Summary: In response to a congressional request, GAO analyzed existing and proposed Medicare physician incentive plans to: (1) assess their legality under current law; and (2) determine the potential abuses that could arise under them in view of the changed incentives under prospective payment.
GAO reviewed operational and proposal plans under which hospitals make incentive payments to physicians for reducing the cost of treating patients and determined that: (1) such plans can provide physicians too strong an incentive to undertreat patients when the decision about whether to pay the incentive is based on the physician's success in keeping down the costs of only a few patients; and (2) the costs of treating any one patient may have a decisive effect on the incentive payment, giving the physician a strong financial incentive to reduce the level of care given that patient, possibly below the level necessary to provide quality care. GAO noted that: (1) Medicare provisions were designed to deter abuse under a cost reimbursement system, typically overuse of services, not the prospective payment system's more likely abuse of underprovision of services; and (2) while some provisions have been adapted to deal with the changed incentives, they deal with quality of care problems on a case-by-case basis after the fact and do not address physician incentive plan features. GAO believes that several such features could be prohibited, or required, to deter potential abuse.
