the findings regarding health promotion and wellness are based primarily on analyses of a limited number of private sector initiatives, whereas the evidence regarding preventive services is based on evaluations of initiatives sponsored predominantly by public programs and directed at low-income populations. In either case, there are several important limitations in the ability of the published findings to provide clear guidance for public program administrators or private purchasers seeking to design and implement effective incentive programs.