Despite Backlash, Most Physicians Continue to Contract with Managed Care Plans

Plans' Use of Fixed, Per Patient Monthly Payments Declines Sharply

News Release
Nov. 7, 2002

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ASHINGTON, D.C.—Despite the backlash against managed care, nine out of 10 U.S. physicians continued to contract with at least one managed care plan between 1997 and 2001, according to a national tracking study released today by the Center for Studying Health System Change (HSC).

Among physicians with managed care contracts, total average practice revenue from managed care actually increased from 43 percent in 1997 to 46 percent in 2001. At the same time, physicians’ average number of managed care contracts grew from 12.4 in 1997 to 13.1 in 2001, probably reflecting health plans’ efforts to broaden networks and give consumers more choice of providers.

"The findings are a bit surprising given the intense backlash against managed care and stories about physicians dropping out of managed care plans," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation. "Managed care remains an integral part of the practice of medicine, but the nature of the relationship between physicians and managed care plans is shifting to a kinder, gentler approach."

While managed care plans continued to play a prominent role in most physicians’ practices, the financial relationship between many doctors and plans changed between 1997 and 2001, with a significant decrease in plan’s use of fixed per-member, per-month payments, or capitation. Of physicians with managed care contracts, the proportion of practices receiving some revenue from capitation, or risk contracting, dropped from 57.4 percent in 1997 to 48.6 percent in 2001—an almost nine percentage point decline.

"Many doctors and health plans have renegotiated the way they do business, and many physicians are no longer as much at risk for high-cost patients as they once were," said Bradley C. Strunk, an HSC health research analyst who co-authored the study with HSC Senior Researcher James D. Reschovsky, Ph.D.

The study’s findings are detailed in a new HSC Tracking Report—Kinder and Gentler: Physicians and Managed Care, 1997-2001—available here. Based on results from HSC’s Community Tracking Study Physician Survey, a nationally representative survey involving about 12,000 physicians, other key findings include:

• The proportion of primary care physicians receiving capitated payments declined from 76.6 percent in 1997 to 66.7 percent in 2001. During the same time, the proportion of specialists receiving capitated payments declined from 45 percent to 36.4 percent.
• Less than a third of all physicians had their overall compensation tied to specific financial incentives at the practice level between 1997 and 2001. The incentives studied were profiling-comparing a physician’s treatment patterns with those of other physicians-results of patient satisfaction surveys and quality of care measures such as whether recommended preventive care was provided.
• The proportion of physicians whose compensation was directly tied to profiling at the practice level declined from 15.6 percent in 1997 to 12.2 percent in 2001.
• The proportion of physicians whose compensation was tied to patient satisfaction surveys or quality of care measures at the practice level did not change between 1997 and 2001, with 23.6 percent of physicians subject to satisfaction surveys and 17.3 percent subject to quality of care measures in 2001.

While relatively few physicians are subject to financial incentives, tools such as profiling, satisfaction surveys and treatment guidelines have broader applications for care management. Over time, the influence of these care management tools has grown—regardless of a link to physician compensation. For example, the proportion of physicians reporting that feedback from patient satisfaction surveys had a "very large," "large" or "moderate" effect on their practice of medicine increased from 58 percent in 1997 to 61.6 percent in 2001.

Likewise, the proportion of physicians reporting that treatment guidelines affected their practice of medicine increased from 45.9 percent in 1997 to 56.2 percent in 2001. The effect of profiling was unchanged among all physicians between 1997 and 2001, with 34.3 percent being affected in 2001.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.