Economists propose paying physicians salary over fee-for-service method to avoid conflicts of interest

In a Journal of the American Medical Association Viewpoint article, a pair of behavioral economists contend that doctors should be paid by salary, rather than the fee-for-service arrangements under which most of them now operate.

While most conflict of interest research and debate in medicine tends to focus on physicians interacting with pharmaceutical and device companies, how doctors are paid is one important source of conflict that's largely ignored in medical literature, they said.

Fee-for-service compensation arrangements, they propose, create incentives for physicians to order more, and different, services than are best for patients.

"Paying doctors to do more leads to over-provision of tests and procedures, which cause harms that go beyond the monetary and time costs of getting them," said George Loewenstein, the Herbert A. Simon University professor of economics and psychology at Carnegie Mellon University, in a statement. "Many if not most tests and procedures cause pain and discomfort, especially when they go wrong."

[Also: Physicians in rural areas, low-cost cities score higher salaries, report shows]

He and Ian Larkin, an assistant professor of strategy at UCLA's Anderson School of Management, said that a commonly proposed solution to the problem involves requiring physicians to disclose their financial interest for a given procedure. But disclosure of conflicts has been found to have limited, or even negative, effects on patients.

Loewenstein and Larkin argue that the simplest and most effective way to deal with conflicts caused by fee-for-service arrangements is to pay physicians on a straight salary basis. Several health systems well-known for high quality of care, such as the Mayo Clinic, the Cleveland Clinic and the Kaiser group in California, pay physicians salaries without incentives for volume of services performed.

Moving more physicians to straight salary-based compensation might have benefits not only for patients, but also for physicians themselves, they said.

"The high levels of job dissatisfaction reported by many physicians may result, in part, from the need to navigate the complexities of the fee-for-service arrangements," said Larkin. "Instead of focusing on providing patients with the best possible medical care, physicians are forced to consider the ramifications of their decisions for their own paychecks."

Twitter: @JELagasse