How do we control physician costs?

Posted on April 1, 2012 in Health Delivery System

Source: — Authors: – life/health/new-health/andre-picard
Published Monday, Mar. 19, 2012. Last updated Tuesday, Mar. 20, 2012.   Andre Picard

One of the country’s biggest labour contracts – the deal between the Ontario Medical Association and the province that is worth more than $8-billion annually – expires on March 31.

The government of Premier Dalton McGuinty has stated clearly that it wants to freeze spending on physicians for at least two years.

So why no outcry over the prospect of 0, 0? Why aren’t doctors threatening picket lines and calling in sick en masse to press their demands like other labour unions?

There are a few reasons.

The OMA is not your typical union. It is, without a doubt, the single most powerful interest group in the province. It has a cozy relationship with the Ministry of Health (and the government more generally), so it doesn’t need to resort public displays of displeasure.

In its last deal, the OMA did well, squeezing 12.5 per cent in pay increases out of the government over four years – 3, 2, 2 and 4.5 per cent annually from 2008 to 2012.

The method of payment has also changed for many doctors in recent years, so for many, wages increased beyond the negotiated hikes. Ontario doctors were making, on average, $100,000 more in 2010 than in 2005, according to a recent report by the Institute for Clinical Evaluative Sciences. (The average gross pay for Ontario physicians is $335,000, though that varies a lot by specialty and, of course, many doctors have overhead costs.) Negotiators for the doctors know better than anyone that limiting physician costs is a lot easier said than done.

Very few doctors get a set salary that can be frozen. Rather, they can be paid on a fee-for-service basis, or alternative fee arrangements, which can include a mix of fee-for-service (with the fees established in a master agreement), salary (for teaching students, for example), capitation (a set fee per patient) and bonuses for achieving targets.

About 70 per cent of Ontario doctors now receive some level of alternative funding but, over all, 70 per cent of their earnings come from fee-for-service billings. In the recent report of the Commission on the Reform of Ontario’s Public Services, Don Drummond said this equation should be flipped so that doctors receive 30 per cent of their pay via fee-for-service. Otherwise, it’s virtually impossible to control costs. Outside hospitals, there are few restrictions on billing: The more acts doctors carry out, or the more procedures they perform, the more they are paid.

These payments rarely, if ever, go down, individually or collectively. In Ontario, physician costs were $3.7-billion in 1992; today they are $8-billion and counting.

Overall physician costs – which account for about 20 per cent of the provincial health budget – depend on the number of physicians, not just individual payments. Since the last time governments attempted to cut costs due to recessionary pressures (in the early 90s), the numbers of doctors, and payments to same, have risen steadily.

There are 5,000 more doctors in Ontario today than a decade ago – 26,000 in total. Canadian physicians practicing in the U.S. are returning in record numbers. Enrollment in medical schools is at an all-time high. (Upon graduation, every new physician gets a billing number.) Provincial medical associations also play a constant game of one-upmanship, arguing that they need to increase wages or risk losing doctors to other jurisdictions. Ontario’s doctors are now the best paid in the country, according to the recent Drummond report. The OMA has disputed that, arguing that Ontario doctors are actually the 7th best paid in Canada.

Finally, let’s not forget that what we pay doctors is just a small part of physicians’ financial impact on the system. Doctors control access to hospitals, to prescription drugs and to tests. Yet we place virtually no responsibility on them for controlling these enormous costs. As a result, there is virtually no gatekeeper function.

It’s hard to imagine how it will be possible to keep costs contained in those circumstances.

So what is to be done?

You can take some showy measures like capping salaries – for example, forcing doctors to forfeit 25 per cent of the first $50,000 over the cap, 50 per cent of the next $50,000 and so on. Ontario used this approach until 2005 but it was ineffective. The result was docs “capping out” after six or nine months, and then no longer providing services or going to practice in another jurisdiction for part of the year.

You can try revamping the fee schedule but, at 812 pages, that’s a long-term job, and it still doesn’t address the fundamental problem of paying for piecework disconnected from outcomes.

Aiming for a zero increase is actually the wrong starting point because it merely perpetuates the status quo. Restricting spending a couple of years and then doing catch-up increases when the economy improves – as the patterns always goes – resolves nothing.

If we want to get value for money for physicians’ services, we need to ask more basic questions than: “How much should we increase existing pay?”

Health policy analyst Steven Lewis stated the challenge succinctly in a recent essay published by “Are we paying doctors to do things, or accomplish goals?”

Right now we pay them to do things in a rather open-ended fashion. The reality is that our health system is almost entirely devoid of goals, even for what are arguably its most important employees: physicians.

If we want healthy citizens – as opposed to citizens who have ready access to sickness care – we need a profound philosophical shift in what we should expect from medical professionals. We need to reward and incent quality, not quantity.

Two weeks before the expiry of a contract is hardly the best time to tackle this sort of fundamental issue, but we can’t put off these big decisions much longer.

The long-term goal in doctor-government talks should not merely be holding the line on costs, but ensuring that we get better value for money and, ultimately, better care.

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One Response to “How do we control physician costs?”

  1. Juliana says:

    That’s not just logic. That’s really selsebni.


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