Research reveals physician payment methods influence health-care delivery and ED visits

By Prabhjot Sohal

Doctors get paid in different ways and how they get paid can change the way patients are treated.  

A new study by Schulich School of Medicine & Dentistry researchers Michael Hong, Sisira Sarma, and Amardeep Thindand Ivey Business School’s Gregory Zaric investigates the varying effects of fee-for-service (FFS) and capitation methods of physician payments on primary care services and the frequency of emergency department (ED) visits in Ontario. 

The research focused on two payment models prevalent in Ontario: The Family Health Group (FHG), a predominantly FFS model; and, the Family Health Organization (FHO), primarily a Capitation model. In the FFS model, doctors receive payment for each specific medical service they provide, such as check-ups, procedures, or consultations, and bill the government or insurance company for each service they offer. In the capitation method, doctors are paid a fixed amount of money for each patient under their care. It's like a subscription model, where doctors receive a set payment for each patient assigned to them, regardless of the number of services provided.

“We found a compelling need to evaluate these models and their impact on emergency department visits – an area with little existing research. It is essential to understand these dynamics to ensure equitable and effective health-care provision,” said Sarma, a professor in Epidemiology and Biostatistics at Schulich Medicine & Dentistry.  

The study, published in the European Journal of Health Economics, found that physicians in the FHO group, where capitation is predominant, provided 14-per-cent fewer services per patient per year compared to doctors in the FHG group, where payment is largely fee-for-service. This disparity was even more significant during after-hours, when 27-per-cent fewer services were provided. 

The findings of the study also reveal that patients seeing FHO physicians on a capitation model visited the ED more frequently for less urgent and urgent issues.

An intriguing finding also emerged among patients with two or more chronic diseases. These patients made fewer very urgent and urgent ED visits if they were with FHO physicians, which could suggest that FHO offers more preventive care and more referrals to specialists to better manage chronic conditions, leading to reduced need for primary care services and urgent and very urgent care in ED settings. 

The study findings bear significant implications for health-care policy and can guide decisions on physician payment models to balance the efficient delivery of services with appropriate compensation for physicians.  

“Our research shows that remuneration methods have tangible impacts on health-care delivery. Policymakers must use these insights to ensure a sustainable and effective health-care system,” said Sarma. 

The study analyzed Ontario physicians practicing in FHG or FHO from April 2012 to March 2017 and their enrolled adult patients. Sophisticated statistical techniques were employed to isolate the impact of the payment models on the provision of services, ED visits and the cost of primary care services.