Most physicians paid based on volume, not value, Rand finds

Photo: Morsa Images/Getty Images

Despite efforts by insurance companies and other payers to move toward compensating physicians based on the quality and value of care they provide, most physicians employed in group practices owned by health systems are paid primarily based on the volume of care they provide, according to a new study by Rand Corp. researchers.

Examining a wide range of medical practices owned by health systems, researchers found that volume-based compensation was the most common type of base pay for more than 80% of primary care physicians and for more than 90% of physician specialists.

While financial incentives for quality and cost performance were commonly used by health systems, the percentage of total physician compensation based on quality and cost was modest – 9% for primary care providers and 5% for specialists.

The findings are published in the journal JAMA Health Forum.


In recent years, both private and public payers have adopted payment reforms that seek to encourage healthcare providers to improve the quality of care delivered and slow spending growth in an effort to generate better value for patients. At the same time, the size of health systems and their employment of physicians has increased markedly.

To examine whether the compensation structure for physicians resembled the payment reforms focused on value, the study examined the physician payment structures used in 31 physician organizations affiliated with 22 health systems located in four states.

Researchers interviewed physician organization leaders, reviewed compensation documents and surveyed the physician practice to characterize the compensation arrangements of primary care and specialist physicians.

Increasing the volume of services delivered was the most commonly reported action that physicians can take to increase their compensation, with 70% of the practices following such a plan. In these cases, volume-based incentives accounted for more than two-thirds of compensation.

Performance-based financial incentives for value-oriented goals, such as clinical quality, cost, patient experience and access to care, were commonly included in compensation, the research showed. However, as those payments represented only a small fraction of total compensation for primary care physicians and specialists, they are likely to affect physician behavior only marginally.

Instead, 70% of physician organization leaders noted that increasing the volume of services delivered is the top action that primary care and specialist physicians could take to increase their compensation.

For the U.S. healthcare system to truly realize the potential of value-based payment reform, health systems and provider organizations will likely need to evolve the way frontline physicians are paid to better align with value, the study’s authors said.


Insurers and providers have long maintained that value-based arrangements result in better overall clinical quality. Internal data from major insurer Humana, which examined Medicare Advantage specifically, found that those MA patients receiving value-based care had better outcomes overall, along with lower costs and more preventative care.

Care consistency is one of the major reasons value-based models tend to result in better outcomes for MA members, Humana said. Despite the trend during the COVID-19 pandemic of deferring care, 86% of the insurer’s MA members still saw their value-based primary care physicians at least once last year, compared with 78% among those in non-value-based arrangements. MA members also saw their primary care physicians more often.

This consistency, the numbers showed, reduced incidences of hospital admissions and emergency room visits during 2020 for value-based members – 7% and 12% lower, respectively – compared with those with non-value-based healthcare providers. Hospitalization avoidance fared even better – it was a whopping 22% less – when measured against original Medicare.

Twitter: @JELagasse
Email the writer: [email protected]