A Better Way to Pay Doctors: The Pay-per-Patient Solution - C. D. Howe Institute

TORONTO, October 17, 2012 /Canada NewsWire/ - Paying doctors for each patient in their care, rather than per-service-performed, would add value for money and increase access to physicians in primary care, according to a report released today by the C.D. Howe Institute. In "How to Pay Family Doctors: Why 'Pay per Patient' is Better than Fee for Service," authors Ake Blomqvist and Colin Busby make the case that primary care doctors should have incentives to promote efficiency in the system through the way they are paid.

"Paying doctors per patient would give them greater incentive to keep patients healthy and add more patients to their rosters," said Blomqvist, Health Policy Scholar at the C.D. Howe Institute.

Physician compensation accounts for about one-fifth of all Canadian healthcare spending, the authors note. But physicians' decisions, particularly those made by primary care doctors - such as referrals to specialists, hospitals, and diagnostic facilities, and prescriptions - also determine other costs. The incentives physicians have to promote efficiency, therefore, greatly affect the overall quality and value of our healthcare services.

Primary care doctors today act more as patient managers within the health system - they diagnose, then prescribe or refer - and deliver fewer direct services than in the past, say the authors. This management role fits better with a per-patient method of compensating physicians - commonly called capitation - than the prevailing fee-for-service model, under which doctors are paid a fixed amount for each service provided.

Under a capitation system physicians receive an up-front, lump sum of money based on the number of patients under their care, but independent of the number of services provided to each patient. This gives them incentives to sign up many patients and keep them as healthy as possible so that they do not need to be seen very often.

Ontario has expanded the use of capitation remuneration plans for doctors such that roughly 17 percent of all income for physicians who receive "blended payments" comes from capitation. Other provinces should expand their use of per-patient payment systems and learn from Ontario's experience.

The risks of this compensation model - for example, that primary care physicians will discourage the sickest patients from enrolling in their practice - can be reduced in a blended remuneration scheme that retains a fee-for-service component, and with appropriate regulatory oversight, say Blomqvist and Busby. Further, they cite the example of the UK system to argue that, over time, the capitation scheme could be extended so that primary care physicians would have incentives to keep track of the costs of their referrals and prescribed treatments and drugs, to encourage the most appropriate and cost-effective choices and make better use of total health system resources.

For the report go to: