Shift toward capitation in Ontario

Ontario family doctors are shifting from fee-for-service to capitation in ever-increasing numbers. Supporters of capitation systems say this is good news for both doctors and patients, though they warn that such systems can be complicated and difficult to operate effectively.

Canadian capitation experts say there has been little momentum in most provinces toward paying doctors annual fees for each patient — except in Ontario. About a quarter of family physicians in Ontario are paid via capitation, many abandoning fee-for-service only recently. About two-thirds of Ontario patients are enrolled in capitation systems or so-called blended systems, which retain some fee-for-service elements.

The Ontario government first dabbled in capitation in the 1970s through its Health Services Organization program. In 2002, physicians were allowed to adopt the Family Health Network model, also based on global payment. But it wasn’t until the 2005 introduction of the Family Health Organization program — which covers more services and offers a higher capitation rate —that Ontario doctors began switching in large numbers. This model became so popular, in fact, that the government at one point issued a temporary moratorium to slow down the massive wave of doctors making the transition.

“In 2002, doctors in Ontario were very skeptical. … There was a lot of suspicion of government at the time, but then they realized that their incomes would go up and their workloads would maybe stabilize or go down. Of Ontario physicians who went into capitation, virtually none have gone back,” says Dr. Richard Glazier, senior scientist with the Institute for Clinical Evaluative Sciences in Toronto, Ontario.

The Ontario government has put much effort into promoting capitation because expenses are very predictable in this payment model and because it allows for the creation of family health teams. Under a fee-for-service system, family physicians have little financial incentive to work as part of a team of health care providers. Sometimes, fee-for-service doctors perform duties they may be overqualified for — giving allergy shots, for example — because they would not be reimbursed if the task was performed by nurses. Such teams are seen as a way to maximize the effectiveness of family doctors, a scarce resource in Ontario.

“The family health team is a flagship initiative of this government,” says Dr. Brian Hutchison, editor-in-chief of Healthcare Policy.

These teams not only relieve physicians of performing easier tasks, but also allow them to relay patients to health care professionals who are more qualified to offer certain services. A team could, for instance, include a pharmacist to assist patients with their medications and a psychiatrist to help them with mental health issues. Such a team could allow a practice to enrol more patients, and thus collect more capitation fees.

“From the patient’s perspective, you go to one place and more of your needs are better met,” says Dr. William Hogg, director of the C.T. Lamont Primary Health Care Research Centre in Ottawa, Ontario.

Proponents of capitation say it encourages high-quality care rather than maximizing throughput. In a fee-for-service system, according to Hogg, there is a “perverse incentive” to bring patients back more than once for problems that could be addressed in one visit. On the other hand, fee-for-service does encourage doctors to work hard and see many patients.

To encourage doctors who switch to capitation systems to still see as many patients as before, the Ontario government pays them bonuses for meeting certain targets. These include getting a set percentage of their female patients in a certain age range to have mammograms and Pap smears. An added bonus of these incentives is that they encourage doctors to shift to electronic records to better track outcome measures. Physicians also receive bonuses if their patients don’t go to other practices, which is another incentive to provide a high level of care.

Another advantage of fee-for-service that could be lost in a capitation system is transparency. The government could easily monitor all services provided by doctors under the old system because it was billed for each one. To keep this valuable information coming in, the government has created a “shadow billing system,” which pays doctors 10% of traditional fees.

“If you are only paid by capitation, then there is no incentive to bill. If you are making 10% of the fee, then it is worth it,” says Hogg. “Financial incentives do affect people’s behaviour. That is true for physicians as well as anybody else.”

Critics of capitation point out another potential negative of shifting from fee-for-service: an incentive to enrol only the healthiest patients. In some countries, capitation fees are adjusted according to many factors, including socio-economic standing and health status. In Canada, they are currently adjusted only according to a patient’s age and gender. That means doctors don’t get paid more to care for sicker patients, who require more time and resources. This makes capitation a much less attractive option for doctors in urban centres than for those in wealthy suburbs, where patients tend to be healthier and need less care.

“Doctors in the inner city could be missing out in the order of $30 000 compared to those in small cities or rural areas,” says Glazier.

Setting and adjusting capitation fees aren’t the only complicated parts of implementing a global payment system.

It is difficult to create a system that works, with the right mix of incentives, but it is necessary if Canada is to improve its primary care system, says Hogg. “It’s very complicated but it’s better. It’s not perfect yet, but it’s already better than fee-for-service from the perspective of patients and doctors.”