AMA Journal of Ethics®

Illuminating the art of medicine

Journal of Ethics Header

AMA Journal of Ethics®

Illuminating the art of medicine

Virtual Mentor. January 2005, Volume 7, Number 1.

Module 6

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Case 6.2: Financial Incentives—The 50-Milligram Difference

Additional Information

The most fundamental goal of the medical profession is to provide for the health of patients. In the context of clinical care, this requires physicians to place the health interests of their individual patients before other concerns and to facilitate access to all necessary treatments.

Opinion 8.03, "Conflict of Interests: Guidelines"

Under no circumstances may physicians place their own financial interests above the welfare of their patients. The primary objective of the medical profession is to render service to humanity; reward or financial gain is a subordinate consideration...If a conflict develops between the physician's financial interest and the physician's responsibilities to the patient, the conflict must be resolved to the patient's benefit.

Accordingly, financial incentives as well as potential financial conflicts of interests should be judged according to their success or failure at fostering improvements in patient care. The following Opinion excerpts explain guidelines for these situations:

Opinion 8.051, "Conflicts of Interest under Capitation"

...(1) Physicians have an obligation to evaluate a health plan's capitation payments prior to contracting with that plan to ensure that the quality of patient care is not threatened by inadequate rates of capitation...Physicians should seek agreements with plans that provide sufficient financial resources for all necessary care and should refuse to sign agreements that fail in this regard.

(2) Physicians must not assume inordinate levels of financial risk...

(3) Stop-loss plans should be in effect to prevent the potential of catastrophic expenses from influencing physician behavior...

(4) Physicians must be prepared to discuss with patients any financial arrangements which could impact patient care.

One potential benefit of financial incentives is a reduction of waste in the use of medical resources, including payments by insurers for unnecessary services and prescriptions, thereby effectively increasing the pool of resources for care. Financial incentives, however, accomplish this social benefit by involving the personal financial interests of the physician in the therapeutic relationship.

As the above Opinions make clear, incentives should be judged according to the extent to which they allow physicians to maintain their role as advocates for the health of individual patients. Specifically, incentives should never discourage physicians from fulfilling their obligations to disclose all treatment options, to appeal denials of coverage for necessary care, to make referrals on the basis of individual patient needs, or to provide each patient with the treatments they believe will be of material benefit. (For normative standards on limitations to prescription coverage see Opinion 8.135, "Cost Containment Involving Prescription Drugs in Health Care Plans.")

The effect of financial incentives is felt most acutely when there is not a clear clinical course and the physician is called upon to render an objective analysis of several complex considerations. Because it is difficult to maintain true objectivity when a monetary reward or penalty is associated with one of the possible courses of action, placing limits on financial incentives helps protect clinical objectivity. There are several means of limiting the negative effects of these incentives including applying the incentives across groups of physicians and correlating incentives to large pools of patients over a substantial length of time.

The potential to affect the objectivity of physicians is not the only cause for concern about financial incentives. Inducements that are based on the use of resources across physicians' practices compound the conflict between the interests of the physician and those of the patient by introducing conflicts between patients. For instance, bonuses attached to patterns of reduced use encourage physicians to consider which patients need certain services most rather than what an individual patient needs.

Finally, patients have a right to be informed of all factors that could impact their care, including the payment system under which their physician practices. In this case, Mr. Ria should be told that his insurer's extra costs will likely come back as increases in coverage costs or decreases in covered care. A much more difficult question to answer than whether or not to disclose incentives is where the responsibility for providing such information lies. Disclosure prior to enrollment in a health plan is preferable, as the structure of financial inducements could influence the patient's decision to purchase a specific form of coverage. Some obligation, however, exists on the part of the physician to provide this information if it has not already been provided.

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The people and events in this case are fictional. Resemblance to real events or to names of people, living or dead, is entirely coincidental. The viewpoints expressed on this site are those of the authors and do not necessarily reflect the views and policies of the AMA.