Over the course of three HCFO grants, Douglas A. Conrad, Ph.D., at the University of Washington, has examined how different payment strategies affect physician practice patterns and productivity.

Conrad's first HCFO study evaluated the effects of alternative provider compensation strategies on the clinical efficiency of individual primary care doctors in a managed care environment. He and his colleagues found that medical groups devise their compensation arrangements based on external market forces and the nature of payment contracts with local health plans.

"This study was the first to distinguish between the effects on health services utilization and cost per person (enrollee) of different health plan payment methods to medical groups, on the one hand, and the effects of different methods of compensating individual primary care physicians (PCPs), on the other," says Conrad. By isolating a plan's payment arrangement for individual PCPs and the enrollees on their panel, Conrad and his colleagues were able to differentiate plan payment and individual physician compensation methods in a more detailed way than previous studies could. "In that light, our findings that neither plan payment nor physician compensation method had significant effects on cost or utilization in Washington state medical groups were that much more powerful," he says. "Now the search is on to see if those results can be replicated in other market environments."

In a second project, Conrad studied the impact of different financial incentives and risk-bearing arrangements on physician productivity to identify best practices with respect to compensation-i.e., approaches that encourage productivity while discouraging overuse and underuse. "We found that 'high-powered incentives,' or those that compensate the individual physician based on his or her own performance, had greater effects on physician productivity," says Conrad. Specifically, a 10 percent increase in the share of the individual physician's compensation based on his or her own performance (e.g., number of visits, relative value units) was associated with a 2.9 percent increase in physician productivity. "This analysis was the first in more than a decade to examine incentive effects on physician productivity in a national sample," Conrad says.

In his most recent HCFO study, Conrad examined the effect of the organization and structure of medical groups and market characteristics on the individual physician compensation methods adopted by medical groups and the productivity of their physicians. His analysis revealed several factors that related positively to the medical group's use of individual production-based compensation: (1) the years of experience of its physicians, (2) multi-specialty practice (either primary care and other specialties or primary care specialties only), (3) and the inherent resource-intensity of its physician specialty mix. "Surprisingly, practice organization and market characteristics were not significantly related to the group's choice of physician compensation method," Conrad says. However, Conrad did find that certain factors besides physician compensation method were key positive influences on individual physician productivity: physician years of experience, multi-specialty practice organization, ownership by the medical group of a hospital, and practice ownership arrangements whereby physicians received a specified share of the group's net income.

Conrad's research interests extend beyond physician compensation models. He also explores conceptual development and performance of integrated health systems and the outcomes of community care networks in the United States. In addition to being Director of The Center for Health Management Research at the University of Washington, Conrad is affiliated with the Master of Health Administration Program and the doctoral program in Health Services. "As a professor in these programs, my teaching interests are three-fold: the study of risk-bearing arrangements, insurance principles and applications, and health economics and finance."

Conrad also investigates the effects of financial incentives on use of health services and patient satisfaction with colleagues at Kaiser Permanente, Georgia. He served as Co-Principal Investigator (Co-PI) for The Community Care Network Evaluation, a recently completed national evaluation of community care networks in 25 sites. "The primary aim of my portion of the project is to assess outcomes (access, care coordination, costs) of the community health partnerships," says Conrad. He is also Co-PI on a recently initiated study, "Paying for Performance: Incentive Effects on Quality," sponsored by the Center for Health Management Research.

Conrad received his B.S. and M.H.A. from the University of Washington. He completed his M.B.A. and Ph.D. at the University of Chicago.

Selected Publications

Conrad, D.A. et al. "The Impact of Financial Incentives on Physician Productivity in Medical Groups," Health Services Research, Vol. 37, August 2002.

Conrad D.A. "Ambulatory Care Efficiency: A Conceptual Essay and Empirical Assessment," Journal of Ambulatory Care Management, Vol. 25, No. 1, January 2002.

Conrad, D.A. et al. "Physician Practice Management Companies: Prospects and Performance," Medical Care Research and Review, Vol. 39, No. 4, September 1999.

Conrad, D.A. "Risk-Bearing Arrangements and Capital Financing Strategies for Integrated Health Systems," Quarterly Review of Economics and Finance, Vol. 39, No. 4, September 1999.

Conrad, D.A. et al. "Primary Care Physician Compensation Method in Medical Groups: Does It Influence the Use and Cost of Health Services for Enrollees of Managed Care Organizations?" Journal of the American Medical Association, March 18, 1998.

Shortell S., et al. "Evaluating Partnerships for Community Health Improvement: Tracking the Footprints," Journal of Health Politics, Policy, and Law, Vol. 27, No. 1, February 2002, pp. 49-95.

Tufano, J. et al. "Effects of Compensation Method on Physician Behaviors," American Journal of Managed Care, Vol. 7, No. 4, April 2001, pp. 363-73.