Physicians' responses to financial incentives. Evidence from a for-profit ambulatory care center

UMMS Affiliation

Department of Family Medicine and Community Health

Publication Date


Document Type



Ambulatory Care Facilities; Boston; Data Collection; Health Facilities, Proprietary; *Health Facility Administration; Income; Office Visits; Personnel Management; Physician Incentive Plans; Physician's Practice Patterns


Community Health and Preventive Medicine | Health and Medical Administration | Health Services Administration | Health Services Research | Primary Care


Health Stop is a major chain of ambulatory care centers operating for profit. Until 1985 its physicians were paid a flat hourly wage. In the middle of that year, a new compensation plan was instituted to provide doctors with financial incentives to increase revenues. Physicians could earn bonuses the size of which depended on the gross incomes they generated individually. We compared the practice patterns of 15 doctors, each employed full time at a different Health Stop center in the Boston area, in the same winter months before and after the start of the new arrangement. During the periods compared, the physicians increased the number of laboratory tests performed per patient visit by 23 percent and the number of x-ray films per visit by 16 percent. The total charges per month, adjusted for inflation, grew 20 percent, mostly as a result of a 12 percent increase in the average number of patient visits per month. The wages of the seven physicians who regularly earned the bonus rose 19 percent. We conclude that substantial monetary incentives based on individual performance may induce a group of physicians to increase the intensity of their practice, even though not all of them benefit from the incentives.

DOI of Published Version



Hemenway D, Killen A, Cashman SB, Parks CL, Bicknell WJ. Physicians' responses to financial incentives. Evidence from a for-profit ambulatory care center. NEngl J Med. 1990 Apr 12;322(15):1059-63. DOI: 10.1056/NEJM199004123221507. Link to article on publisher's site

Journal/Book/Conference Title

The New England journal of medicine


At the time of publication, Suzanne Cashman was not yet affiliated with the University of Massachusetts Medical School.

Related Resources

Link to Article in PubMed

PubMed ID