Paying the Physician

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Paying the Physician. Dr. Shahram Yazdani. Shahid Beheshti University of Medical Sciences School of Medical Education Strategic Policy Sessions: 27. The principal methods of provider payment. Salary Capitation Fee-for-service Case-based reimbursement. Salary. - PowerPoint PPT Presentation

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  • *Paying the PhysicianDr. Shahram YazdaniShahid Beheshti University of Medical SciencesSchool of Medical EducationStrategic Policy Sessions: 27

    Dr. Shahram Yazdani

    *The principal methods of provider paymentSalaryCapitationFee-for-serviceCase-based reimbursement

    Dr. Shahram Yazdani

    *SalaryThe most common system of physician remunerationPhysicians and other health care personnel are paid a fixed amount for predetermined hours of work.The amount of salary does not depend on the number of patient visits, number of cases, severity of cases, etc.

    Dr. Shahram Yazdani

    *Countries that follow a salary-based system for remuneration of health care personnelAlbaniaBulgariaCroatiaEstoniaFinlandGreeceLithuania

    PolandPortugalRomaniaSloveniaSwedenTurkey

    Salary

    Dr. Shahram Yazdani

    *incentivesSalary-based remuneration systems provide almost no financial incentives to physicians for longer working hours, or seeing more patients, or spending more time and effort with each patient.

    Salary

    Dr. Shahram Yazdani

    *Potential Impact on PatientsSalary-based remuneration system is likely to have both beneficial and adverse effects on the nature, quantity and quality of care that a patient receives.

    Salary

    Dr. Shahram Yazdani

    *Beneficial Effects:Physicians have no incentives to deny access to any patient. Since the compensation package is decided prospectively and is fixed, physicians have no reason to deny treatment to any patient.Physicians have no incentive to provide excessive treatment, since the extent or type of treatment is not likely to alter their compensation in anyway.

    Salary

    Dr. Shahram Yazdani

    *Adverse Effects:Patients may not receive adequate attention from the physician, which may adversely affect patient satisfaction.Access to care may be somewhat limited by the limited time that the physician may allocate to his duties.Patients may potentially receive less than optimal care, and both quality and quantity of care may be compromised.Salary

    Dr. Shahram Yazdani

    *In the absence of incentives, performance becomes an individual function that is not guided by institutional' considerations.

    Salary

    Dr. Shahram Yazdani

    *AdministrationProbably the biggest advantage in the salary-based remuneration system lies in the ease and simplicity of administration.There are no patient bills to be processed, no patient lists to be prepared, and no case-based groups to be formed.

    Salary

    Dr. Shahram Yazdani

    *AdministrationPhysicians are treated like other employees of the administration, and their service records and payrolls maintained in the same manner. Their promotions are usually time-based, like rest of the staff. Personnel costs are known in advance, and can be built into any planning exercise of the health department.

    Salary

    Dr. Shahram Yazdani

    *Measures to mitigate adverse effects of a salary-based remuneration system:Governments/payers can offer non-pecuniary incentives to physicians,like awards, favorable posting, status-related designations etc.Even pecuniary benefits can be built into a salary system. One example of such incentives are performance-related financial bonuses.Governments/payers can set in place a system of quality control to monitor and maintain quality levels.Governments/payers can improve monitoring to ensure greater availability of physician time.

    Salary

    Dr. Shahram Yazdani

    *salary-based remuneration systemSalary

    CharacteristicsHighLimitedLowPhysicians have appropriate incentives to provide optimal quantity of carePhysicians have appropriate incentives to provide high quality of carePhysicians have appropriate incentives to keep costs downPatients are not denied accessPatients can exercise choiceThe payment system is easy to administerThe payment system requires a sophisticated information and cost accounting system

    Dr. Shahram Yazdani

    *CapitationPhysicians and other providers receive a fee for each enrollee to cover a specified level of health care and offer a defined package of services, for a specified time period.Physicians under capitation are usually responsible for all costs of providing the full package of treatment, including diagnostic tests, specialist consultations, and some minor, ambulatory surgery.

    Dr. Shahram Yazdani

    *Geographic capitationThe physician receives capitation-based block funds to provide health care to the entire population in a given geographic area.

