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Research Question

  1. How do alternative health care payment models (i.e., models other than simple fee-for-service payment) affect physicians and physician practices in the United States?

The project reported here, sponsored by the American Medical Association (AMA), aimed to describe the effects that alternative health care payment models (i.e., models other than fee-for-service payment) have on physicians and physician practices in the United States. These payment models included capitation, episode-based and bundled payment, shared savings, pay for performance, and retainer-based practice. Accountable care organizations and medical homes, which are two recently expanding practice and organizational models that frequently participate in one or more of these alternative payment models, were also included. Project findings are intended to help guide efforts by the AMA and other stakeholders to make improvements to current and future alternative payment programs and help physician practices succeed in these new payment models — i.e., to help practices simultaneously improve patient care, preserve or enhance physician professional satisfaction, satisfy multiple external stakeholders, and maintain economic viability as businesses. The report provides both findings and recommendations.

Key Findings

Payment Models Affect Practices

  • Multiple practice leaders and market interviewees reported that their own practices or others in their markets were changing their organizational models in response to new payment models.
  • Respondents perceived that alternative payment models have encouraged the development of team approaches to care management.
  • Market observers and physician practices reported that global capitation and related shared savings models were changing relationships between primary care and subspecialist physicians.
  • Physician practices reported making significant investments in their data management capabilities to track and improve performance in alternative payment models.
  • The multiplicity of pay-for-performance and other incentive programs has created a heavy administrative burden for some physician practices.

Payment Models Affect Physicians

  • The financial incentives applied to physician practices via alternative payment models were not simply "passed through" to individual physicians. Practice leaders described transforming certain practice-level financial incentives into internal nonfinancial incentives for individual physicians. Leaders acknowledged the presence of inconsistencies between financial and nonfinancial incentives. Alternative payment models had negligible effects on the aggregate income of individual physicians within the sample. Some physicians reported wanting to have their incomes more closely linked to quality and efficiency of care.
  • Alternative payment models have not substantially changed how physicians delivered face-to-face patient care. Additional nonclinical work created significant discontent. Most physicians in practice leadership positions were optimistic and enthusiastic about alternative payment models, while most physicians not in leadership roles expressed at least some level of apprehension.


  • To optimize the quantity and content of physician work under alternative payment models, ensure that physician practices have support and guidance.
  • To improve the effectiveness of alternative payment models, address physicians' concerns about the operational details of these payment models.
  • To help them succeed in alternative payment models, ensure that physician practices have data and resources for data management and analysis.
  • To help physician practices respond constructively, harmonize key components of alternative payment models, especially performance measures.

This work was sponsored by the American Medical Association (AMA). The research was conducted in RAND Health, a division of the RAND Corporation.

This report is part of the RAND research report series. RAND reports present research findings and objective analysis that address the challenges facing the public and private sectors. All RAND reports undergo rigorous peer review to ensure high standards for research quality and objectivity.

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