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Commentary: Guest Editorial

There was a saying among workers in the old Soviet Union: “They pretend to pay us and we pretend to work.” They were partly joking and partly serious. In a centrally planned economy, workers are not paid their true worth and, consequently, they respond by not trying so hard.  Government intrusion into a free market distorts that free market in many unexpected ways that limits the ability of government to attain its purported goals. This can be said about the bogus Medicare pay-for-performance schemes that have started to crop up in the last few years. /files/TWC_Gianoli_1015.jpg

Recently, legislation passed as part of the “doc fix” (repealing the “sustainable growth rate” physician pay cuts) institutionalized a physician pay-for-performance Medicare program known as the Merit-Based Payment Incentive System (MIPS). The idea is to pay bonuses to physicians providing higher quality care.

Let’s make the highly dubious assumptions that government can measure quality in medical care and that such a system won’t just lead to patient “cherry picking.” MIPS still won’t work to identify and reward “quality” physicians with bonuses. Why? Because most doctors have in one way or another divorced themselves from Medicare’s MIPS.   

The idea of pay-for-performance (now MIPS) originated more than 10 years ago when the overwhelming majority of doctors were private practice owners. Private practice owners are directly affected by Medicare payments, and a bonus might entice them to perform according to the wishes of the Centers for Medicare & Medicaid Services (CMS). However, in the time it takes to finally implement this program, almost all of the doctors who have not opted out of Medicare will be employees of hospitals or other large groups. The number of doctors who will still be private practice owners and still take Medicare payments will be much less than 10 percent of all physicians.1

One might assume that bonus payments from CMS would be desired by the hospitals/groups that employ these physicians. However, a recent survey from Merritt-Hawkins2 (the physician headhunter group) revealed that, for 2014, the number of quality-/value-based incentive packages for physicians actually declined from 39 percent to 24 percent of job searches. Basically, this means that just when CMS is starting to shift to MIPS bonus payments, hospitals are shifting away from offering bonuses to physicians who make the MIPS bonus goals. The Merritt-Hawkins data also reveals that the dominant production bonus in recruiting packages is based on relative value units (RVUs), which grew to 59 percent of packages. RVUs are a measure of volume of patient activity — not quality.

Regardless of MIPS bonuses, doctors who are salaried by a hospital with bonus pay based on RVUs will continue to produce volume over quality. They will do this because they will be under immense pressure from their corporate bosses. If they don’t comply, they will either see their income drop or they will see a pink slip.

Why? Because the MIPS bonus payments are miniscule compared to the revenue that a hospital will see from a very modest increase in the volume of scans, tests, admissions, and surgeries that employed physicians can generate.

The average doctor has a salary just shy of $200,000, but the economic impact of his/her actions is greater than $2 million. All the dotting of “i”s and crossing of “t”s throughout an entire year for a MIPS bonus may yield $10,000 for a doctor (if he/she is one of the lucky few), but one extra surgery could bring in more than $50,000 for the hospital. While MIPS may have worked on private practice doctors, these doctors are an endangered species. MIPS won’t work for the employed doctors. They’re controlled by their corporate bosses, who have very different incentives.

In 2012, it was estimated that hospitals “lost” money on employed physicians’ salaries at a median of $176,463 per doctor per year.3 In other words, the doctors are being paid more than their fees generate in revenue. The reason that hospital administrators do this is to capture the physicians’ testing, admissions, and surgeries — where the hospital more than makes up the loss per doctor. In this context, MIPS is inconsequential and doesn’t even equal a rounding error.

Wound care professionals are not exempt from the new MIPS program. However, the insignificance of MIPS will become increasingly apparent as more of these providers become corporate employees. What might have worked in 2005 is not going to work in 2018 when this program finally gets deployed. Government has again tried to manipulate the medical market and failed before the program even gets started. They’ll pretend to reward quality and they’ll have to change their quality indicators to “show” success. By the time it is reported that MIPS has failed to control costs and improve quality, CMS will put together some other bureaucratic program that sounds nice on paper but, once deployed, will fail again. 

Gerard J. Gianoli is a clinical associate professor in the departments of otolaryngology and pediatrics at Tulane University School of Medicine and a private practice physician based in Covington, LA, who specializes in neurotology and skull base surgery. He’s lectured and written extensively on third-party free medical practices and free-market medicine. His editorials have appeared in The Wall Street Journal, Forbes, Investor’s Business Daily, The Hill, and other periodicals.


1. 2014 Survey of America’s Physicians: Practice Patterns & Perspectives. The Physicians Foundation. Accessed online:

2. 2014 Review of Physician and Advanced Practitioner Recruiting Incentives. Merritt Hawkins. Accessed online:

3. Kutscher B. Making Physicians Pay Off. Modern Healthcare. Accessed online:

Gerard J. Gianoli, MD
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