Physicians Can Help Cut Costs. They Just Need the Right Incentives.

Many of physicians’ daily decisions — such as their selection of drugs, devices, and technologies, and the amount of time they utilize resources such as operating rooms and hospital beds — have a significant financial impact on hospitals. By providing physicians with the appropriate incentives, hospitals and health systems can enlist them in the effort to manage costs while simultaneously maintaining or improving patient outcomes.The reality, however, is only a small percentage of health systems do so today. To help the others who haven’t yet taken this path, we present guiding principles in this article for designing incentives. It is based on our experience over the last decade working and speaking with dozens of health systems to help them improve their financial, clinical and operational performance and the research of one of us (Susanna) on the design of incentive and performance management systems.