Context: Although medical groups are adapting to changes in financing health care, little is known about individual physician incentives in this environment. Objectives: To describe methods group practices use to compensate primary care physicians in a managed care environment and to examine the association of revenue sources for the group practice from all patients and primary care physician incentives. Design: We surveyed by mail group practice administrators for practices that had at least 200 members continuously enrolled in 1995. Setting: Group practices that had contractual arrangements with Blue Cross/Blue Shield of Minnesota. Participants: One hundred of 129 group practices returned usable surveys. Results: Most groups had some portion of primary care physicians' compensation at risk, although 17 groups compensated them through fully guaranteed annual salary. Seventy-one groups used productivity, 4 groups used quality of care, 1 group used utilization, and 30 used group financial performance. Factors reported to significantly influence primary care physician compensation included billings or charges, overall group practice performance, and net revenue or profit. Groups that had a higher proportion of income from various types of fee-for-service arrangements used lower proportions of base salary for primary care physician compensation and were more likely to relate physician income to measures of productivity. Conclusions: Substantial variation exists in the types of primary care physician incentives implemented by medical groups. Base salary, individual productivity, and group financial performance were most frequently used to determine compensation. Physician personal financial risk was higher overall in group practices that derived more revenue from fee-for-service contracts.