9 Behavioral Economic Strategies for Doctor Pay

This video provides an in-depth exploration of nine behavioral economic strategies designed to influence physician behavior, ultimately aiming to improve quality, lower costs, and increase patient access within healthcare. Dr. Eric Bricker, referencing a seminal 2016 article from the Annals of Internal Medicine authored by a "who's who" of healthcare economics and health services research experts, critiques the prevailing fee-for-service model for its tendency to incentivize relative value unit (RVU) maximization rather than patient-centric outcomes. The core premise is that the current compensation structure is suboptimal for patient care, and behavioral economics offers actionable pathways to realign incentives.

The presentation systematically unpacks each of the nine strategies, offering both theoretical underpinnings and practical examples of their application in physician compensation and practice management. Dr. Bricker emphasizes that simply educating doctors about "the right thing to do" is insufficient; effective change requires carefully structured financial and non-financial incentives. He highlights how leveraging inherent human biases, such as inertia and loss aversion, can be more potent than traditional incentive models. The discussion also touches upon the operational challenges associated with implementing these strategies, often noting that effective behavioral change frequently demands "more work" from administrative staff, contrasting with simpler but less effective approaches.

Throughout the video, Dr. Bricker provides concrete illustrations, such as Intermountain Healthcare's use of care pathways as defaults in their electronic medical records to guide ventilator settings, or Mass General Hospital's practice of sending physical bonus checks to doctors' homes to enhance their perceived value. He also points out common pitfalls, like choice overload leading to decreased behavior change when too many quality metrics are introduced. The speaker's perspective is rooted in a deep understanding of both clinical practice (as an internist) and healthcare finance, allowing him to bridge the gap between academic research and real-world applicability, advocating for systemic changes over reliance on individual willpower.

The overarching message is that to truly transform healthcare outcomes, compensation and operational systems must be redesigned with an understanding of human psychology. By moving beyond the limitations of fee-for-service and embracing these behavioral economic principles, healthcare organizations can create environments where physicians are naturally guided towards behaviors that enhance patient care, efficiency, and accessibility. The video serves as a compelling argument for a more sophisticated, data-driven approach to physician engagement and performance management.

Key Takeaways:

• Fee-for-Service Limitations: The current fee-for-service model primarily incentivizes the maximization of relative value units (RVUs) rather than optimizing for quality, cost-effectiveness, or patient access, necessitating alternative compensation strategies.
• Beyond Education: Simply informing physicians about best practices or "the right thing to do" is insufficient to change behavior; effective strategies require a combination of financial and non-financial incentives.
• Leverage Defaults (Inertia/Status Quo Bias): Design systems where desired behaviors are the default option. For example, integrate evidence-based care pathways as pre-selected choices in electronic medical records (EMRs), requiring physicians to actively opt-out for alternative actions.
• Avoid Choice Overload: Introducing too many quality metrics or choices can paradoxically decrease desired behavior change. A "Goldilocks" approach—not too few, not too many—is crucial for effective physician engagement and focus.
• Increase Incentive Immediacy: Annual incentives are often too infrequent to drive sustained behavior change. More frequent feedback and rewards (e.g., weekly, monthly, quarterly) can significantly improve the effectiveness of both financial and non-financial incentives, despite requiring more administrative effort.
• Harness Loss Aversion: People are generally more motivated to avoid losing something they possess than to gain something new. Structuring incentives as an upfront bonus that can be taken away if performance targets are not met can be more effective than offering a bonus at the end of a period.
• Utilize Relative Social Ranking: Transparently comparing physician performance by name within a group can be a powerful motivator. Publicly displaying metrics like immunization rates, even for individual physicians, can drive improvement among lower performers and elevate overall group performance.
• Account for Threshold Effect: Physicians will work harder as they approach a goal or threshold, but once that goal is met, their effort may decrease. Incentive structures should anticipate this effect, potentially by introducing new thresholds or continuous goals to maintain motivation.
• Systematize Beyond Willpower: Relying on individual physician vigilance for tasks like preventive care gap closure is unsustainable and contributes to burnout. Instead, implement systemic solutions, such as empowering nurses to manage and follow up on preventive screenings and immunizations, removing the burden from physicians.
• Employ Mental Accounting: The way a bonus is delivered impacts its perceived value. Separating bonus payments from regular paychecks (e.g., sending a physical check to a home address, as Mass General did) makes the bonus stand out and reinforces its connection to specific achievements.

Key Concepts:

• Behavioral Economics: The study of the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions, and how those decisions vary from those implied by classical theory.
• Fee-for-Service (FFS): A payment model where services are unbundled and paid for separately. In medicine, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality.
• Relative Value Unit (RVU): A measure of value used in the U.S. Medicare reimbursement formula for physician services. It is a component of the resource-based relative value scale (RBRVS).
• Inertia/Status Quo Bias: A cognitive bias where people have a strong tendency to prefer the current state of affairs, or to do nothing, rather than make a change.
• Loss Aversion: A cognitive bias that describes why, for individuals, the pain of losing is psychologically more powerful than the pleasure of gaining.
• Mental Accounting: The tendency for people to separate their money into different mental accounts based on subjective criteria, like the source or intended use of the money.

Examples/Case Studies:

• Intermountain Healthcare System: Implemented care pathways as defaults in their hospital systems (e.g., for ventilator settings in the ICU) to ensure evidence-based care was the standard, requiring doctors to actively choose an alternative.
• Outpatient Primary Care Physician Group: Used relative social ranking by publicly displaying individual physician immunization rates (pre-COVID) for adult immunizations. This led to significant improvement in rates, particularly among those with lower initial performance.
• Mass General Hospital: Employed mental accounting by sending individual, hard-copy bonus checks to doctors' home addresses, rather than integrating them into regular electronic paychecks, to make the bonus stand out and increase its perceived value.
• Outpatient Clinic (Systematization): Shifted the responsibility for reviewing preventive care gaps and following up on screenings and immunizations from physicians to nurses, recognizing the unsustainability of relying on physician willpower and vigilance.