Cost Risk & Doctor Billings

Family medicine almost died 15 years ago. Students avoided it. Patients couldn’t find doctors. Pay plummeted to ½ of specialists’ average.

Then the government realized that family medicine actually makes the whole healthcare system work. And patients like having a family doc.

So the government undertook Primary Care Reform with the Ontario Medical Association.  It resuscitated family medicine. Students started applying for general practice again. Patients found family doctors. And doctors’ pay increased.

What did Primary Care Reform do? What happened to physician payment?

Cost Risk & Doctor Billings

Central planners and healthcare pundits hate fee for service (FFS).    It encourages doctors to work, to provide services. Doctors bill a fee for every service provided. It incentivizes doctors to look for services that might help patients.

While patients love doctors who offer to do more doctoring, FFS drives up the numbers of services provided. It increases utilization.  Utilization growth makes central planners panic.

But the biggest reason central planners hate – really despise – FFS is that it puts all the cost risk on the payer.  In Canada, the government bears all the risk of paying for services. More service equals more cost for government in a purely fee-for-service system.

Does Salary Help?

Guaranteeing physicians a salary isn’t much better. Studies show that doctors see fewer patients and work fewer hours when paid a salary.  They produce only during the hours they are paid, just like everyone else on salary. The payer bears all the risk of decreased production and covers all the cost of providing care.  Most non-government employers now include a productivity incentive for salaried professionals.

How can governments avoid cost risk?

Capitation Cuts Cost Risk

Capitation works by giving doctors a specific amount for taking care of a patient for the whole year. In Ontario, family doctors get $140 per year whether a patient needs 1 or 10 visits. Extra fees can be billed for rare procedures that require outstanding time and effort, and for things the government wants to promote, like smoking cessation (e.g., E079: $15.40 minus 3.15%). A tiny tracking fee of a few dollars gets included with office visits (e.g., $3 for a routine visit).

The literature does not hide the main motivation for capitated payment models. Governments love capitation because it puts cost risk onto physicians. It removes incentives to provide care. It unhinges, or removes the alignment of, patients’ need for care and doctors’ payment for providing it.

Capitation forms the backbone of Primary Care Reform. Most family doctors in Ontario work in some form of capitation now.

The government created enormous incentives for doctors to join capitation models, in some cases a 30% raise. Reform attracted hordes of doctors back into primary care. Over 1 million Ontarians found a GP when they couldn’t find one before.

Dark Side of Capitation

Capitation encourages peculiar behaviour.

• It rewards doctors for signing up as many patients as possible.
  • No wonder the number of ‘unattached patients’ decreased in Ontario.
• It encourages risk selection.
  • Healthy older patients, who never go see their doctors, have the lowest cost risk. They have the smallest likelihood of needing care above the capitation rate (annual fee).
  • Low risk patients decrease the chance that doctors will have to provide care for free.
• Capitation results in doctors not seeing their patients as frequently.
  • This usually happens because doctors enroll too many patients.
• It encourages referrals.
  • Why should family doctors spend time managing high blood pressure when consultants are eager to do it for them?

The College of Physicians and Surgeons of Ontario pounced on patient selection. They published an official policy ordering doctors to take all patients no matter what.

But not all doctors provide a full spectrum of care. Even full spectrum doctors end up caring for enough complex patients to justify their not being able to accept any more.

Proponents of capitation defend capitation with,

“But all the lower acuity patients compensate for those few complex patients you have to see. If everyone shared the load, it would all work out. Let’s all work together.”

So proponents actually support a balanced practice. They support some level of risk selection without saying it.

These days, older patients with multiple medical conditions insist on living in the community longer than before. They require at least 30 or 40 minute visits, every 4-6 weeks.

They easily use 6 hours of face time with their doctor in a year, plus countless hours of filling forms, reviewing labs and interacting with consultants and allied health workers.

After overhead, the most challenging (and interesting) patients compensate family doctors at less than $20 per hour.

Proponents of ’sharing the load’ cannot pay their overhead, if they focus their practice on complex patients. They balance their patient list by finding polite ways of saying they are too busy to accept any more complex patients. They have their fair share.

While trumpeting the benefits of capitation, proponents also criticize doctors who accept too many complex patients and don’t provide enough office visits.

Paradigm Shift

Thomas Kuhn wrote that science is not gradually progressive in his classic, The Structure of Scientific Revolutions: 50th Anniversary Edition.  Science does not build on knowledge like a student. It does not grow slowly smarter and smarter forever. It makes abrupt jumps. It adopts new paradigms and runs with them until a crisis displaces the old thinking.

Medicine faces a paradigm shift. Physicians bear the cost risks in capitation. Government took back all the incentives to join Primary Care Reform, just like the die-hard FFS physicians warned. Doctors face a 30% cut to net income by 2017 (before claw-backs). The gravy train has ended. Doctors are caught in their rosters with no viable FFS left, and no way to ramp up billings by working harder.

The government arbitrarily forced a rigid cap on total medical spending this spring on top of their cuts. Correction: they offered to pay for less than 1/2 of the historical growth. So, doctors must fight over a limited pie in an industry that grows by 140,000 patients every year in Ontario. Government claw-backs designed to meet the rigid cap could easily cost more than 1 month’s total billing for doctors. It would take many doctors more than a year to recover, if ever.

I learned about cost risk last weekend reading Getting Health Reform Right A Guide to Improving Performance and Equity. Surely someone knew about this when Primary Care Reform started? Is that why government was so eager to support it?

These facts impact my tiny rural practice. They force me to the obvious. I need another part-time job.

Photo credit: jobcreatorsnetwork.com Healthcare Reform article USA