The impact of physician economic incentives on admission rates of patients with ambulatory sensitive conditions: an analysis comparing two managed care structures and indemnity insurance.

The utilization of financial incentives to limit the use of health resources by primary care physicians represents a common reimbursement strategy by managed care organizations. These arrangements are virtually nonexistent with indemnity insurance. This analysis compares the hospitalization rates of patients with low-acuity medical conditions--ambulatory sensitive conditions (ASCs)--among three groups receiving care from primary care physicians. The physicians were compensated under different reimbursement mechanisms, in which incentives for reduced resource utilization varied. The groups can be described as follows: (1) a capitated for-profit group practice in which the physician partners have a relatively high economic incentive for lower utilization (group I); (2) physicians providing care under the auspices of three separate independent practice associations, in which the associations are capitated but the physicians are paid on a discounted fee-for-service basis (the associations also were included in this group) (group II); and (3) physicians who service patients whose care continues to be paid for by traditional indemnity insurance (group III). Financial incentives in the third group cohort were believed to be low to intermediate, and the physicians were assumed to have had no economic incentives to restrain their use of healthcare resources. Additional data analysis examined the role of emergency department utilization among patients in the groups. Group I patients ages 25 to 44 were admitted for ambulatory sensitive conditions at a significantly lower rate than were patients in groups II or III--0.8/1,000, 2.7/1,000, and 2.9/1,000, respectively. No difference was apparent in admission rates between patients in groups II and III. Overall emergency department utilization rates were lowest in the group I capitated panel (70/1,000), much higher in the group II independent practice association panel (363/1,000) and highest in the group III indemnity panel (466/1,000). Each of these rates was significantly different from the other. Both the ED utilization rate and ambulatory sensitive condition admission rate may have been affected by differences in socioeconomic status among the patient panels in the three groups. The overall effect of this variable on the two admission rates could not be isolated.