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Table 1 Overview of physician payment approaches

From: Impact of oncologist payment method on health care outcomes, costs, quality: a rapid review

Payment model Definition Potential benefits and harms
Capitation; pre-payment Providers are paid a set amount for each person enrolled with them regardless of whether the person receives care. May reduce unnecessary health services utilization since payment is not tied to service provision. It is argued the financial incentives in capitation will lead primary care physicians to reduce referrals to specialists [12]. However, some argue that providers may be incentivized to develop overly long lists and actually refer to specialist care too frequently [33].
Fee-for-service Providers are paid separately for all medical services delivered In this method, providers are reimbursed for all medical services they provide, lowering the risk of taking on patients who need many services. However, appointments may be limited to one service and complicated patients may require many appointments. This method may also increase the use of services which can give diminishing marginal returns or even have detrimental effects [33] and incentivize the over-delivery of care because it rewards increases in service volume, regardless of health benefit [11].
Pay for performance; payment by results; performance-based payment; results-based purchasing; value-based purchasing; target payments Providers receive different payments for meeting or missing performance benchmarks, e.g., related to quality, efficiency, care integration [8]. Incentives based on achieving quality objectives are expected to be associated with behaviors designed to achieve the quality targets, e.g., immunization rates, mammography screening, patient satisfaction scores [16]. Risk adjustment algorithms should be employed so that organizations are not penalized for treating sicker patients.
Prospective payment; activity-based funding; bundled payment; lump-sum payment; block funding; clinical pathways A fixed payment for each patient, based only on the patient’s diagnosis May reduce clinical variation and end-of-life costs [40]. However, without a focus on quality measurement, the pressures of these systems may place perverse incentives on providers to deliver less care [51]. The development of “clinical pathways” (management plans that address quality by providing the sequence and timing of actions covered by the associated lump sum payment [55]) aims to address this issue.
Salary Individual providers get a fixed fee per year regardless of the number of patients they treat Similar to capitation, this method may have utilization lowering effects. However, care quality may be compromised if providers respond to fixed payment by working shorter hours and being less responsive to their patients’ needs and demands [56].