Good Practice: Conflict of Interest and Incentive Contracts

  •   January 7, 2021
  •  Nancy Littke, PT

Throughout the year, Physiotherapy Alberta receives questions from physiotherapists and members of the public related to contractual arrangements between providers, third-party payers and/or referral sources. Some contract terms have the potential to create a real or perceived conflict of interest between the physiotherapist’s duty of care to the patient and their financial interests. Let us consider the effect that different contract terms or agreements may have on clinic processes or the clinical decisions made by physiotherapists. When the ability to provide care in compliance with their Standards of Practice or the provision of client-centered care is impeded by the terms of a contract, physiotherapists need to take steps to address the risk and must communicate the existence of such contracts to their patients.

What is an incentive contract?

Any contractual arrangement between a third-party and a clinician or the owner of a clinic where the third-party attempts to influence the price, volume or quality of health services through financial or other incentives is one that may risk non-compliance with the Standards of Practice.

Incentive contracts can take many forms and may exist between third-party payers and physiotherapy business owners or between employers and their employees.

When between payers and businesses, these contracts generally take the form of seeking to limit the payer’s costs by attempting to control health-care provision and costs in a fee-for-service environment.1 Encouraging or incentivizing early discharge is an example of this.1 Third-party payers may also attempt to direct, monitor and/or review a clinician’s treatment recommendations, and/or direct patients to health providers whose practices accord with the insurer’s perceptions of how best to service health needs, incentivizing certain treatment approaches through promises of increased referrals.1 In other instances, a large business may offer a clinic owner incentives to provide their employees with a reduced fee for services.

When incentive contracts exist between employers and employees, they often involve financial incentives to have the physiotherapist see more patients/day, provide more treatment visits/patient, and/or provide more expensive or “extra” services or modalities with the aim of increasing business revenue.1

What are the issues?

Although incentive contracts tend to have a negative reputation, it is also fair to note that when contracts promote early patient self-management or limit access to unnecessary care, they are not universally bad. However, these types of contracts , to varying extents,  all have the potential to create  real or perceived conflicts of interest due to the influence of financial pressures and another party’s interests on the provider-patient relationship and the delivery of physiotherapy services.1 The risk is that the provider may not place the patient’s interests first and foremost, and factors that have nothing to do with the patient’s health, will influence the provider’s behaviour and clinical decision making.1 Regardless of  the motivation behind the contract, the results can be detrimental to the client. They may be discharged earlier than they should or be seen longer than clinically necessary depending on the incentive in place, neither of which meet the expectations of Physiotherapy Alberta’s Standards of Practice or Code of Ethical Conduct.

The Conflict of Interest Standard specifically states:

 The physiotherapist:

  • Identifies and manages any situations of real, potential or perceived conflicts of interest involving themselves or a related person. This includes but is not limited to:
    • Receiving financial or other benefits from other providers related to accepting referrals, providing services, or selling products.
    • Providing and/or accepting incentives to/from others to generate referrals, provide services, or sell products.
    • Receiving financial incentives based on client numbers, service volumes, profits, etc.
  • Refrains from participating in any activity in which professional judgment could be compromised or is for personal gain.

The Standard clearly prohibits physiotherapists entering into any contractual arrangement that promotes or encourages financial gain over patient-centered care.

What about patient choice?

Another aspect of this issue is that sometimes incentive contracts include an agreement that the third-party payer will direct clients to specific providers for physiotherapy services. There is nothing inherently wrong with an organization identifying providers with whom they frequently do business, have a relationship with, or for whom they can provide a recommendation. However, concerns arise when clients are directed to a specific provider or group of providers with the insinuation that they can only receive payment for services by these providers, that these providers are the only ones competent or capable of providing the care required, or are otherwise intimidated into going to these providers for care. This is of particular concern if there is an incentive contract in place between the third party and the clinic or physiotherapist which incentivizes the limiting treatment visits.

The Client-Centered Care Standard states:

The physiotherapist:

  • Values the best interests of clients.
  • Involves clients in decision-making regarding their care, respecting their independence and right to refuse or withdraw from treatment at any time.

Finally, the Code of Ethical Conduct identifies Respect for Autonomy as one of four key ethical principles informing physiotherapy practice. This principle states that people should be allowed to make decisions that apply to their lives and to have control over their lives as much as possible.

Albertans have an unalienable right to choose where and from whom they receive care and to be involved in any decisions related to the care they receive. When another party has a “stake in the game” or is exerting influence on that care, the client should be aware of that influence.

It is expected that physiotherapists will affirm the patient’s right to choose their health-care providers. It is also expected that the clinician will disclose the existence of incentive contracts to the client if such an arrangement exists.

Questions to ask yourself

Physiotherapists must be aware of and carefully review contracts between themselves and their employers and ask practice owners about the existence of contracts between the employer and third-party payers.

  1. Are there any contractual arrangements in place between my employer or clinic owner and any third-party payer or referral source?
  2. What effect may this contract have on my practice from a financial or any other perspective?
  3. Do these contracts have the potential to prioritize some clients ahead of others when booking new appointments or ongoing treatments?
  4. Are my clinical decisions regarding ongoing care or discharging my patients at risk of being biased based on financial gain or employer pressure?
  5. Have I disclosed any potential conflict of interest to my clients to ensure they have the information they need to provide informed consent to my proposed course of treatment?
  6. Have I supported my clients in their right to choose who and where they receive treatment?
  7. Have I put the best interests of the client ahead of any other parties’ interest?

In summary, while clinicians and/or clinic owners can enter into contracts with other parties it is imperative that all regulated physiotherapists are aware of the  contracts or agreements that pertain to their practice and identify real, potential, or perceived conflicts of interest that may arise from the contract terms. Physiotherapists are accountable for their own practice and their adherence to the Standards of Practice and Code of Ethical Conduct. Each regulated member must actively mitigate potential, real, or perceived conflicts of interest and fulfill their fiduciary duties by making clinical decisions that reflect the client’s interests, not those of a third party, the employer, or themselves.


  1. Nelson E, Flood C, Caulfield T., Financial Incentives, Conflicts of Interest and Physical Therapists: A Discussion Paper on the Legal and Ethical Issues in Managed Care Prepared for the College of Physical Therapists of Alberta