Insurer Doctor Ratings and Physican Income

July 22, 2010
Jeff Brown, MD

Doctors need to start thinking seriously about insurance company ratings and rankings, as our incomes and status will increasingly become hostage to them. History shows that attempting to bring incentives to bear on physicians to reduce costs or improve care often carries a high risk of backfiring.

I have avoided writing on this subject because it is about as easy to get a footing on it as it is to get on Jello. But, as the economists tell us, people respond to incentives, so this is a direction in which the insurance industry and the government are looking to increase control of doctors via an incentive structure built upon some cobbled-together rating system.

Across the country, insurance companies now rank physicians based on various factors, including quality of care and cost-effectiveness, in order to persuade participants to see lower-cost doctors. Patients are incentivized to choose low-cost care because their co-pays are typically lower for high-ranking doctors.

So doctors need to start thinking seriously about ratings and rankings as our incomes and status will increasingly become hostage to them. I know, economists have a hard time explaining the past, let alone predicting the future, but I think we can all agree they might have the incentive thing right -- and we doctors have a direct economic need to know how this might play out.

Here are two quick examples of how people respond to incentives, as described by Steven D. Leavitt and Stephen J. Dubner in their compelling "Super Freakonomics" (Morrow 2009): First, the book details how the week after Australia did away with inheritance taxes, there was a big spike in the country’s mortality rate, compared with the prior week. Second, the authors cite American insurance industry statistics that show people who invest in annuities — guaranteeing income for as long as they live – tend to outlive equivalent cohort people who do not buy an annuity. In other words, give me a financial incentive to live longer, and I will!

With doctors, however, you must be very careful in establishing incentives or bad things might happen as a result of the law of unintended consequences. (Call it throwing the baby out with the bathwater, for short.) Physicians' historic ethical directives that put our patients' best interests first is precious, despite the fact that it’s been threatened throughout history by the heavy hand of economic incentives. History shows the effect of consciously and systematically attempting to bring incentives to bear on physicians to reduce costs or improve care often carries a high risk of backfiring.

The central problem for the future is the implication that doctors who score better in some contrived insurance company rating scheme will be more richly compensated for it. So the artificial measuring system itself will come under intense scrutiny for flaws and loopholes. Then gaming the system begins and the law of unintended (and typically bad) consequences kicks in.

The commodity that is always in the shortest supply is information. What is needed is accurate, verifiable and trustworthy information that can be reliably acted upon. But exactly how will the desired behaviors and/or outcomes be defined? And how long will it take for results to be ultimately assessed of processes performed today? How can we accommodate selection bias, or patient compliance? What about exceptions and outliers? Studies have shown that even colleagues' opinions of other doctors do not correlate well with outcomes.

For example, Leavitt and Dubner refer to one study that showed that the average doctor spends 60 percent of the work day on "information management" and only 15 percent on "direct patient care." Even if that metric is correct, how do you begin to analyze the value or results of that work distribution?

And new studies have called into question the accuracy of doctor-ranking systems themselves. Earlier this year, a study by the RAND Corp. published in the New England Journal of Medicine questioned the accuracy of rating scores. The study found that 22 percent of doctors in 10 specialties would be misclassified in a two-tiered system that categorized doctors as being low-cost or high-cost. In a few specialties, most notable for vascular surgeons, more than a third were misclassified.

Also yet to be determined is whether the spread between the top-ranked doctors and the ones on the bottom results in a meaningful difference in outcomes worth the time, trouble and expense. Some in the field have already surmised that physician differences in cost will pale in comparison to patient behaviors and characteristics when it comes to choosing a physician.

It's important to try to remain objective about all this, especially as physicians have so much ego and emotion -- let alone money -- tied up in our professional status. We know that economic success also is related to our standing, whatever we imagine that to be. But someday for the profession, the public, and other interested parties, it would be desirable to have agreed upon standards of care and pay. It is expensive, wasteful and harmful to patients that the proper assessments have not yet been identified.

Until then, all we have, really, is our oath, our evolving best practices and our consciences. That, and the dysfunctional economic incentives we wrestle with everyday trying to integrate doing the best for our patients while doing well enough for ourselves.