    Capitation

    Dr. Shahram Yazdani

    *List capitationThe physician receives per-enrollee capitated funds to provide health care to all individual enrollees on a list.Capitation

    Dr. Shahram Yazdani

    *Package of servicesThe defined package of services can include many different types of services.Packages of services that include primary and family care are more common, since the cost of primary and family care is usually known with a high degree of certainty and the range of possible procedures is rather well defined and limited.Capitation

    Dr. Shahram Yazdani

    *Capitation formulaThe capitation formula is usually based on variables on which reliable information is available and easy to get. Capitation

    Dr. Shahram Yazdani

    *Variables commonly used in capitation formulaNumber of individualsAgeGenderMarital statusSocioeconomic conditionsUrbanizationMortality and morbidityNumber of individuals disabledNumber of individuals under rehabilitationNumber of individuals with substance abuse problemsEpidemiological indicesCapitation

    Dr. Shahram Yazdani

    *Physicians thus receive a fixed amount per enrollee, and after meeting all costs of treatment, retain the surplus as their income.

    Capitation

    Dr. Shahram Yazdani

    *In some countries the principle of capitation is used to define provincial and district health care budgets. Fund allocation across different administrative areas follows use of capitation formulas that typically include demographic and epidemiological indices.

    Capitation

    Dr. Shahram Yazdani

    *Countries that follow a capitation-based system for remuneration of health care personnelHungaryIrelandItalyHollandCroatia (private sector)Capitation

    Dr. Shahram Yazdani

    *Example1The simplest capitation formula reimburses physicians according to the number of patients enrolled. Consider the case of Dr. A who has 2,836 persons enrolled on her list. The capitation formula used in her reimburses 5.50 $ per enrollee per month.Calculation of compensation for Dr. ABasic capitation remuneration: 2,836*5.50 = 15,598 $ per month.Capitation

    Dr. Shahram Yazdani

    *Example2Dr. A has 2,500 persons on his list, of whom 1,500 are female and 1,000 male. Further, 500 persons are under the age of six, 1,500 are between 6 and 65, and 500 are above the age of 65. Dr. A has 16 years of experience.Dr. B has less than 1 year of working experience. She has 3,000 persons on her list, of whom 2,000 are female and 1,000 are male. Further, 400 persons are under the age of six, 2,000 are between the ages of 6 and 65, and the remaining 600 over 65.Capitation

    Dr. Shahram Yazdani

    *Example2 (ctd.)The monthly capitation formula awards 1 point per enrollee for the first 2,500 enrollees, and 0.5 points per enrollee thereafter. Enrollees below the age of 6 and above the age of 65 are awarded an additional 0.5 point each. Female enrollees are awarded an additional 0.1 points.Physicians with more than 10 years of experience are awarded an additional 2% for every additional year of experience. Each point is worth 1$

    Capitation

    Dr. Shahram Yazdani

    *Example2 (ctd.)Calculation of compensation for Dr. A:Basic capitation fee: 2500*1 = 2500Age-specific additions: (500*0.5+500*0.5) = 500Gender-specific additions: 1500*0.1 = 150Total: = 3150Experience bonus: (16-10)*0.02=12% = 378Grand total = 3528Capitation

    Dr. Shahram Yazdani

    *Example2 (ctd.)Calculation of compensation for Dr. B:Basic capitation fee: 2500*1+500*0.5 = 2750Age-specific additions: (400*0.5+600*0.5) = 500Gender-specific additions: 2000*0.1 = 200Total: = 3450Experience bonus: nil = 0Grand total = 3450Capitation

    Dr. Shahram Yazdani

    *IncentivesCapitation provides a number of financial and professional incentives to the physicians. Some of these are positive and beneficial incentives while others are adverse.Capitation

    Dr. Shahram Yazdani

    *Beneficial Incentives:Physicians have strong incentives to minimize financial costs. Since the compensation package is decided prospectively, physicians can maximize the difference between their earnings and costs by simply keeping costs down.Physicians have strong incentives to make efficient the whole episode of care. Preventive medicine that is likely to save expensive treatment later on is thus favored.Capitation

    Dr. Shahram Yazdani

    *Adverse Incentives:Physicians have an incentive to enroll relatively healthy patients, who are likely to require less frequent and less costly treatment.Physicians have an incentive to limit the quantity of services provided to the patient, as this would reduce their operating costs.Capitation

    Dr. Shahram Yazdani

    *Adverse Incentives:Physicians have an incentive to save on high quality treatment, since such treatment is usually expensive.Physicians have an incentive to refer patients to next higher levels of care, such as to specialists and hospitals, so as to save own operating costsCapitation

    Dr. Shahram Yazdani

    *Potential Impact on PatientsA capitation-based remuneration system is likely to have both beneficial and adverse effects on the nature, quantity and quality of care that a patient receives.Capitation

    Dr. Shahram Yazdani

    *Beneficial Effects:In many capitation-based settings, the patient receives most kinds of c

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