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Journal Article


Ethical Physician Incentives—From Carrots and Sticks to Shared Purpose

The Issue

Accountable care organizations (ACOs) are increasingly using financial incentives to encourage physicians to meet quality standards and improve patient outcomes. At the same time, clinicians in ACOs are assuming greater financial risk—facing penalties when the cost of care is above a negotiated payment, for example. In their New England Journal of Medicine “Perspective,” Commonwealth Fund Harkness Fellow Nikola Biller-Andorno and Thomas H. Lee warn that if institutions adopt a carrot-and-stick approach only, there could be harmful consequences for patients and growing resistance by physicians.

What the Study Found

For ACOs to be successful, they must improve the efficiency of care, meet patients’ expectations for care and clinical outcomes, and attract and retain top-quality professionals. Incentives like pay-for-performance bonuses are key management tools for achieving these goals. Taken alone, however, these incentives are of limited effectiveness and can pose ethical challenges for clinicians when it comes to patient care.

Instead, the authors recommend using an array of financial and nonfinancial incentives—including performance rankings that are openly discussed in group settings and performance report cards for value-based care—to help facilitate a broad “shared-purpose orientation” embraced by all participating clinicians.


An incentive scheme focused on goals that resonate with the staff’s sense of purpose will protect and promote physicians’ sense of moral responsibility and ethical standards. “Practically speaking, however, a shared-purpose orientation alone is not sufficient,” the authors conclude. “Other types of incentives must be used to enable organizations to move effectively towards the shared purpose.”

Publication Details



N. Biller-Andorno and T. H. Lee, “Ethical Physician Incentives—From Carrots and Sticks to Shared Purpose,” New England Journal of Medicine, March 14, 2013 368(11):980–82.