The compelling case for salaried physicians

It is a well known and accepted economic theory that once you get a minimal level above the poverty line in terms of household income,  increasing levels of financial compensation are associated with decreasing returns on happiness.  When you go from a household income of $30000 a year to $60000- large increase in happiness.  Double $60000 to $120000 and again your happiness level goes up.  Just not as much as the original jump from $30000 to $60000.  And so on.  Until you get to a point where you have so much your money is actually causing you some stress and happiness levels actually decline.  (See the terrific read “The Happiness Myth” by Jennifer Michael Hecht for a fuller explanation of this and other insights into happiness) .  So on to physicians.  While residents and medical students are often under some financial stress, particularly with heavy debt loads, most physicians do ok from a financial point of view, I think we can all agree on that.  Almost no physician is going to end up under the poverty line, aside from serious illness or addiction resulting in an inability to practice or other personal calamity (Get disability insurance doctors!).  I cannot explain the number of unhappy (and sometimes downright miserable) physicians in Ontario right now based on absolute income.  We have had cutbacks, which nobody likes, so some of it comes from that, but not all of it. Fee for service motivates physicians to work lots of hours, see lots of patients and do lots of procedures.  Burnout levels are high, in part due to what I refer to as the “fee for service treadmill”, which results in no work, no pay, but also a lots of work, lots of pay motivator which I think is contributing a lot to making physicians miserable and possibly (likely) not being that great for patients.

The vast majority of payments to physicians in Ontario are paid on a fee for service basis (FFS), around 70%.  As a physician, you see a patient, or in my case, do an operation, then bill the government for the service provided.  The collective total each month is your billings or gross income. This is the figure rolled out to the media by the government to defend their cuts to the physician services budget over the last few years. But out of these billing totals comes the cost of being in practice, running an office, paying ever increasing fees and administrative costs from an ever increasing number of organizations (CPSO, OMA, CMPA, and CME organizations like the Royal College and CCFP, to name a few of the mandatory ones).  FFS has an intuitive appeal, in that docs who work more, get paid more.  That seems fair, and bonus- it’s easy and simple to understand.  Or is it?  FFS has a number of upsides and downsides.  The upside is that physicians are motivated to provide care- lots of care.  That is good for patients in that, in theory, wait lists are reduced. The bad news is that sometimes it doesn’t lead to care that is all that good in terms of “quality”.  Another issue is that as across the board fee increases have been applied to the entire fee schedule over the years, specialties who bill lots of codes have had their incomes rise out of proportion to those who do not, magnifying relativity differences.

Other compensation models have become more common in Ontario. APPs (alternate payment plans) are used often in academic settings or cancer centres to account for a lot or work which does not involve direct patient care and is therefore not compensated, such as administration, research and teaching. It is not unusual for per diems to be used in emergency rooms, and of course some physicians receive salaries.  Capitation was introduced into primary care in the last 20 years, along with multidisciplinary teams of social workers, nurse practioners, dieticians, etc.  called family health teams. Capitation for the physicians in these groups is a form of salary where the physician get paid per patient per year.   Those patients “rostered” or signed up in family health teams have free access to a wide variety of services, while those who have a family doctor outside of one of these teams, often end up paying out of pocket (or sometimes not using the service at all). Patients today are becoming more chronically ill, with complex health problems and long lists of medications.  Capitation allows GPs to spend more time with patients sorting out their problems and getting to know them, which is just sooooo important for the types of patients we are seeing now and increasingly in the future. And that’s just good relationship based primary care (which everyone should have access to).  The problems with it are that a lot of people aren’t rostered with a family health team.  FFS family docs are paid a pittance, around $33 minus cutbacks for an A007-which is called intermediate assessment, and is the backbone fee of primary care. FFS family docs have to churn through a lot of patients to make their practices viable, which results in not so much time to spend getting to know patients and sometimes the “one issue per visit” rule in doctors’ offices. Since the Ontario government stopped allowing doctors to sign up for family health teams (outside of designated “high needs” areas) there are few new graduates setting up family practice.  Which is a shame with 800000 people in Ontario without a family doctor.  Capitation has had problems with after hours access not being available to patients in these teams and other issues I won’t go into, but I think the principle is a sound one.

Which begs the question- if capitation works in primary care for complex patients why not use a salaried model for all physicians?  Overhead, benefits, and sick leave would need to be negotiated of course. It would a long, complicated and messy process.  Would it save money overall?  Probably not and that wouldn’t be the point. Physicians spend a lot of time setting up and running an office (not doctor work).  Why not have offices run in larger group settings with the overhead covered and let doctors be doctors?  That’s what most of us want to do.

