Friday, 10 August 2012

Financial incentives and surgery rates

Recently, a reader asked me if financial incentives could be responsible for the findings referred to in previous posts, like practice variations and the persistence of some surgical procedures despite evidence of their ineffectiveness. We know that you can change physician behaviour by altering financial incentives (Cochrane review), but anyone who believes in Homo Economicus will tell you that. And there is also evidence that financial incentives lead to increased health care usage amongst primary care doctors (here), but what about the evidence for financial incentives influencing surgery rates?

The rates of many surgical procedures in the USA (and Germany) far outstrip the rates in other (even neighbouring) countries, but due to the complexity of the possible confounding, it is not possible to conclude that financial incentives are completely responsible for the observed differences. Better-controlled studies are needed to find any such effect.

Looking at payment type, we find that surgeons who are paid per procedure are more likely to operate than surgeons paid on a sessional (hourly) basis. Within a Health Maintenance Organization, ‘fee for service’ structure is associated with higher rates of surgery (here). One particularly detailed investigation (full pdf available here, later journal article here) used nationally representative (US) data, and found that fee-for-service arrangements led to a 78-84% increase in surgery rates compared to capitation payments. 

We also find that surgeons who have part-ownership in hospitals, are more likely to refer patients for surgery compared to hospitals where there is no ownership (here).

Surgeons are also more likely to prescribe more treatments to insured patients (here) than those in the public system, and this is clear to those of us who work in a country with a two-tier (private and public) system, where we see wide variations in practice between private and public hospitals. This holds not only for non-operative treatments like rehabilitation and physiotherapy, but for many operations, like arthroscopies and spine fusion surgery. This study from such a two-tier system allowed for different access between private and public sectors, and compared spine fusion to hip and knee replacement surgery, and found that the surgical rates in the private sector were far higher, and were increasing, compared to low rates and very little demand in the public sector.

The bottom line
It appears that the consumers of healthcare (you can call them patients) are members of the species Homo Economicus, as they are much more likely to consume healthcare if their direct (out-of-pocket) expenses are reduced (as shown by the famous RAND Health Insurance Experiment). That surgeons are also members of this species seems likely, as suggested by the higher likelihood of a surgical intervention being performed when it is linked to payment. This makes sense, as surgeons have to make a living (and run a business), so if they are paid per operation, they will be more likely to recommend surgery to patients, particularly those that fall into the grey zone (and in surgery, the grey zone is often bigger than the black and the white zones combined, but more on the evidence behind surgery later). As you know, ‘making sense’ doesn’t make it true, but in this case there appears to be evidence to support our intuition that surgical interventions are at least partly driven by financial incentives.


  1. Its interesting that ownership (or part-ownership) of specialty hospitals commonly occurs and consequently leads to higher user rates for surgery, than those without ownership in the hospital. It is almost analagous to part-ownership in a pharmaceutical company and higher prescription rates of the company drugs. Whereas one is grossly unethical, the other occurs as common practice it seems.

    1. Thanks Abhinav,
      I think there is a general impression that surgery is either required or it isn't; that there is no discretion involved. THerefore people don't see how surgeon ownership of a hospital could influence surgery rates. In reality, of course, the decision to operate or not is influenced by many factors, including financial incentives.

  2. Oh, this is the saddest case that we have in the US: we seldom provide surgery incentives for seriously-ill patients. Not all of us can avail surgeries nowadays, especially that we haven't moved on from recession so far. Hopefully the government would try to get a peek on what's happening to the so-called "promised incentives". Seriously.

  3. I used to say to our audiences: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
    I, Candidate for Governor: And How I Got Licked (1935)

    Upton Sinclair, Jr. (September 20 1878 – November 25 1968)

  4. Orthopedic surgeons (spine) working in metropolitan areas of 50,000-250,000 residents made more than any other demographic classification, at $717,710.

    MGMA's Physician Compensation and Production Survey: 2010 Report Based on 2009 Data

    Can orthopedic surgeons be called on to decrease ineffective procedures when it will harm their incomes? The income depends upon the procedure, without many spine surgeries income will start to decline to office based nonsurgical specialty levels- 200,000 per year. This is a strong bias against finding the truth!