Paying the Piper and Calling the Tune: Principles and Prospects for Reforming Physician Payment in Canada

Effective management and productive use of health care expenditures in Canada requires that primary care doctors in Canada be paid by means of a system which more closely reflects the goal of improving the health of the population and that means replacing the current fee-for-service system. This is the main thesis of the paper recently prepared for provincial deputy ministers of health outlining the benefits of paying general practitioners on a capitation basis supplemented by a reward system for identifying cases of disease. The paper outlines how fee-for-service is “widely recognized” to be an open-ended system which sends the wrong messages to doctors by rewarding them for providing more services regardless of how much these services benefit the patients’ health. Because numerous groups and task forces have identifies fee-for-service as “incompatible with promoting the most productive use of the time an skills of physicians,” the paper outlines a viable alternate payment method. A system of payment based on the size and characteristics of the population served would sever the links between spending on doctors and the actual number of physicians– an ongoing, highly controversial subject. By paying primary care doctors based on the number and type of people they are responsible for (capitation), physicians would be rewarded for meeting goals which are compatible with policy makers, namely maximizing the health of the population. In such a system, primary care doctors would sign up a roster of people who are his or her responsibility and would be paid a certain amount for each over a set period, regardless of the number of medical services provided to them. While such an approach would be a step forward, it would also mean “two physicians who cover identical populations receive identical incomes”, irrespective of how much work they put into caring for their patients, the quality of care provided, or the level of health achieved. In principle, a pure capitation system would reward physicians who under serve the population for which he or she is responsible. Ethical considerations and the fear of losing capitation fees if unsatisfied clients go elsewhere would make this unlikely. However, in order to identify and reward good physicians, the payment system proposed would pay bonuses for maximizing health benefits among their client population and identifying cases of disease among their patients. In order to encourage physicians to practice in underserviced rural or isolated parts of the country, a proportionate increase in per-resident payment rates to compensate doctors for the smaller population size is proposed. To control inappropriate use of medical specialists, the family doctors could be made responsible for the management of and financial accountability for referred care by means of a system similar to that introduced in the US where general practitioners contract with hospitals to provide them with care for their patients. Changing to this alternative payment scheme should be done on an “evolutionary” rather than a “revolutionary” basis, so as not to alarm those involved. Population-based payments could be introduced as a reward for developing and maintaining rosters of people whose care they would be responsible for. This could be funded by across-the-board reductions in fees paid to family physicians in the traditional system. “…insofar as it may be politically infeasible to switch all family physicians to the blended method at the outset, the initial change could be used as a demonstration of the benefits of the system to physicians and the population.” In analyzing the potential impact of changing the system of payment for family doctors, existing studies are the only limited value because of the way in which they are designed. The paper advocates implementing the new system on a restricted basis and dealing with any issues or problems as and when they arise. The authors oppose a proposal from the College of Family Physicians of Canada which would allow family doctors to choose how they are paid. However, the paper stresses any alternative payment policies must take into account the concerns of physicians and the success of a new system working will depend on satisfying these concerns.