Do different payment strategies affect how a physician practices within a managed care setting? Researchers at the University of Washington examined the effects of alternative compensation strategies on the clinical efficiency of individual primary care doctors in a managed care environment. The project team studied five health plans/managed care organizations in the greater Puget Sound area of Washington to identify primary care physicians who are paid under salary, capitation, or fee-for-service arrangements. The study then analyzed patient utilization and cost for episodes of care for eight common conditions. The objective of this study was to understand better how groups reallocate payments they receive from health plans into individual compensation and how that activity influences physician practice.