A good start toward rational health-care billing

TheStar.com – opinion/editorialopinion
Published On Mon Aug 15 2011.   Will Falk

Last Friday, Ontario’s Ministry of Health made a low-key announcement: “The province and the Ontario Medical Association have improved the final year of the four-year Physician Services Agreement by making changes that will deliver better health-care results for families, reduce the use of unnecessary medical procedures and allow for health dollars to be redirected into other front-line services.”

Short of details, the statement says dryly that changes in three areas will result in current year savings of $223 million for the province. Yes, that’s right: the province’s doctors are returning over a fifth of a billion per year. Why would the OMA quietly give back more than $8,000 per doctor?

A few numbers may help to put this in context:

Total clinical payments to Ontario physicians (from Canadian Institute for Health Information, CIHI):

2004-05: $5.17 billion.

2008-09: $7.48 billion.

Growth in four years: 44.7 per cent.

The current fee schedule (which gave doctors about 4 per cent a year in fee increases) was in place for only one of these years and that one-year increase was 11.9 per cent. Some of this is due to new doctors coming in — probably under 1 per cent. Still, it is fair to comment that most Canadians did not see their incomes go up in 2008-9 by 10 per cent in that terrible economic year. And nurses and other professionals have been settling for 2 per cent or below? The final year of the agreement is the most generous and the OMA knew that the political optics were terrible.

So the OMA gave back a fifth of a billion dollars. Per year. This money comes in three areas that simply were no longer publicly defensible:

A new payment model for methadone that reduces unnecessary tests and increases access to doctors.

Reduced ophthalmology fees, including those for cataract surgery.

Reduced payment for screening endoscopy services.

These three changes to the fee schedule are linked by the common fact that the need for change is very clear and the overbilling hard to defend.

The government is pursuing a potentially very profitable strategy: recoup for the public purse some of the productivity gains that have been occurring in the health-care system — in part due to the government’s own investments. There is probably even more out there.

The specific areas are great examples of where paying using our current methods results in serious overpayments. That method combines a fee for service (FFS) payment with an (incorrect) assumption that we should raise the payment year-over-year for areas where the technology is improving productivity quickly. What ends up happening is that volumes go up and prices go up while costs in terms of physician time and resources are going down.

Imagine if a business priced computers this way? Here’s the deal: “We will sell you the same computer each of the next four years and you will pay us 4 per cent more each year.” You would say to the provider something like: “That’s nuts. Your costs are dropping by 20 per cent per CPU power every year (that’s ‘Moore’s Law’). I want to benefit too! Some of it can come from a better product, but I also want a lower price.”

We need to think about a Moore’s Law for health care. Costs aren’t declining for every service but they are declining for these three and probably for many more. Some likely candidates in the near term include: Diagnostic radiology, brain surgery, chronic kidney disease, less complex orthopedic and cardiac procedures, and lab tests.

The list could be thoughtfully expanded by the OMA and the government in partnership. Physician visits cannot routinely happen by email and phone for FFS physicians (there are some exceptions). Imagine if other service professionals had to live with this constraint on productivity. “I would like to give you that legal advice over the phone but can’t because I can’t bill you. Would Tuesday at 2 p.m. in my office work well? Oh, and expect to wait a bit. So, sorry if the situation worsens in the meantime and you go to jail.”

We need to allow doctors to use the telephone! And maybe email too! And allow them to fairly bill the system when they do so (if we are going to continue paying them using piecework FFS). Anyone who has had the frustrating experience of having to spend two to four hours renewing a prescription understands this.

The minister and the OMA are to be congratulated for taking a proactive step at this time. They did not invent this ridiculous compensation method common throughout Canada and globally. In the days of Marcus Welby there was a lot of sense to a usual, customary and reasonable fee schedule. It rewarded hard work and was relatively stable. It created independent clinical business people who managed their overhead costs. But the assumptions that were implicit in the system just aren’t true anymore.

Friday’s announcement sets the stage to reset the assumptions and method in the 2012 negotiations. There are three options:

1) Keep fee-for-service: Set a fair total increase number as a hard cap. Say, 2-3 per cent. Figure out how much the fee schedule will need to be reduced by procedure performed. Create an end of year reconciliation mechanism. Have providers self-police over-ordering. Create automatic review thresholds for any extraordinary volume increases.

2) Shift from FFS toward capitated payments both for primary care but also for chronic care for higher needs patients. Create a cadre of physicians who are paid for managing integrated care rather than doing things.

3) Give physicians responsibility and accountability for total health system expenditures and allow them to benefit from costs savings in other parts of the system.

But $223 million is a good start. Sometimes it pays to check the bill.

Will Falk is executive fellow in residence at the Mowat Centre, and SPPG adjunct professor at the Rotman School of Management, University of Toronto.

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