Disclosing Physician Financial Incentives

Federal and state regulatory initiatives as well as court decisions increasingly require managed care organizations to disclose physician financial incentives and have raised the issue of disclosure by physicians themselves. These mandates are based on ethical and legal principles arising from the patient-physician relationship and the relationship between health plan sponsors and enrollees. Disclosing incentives also serves important policy objectives: it can inform enrollees\u27 choice of plan, reinforce enrollees\u27 capacity to understand and exercise other rights under managed care, and discourage use of compensation methods that might compromise patients\u27 access to treatment. However, significant conceptual and practical questions remain about implementing a disclosure mandate. Unresolved issues include the timing, content, and scope of disclosure, the relationship of disclosure to patients\u27 substantive rights, and the impact of disclosure on trust between patients and physicians. These uncertainties exemplify the challenges facing policymakers, plans, and physicians as they determine how best to inform patients about managed care. Interest in mandatory disclosure laws is growing rapidly among health care policymakers.1,2 Disclosure has been embraced as a tool to empower consumers and enhance competition in the health care marketplace.3Other forces have also contributed to this trend, including a general rise in consumer awareness and participation, public suspicion of profit-motivated health care, and the failure to reach consensus on a common framework for substantive regulation of the health care system. Many new laws impose detailed disclosure duties on health care plans vis-à-vis their subscribers, while others require physicians and hospitals to provide information from which public reports are generated. Increasingly, disclosure mandates encompass financial incentives offered to physicians to discourage utilization of health care services. Managed care organizations use financial incentives to prompt physicians to recognize the cost consequences of their treatment recommendations and therefore to reduce the amount of care subject to insurance reimbursement.4,5 Requirements to disclose financial incentives have been enacted in many states and are included in recent reforms to Medicare and Medicaid. Congress is also debating disclosure mandates in connection with comprehensive federal managed care legislation. In addition, the courts have begun to require disclosure of financial incentives in 2 contexts: physicians\u27 informed consent obligations and the fiduciary duties of employers and insurance companies that sponsor or administer health benefit plans. Strong legal and policy arguments support disclosure of financial incentives.6-8 Those arguments have roots in economic theory, in general principles of agency and trust law, in the doctrine of informed consent, and in the theory of managed competition. Nonetheless, important conceptual and practical issues remain unresolved. These include the form of disclosure, the relationship between disclosure and patients\u27 substantive rights, the impact of disclosure on trust between patient and physician, and the method of enforcing a disclosure mandate. Disclosure of incentives also highlights the trade-offs between ethical and legal solutions to conflicts of interest in professional practice