On the heels of yesterday's post on physician compensation, I was struck by the story of Dr. Hu Weimin of Loudi, China, featured in yesterday's Wall Street Journal (In China, Preventive Medicine Pits a Doctor Against the System) (subscription may be required). The article details Dr. Hu's battle against the Chinese health system as he works to provide affordable treatment and urges preventative health measures for the city's poor, a practice that threatens hospital profitability and -- most notably -- the revenue-based incentive compensation on which doctors rely. According to the article:
A bonus system for doctors is widespread in China, as documented in a study by researchers at China's Shandong Medical University and the Harvard School of Public Health. Dr. Hu describes in detail how the financial incentives work in Loudi Central, a sparkling new facility.
Doctors who prescribe a CAT scan collect a personal bonus of 20 yuan ($2.50), he says. Inducements grow quickly with the sophistication of the treatment. The bonus for laser surgery: 500 yuan ($63). For a heart pacemaker the reward is as much as 20,000 yuan ($2,500). In addition, he says, the hospital pays departments collective bonuses based on the value of drugs their doctors prescribe. For expensive Western drugs, it's 3% of the sales price; for cheaper Chinese drugs, it's 5%.
The extra cash makes a huge difference to a hospital doctor in a small provincial city like Loudi, who typically earns less than $200 a month in salary. Bonuses can be many times basic pay.
Few countries let doctors profit so directly from their patients. China's system virtually forces the profit-making incentive upon hospitals that are still mostly owned by the government -- yet are largely self-funded.
At the heart of this sad dilemma is the fact that a system of financial incentives is undermining China's already weak health care system, and posing a formidable barrier to any reform attempts.
We who work in the profession of employee rewards often talk about the "law of unintended consequences" when we discuss incentive plans -- but this represents a scale and scope that challenges comprehension.
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