Overdiagnosis and overtreatment are an increasingly recognized problem in medicine.  It takes time to explain the possible outcomes of tests and procedures-sometimes a lot of time. Often more than the time to do the actual procedure and certainly a lot more time than to fill out the requisition!  Patients are being subjected to an ever increasing number of diagnostic tests and procedures without understanding the cascades and vicious circles of ongoing investigation and treatment which can result.  I think shared decision making with patients around what their care plan is for any given complaint is mandatory, but this takes time!

Gender problems exist with using FFS as well.  Female physicians must work an average of 2 full time weeks longer each year under FFS to earn the same amount as male physicians.   Mostly the problem lies in the fact that lots of female physicians spend more time talking to their patients, something which is not rewarded in our current system. I myself, and other female colleagues I have talked to, are often referred patients after procedures have been done to “talk” to them about the procedure.  Since surgeons make little to no money running their offices, stuff like this puts the female surgeon behind.

Academic institutions are increasingly going toward a salaried model, and in other countries (Europe, UK, Australia) salary is a common way to pay physicians.  In the US Relative Value Units, or RVUs, are now used to determine productivity and compensation, or both.  For a discussion of RVUs, see here- .

We are living in a time of relative physician oversupply, allowing that some rural areas and specialties are undersupplied. A lot of specialties, especially surgical ones, are oversupplied, with under and unemployed specialists becoming commonplace.  FFS does not provide impetus to let others into your call schedule or operating room time. Flat salary may not be the way to go, blended models of compensation which provide some motivation to keep volumes relatively high and are generally thought to be the best way to compensate physicians. Financial remuneration serves to influence behaviour, and we should design the system so that physicians can look after patients properly. I don’t believe the way forward for our profession lies in fee for service.  I’m not the only voice saying this, and I hope someone is listening.

4 thoughts on “The compelling case for salaried physicians

  1. In my rural environment,my patients love the opportunity to come and talk about their colonoscopy results so I can inform them when their next exam should happen, and they can draw closure #communion. I have heard from big city colleagues that pts get pissed at this, paying $20 bucks for parking for a 10 minute appointment. Even some that think the doc is screwing them and the system for another $25bucks for this 10 min chat. In a salaried system, would this change? I and my office staff don’t have the time or energy for telephone tag.


    1. I would think on a salary time could be set aside for telephone calls (maybe done by a PA?) for stuff like scope followup that can be done over the phone or by email.


  2. Every model of payment has its problems, and transitioning to a different model of payment, as you point out, could take a generation if not longer. If we were “starting from scratch”, say when Medicare was introduced, the solution would have been to grandfather in the existing MDs working under FFS, and plan the rest of the system the way we plan schools: clinics/hospitals built where they’re needed, and a proper competitive job market with salaried physicians.

    The question, as always, is what are we trying to achieve by changing how we pay doctors? Cost savings? With the government as landlord and employer, and doctors negotiating as a proper union rather than a collection as self-interested specialty “tribes”?

    Are we trying to improve access and reduce wait times? Salaries will definitely help with geography and high needs populations (I’m a big fan of CHCs), but we have an Auditor General report confirming that after hours access and wait times are no better with capitation and so on. Some of that is lack of enforcement on the part of the Ministry, but there are always other factors at play.

    Beyond the hard issues of system cost and access, you also have the not-easily-answered questions of the culture in which MDs are trained, and who’s ultimately responsible for care of the patient. How do you resolve differences between what an individual doc feels is needed to care for an individual patient, and the demands of the job description? What happens when the managers in such a system aren’t listening to front-line providers?

    You’ve worked in a system where the docs were salaried, and your insights interest me a great deal. For the record, it strikes me as silly to have surgeons work on a FFS basis, when the government pays the overhead anyway. But the outpatient world is a much more complicated beast.

    Liked by 1 person

    1. Thanks so much Frank! Yes I do need to write more about on working on salary. I would like to say that my MAIN aim in trying to advocate switching to a blended or salary model would be to improve physicians quality of life (that’s what I was trying to get at in the first paragraph). It is about income cuts, but the far larger issue is that most of us simply work too many hours with far too much responsibility. In a world with more families with two working parents it is just not good for anybody (docs, spouses, families) to have 50, 60, 80 hour work weeks for physicians.


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