The relationship between a physician incentive plan and departmental performance in a Taiwan hospital

The objective of this study is to investigate the influence of a physician incentive plan based upon treatment of patients in a large private non-for-profit hospital in Taiwan. We examine the relationship between physicians’ bonuses and departmental performance to assess the impact of the physician incentive plan in the case hospital. The multiple regression models are used to examine the relationship between physicians’ bonuses and departmental profitability. In addition, we use Data Envelopment Analysis (DEA) model to measure the operational efficiency of each department in the case hospital. Then, a multi-factor tobit model is used to examine the relationship between physicians’ bonuses and departmental efficiency. The results indicate that physicians’ bonuses in the case hospital are negatively correlated with departmental profitability and efficiency. That is, the performance measurement of current incentive plan may not be appropriate and it does not induce physicians to increase departmental profitability and improve efficiency. Our results suggest that the incentive plan is flawed and might fail to hold physicians accountable for improving departmental performance in the case hospital.