Doctor pay is far from simple
There is big money at stake in the contract dispute between the province and doctors. Yet do you know how your physician is paid? Few people do
A toddler with a sore throat and nagging cough is brought to a family doctor’s office, where the MD looks the boy over, diagnoses him and prescribes a medication.
At a hospital a few blocks away, a cardiac surgeon is completing a valve replacement on a senior with heart disease.
Downstairs in the emergency room, a doctor is trying to resuscitate a woman who has been involved in a car crash.
At a private clinic across town, ophthalmologists are performing cataract removals and laser eye surgery.
As many Albertans are aware, just how much each of these physicians gets paid is among the major issues in an increasingly bitter dispute between doctors and the provincial government.
However, far less understood is exactly how that compensation system works. Though the province likes to say Alberta doctors are the best paid in Canada (with an average gross income of $350,000 a year), physicians’ compensation is as complex as many of the diagnoses and procedures they perform. We know, for example, the government has set a firm budget of $3.4 billion this year to pay doctors, a slight decrease from the previous year. That total represents about eight per cent of the entire provincial budget, and 20 per cent of the health budget.
It’s big money, especially since there are only about 8,000 physicians in the province. Yet, because most doctors are private contractors, taxpayers have little idea exactly how big a slice each of them takes home.
With some confidence, it can be said that family physicians and psychiatrists tend to be among the lowest earners of their profession, while ophthalmologists and cardiovascular surgeons are among the highest.
But even within those specialties, wide differences in both income and expenses exist from one practice to another. A doctor’s bottom line is subject to a number of factors, including area of expertise, business model, overhead costs and location.
FEE FOR SERVICE
Historically, physicians in Canada have been paid using a fee-for-service model.
The system works just like it sounds: a specific charge is assigned to various procedures a doctor performs for a patient, ranging from a simple office visit ($36) and flu vaccination ($10) all the way up to a quadruple bypass ($2,338) and a liver transplant ($5,484).
In Alberta, the province currently provides funding for about 4,500 services, each of which is assigned an unique, four-digit fee code.
A doctor’s office enters the applicable codes each week into an automated billing system, which then pays the correct amount the following week through direct deposit.
Despite the large volume of codes, fee-for-service is lauded by some observers as the fairest and most transparent compensation system that also acts as an incentive for doctors to be productive. After all, the more services a physician provides, the more money he or she makes.
But fee-for-service also has detractors, with some critics suggesting the system puts too much focus on fees rather than patients. They worry that doctors are given no incentive to spend time with patients as they rush to get to the next fee. Others warn the system pushes doctors to focus on the most lucrative services and ignore others.
ALTE R NATI VE RE LATIONSHIP PLANS
While Alberta still distributes more than 80 per cent of its physician payments through fee-for-service — the highest rate in the country — other provinces have been increasingly moving to Alternative Relationship Plans. Such plans come in different forms, but in general they offer a block of funding to a physician or group of physicians to provide a “basket” of services to a particular population.
1 . ANNUALIZED OR CONTRACTUAL MODEL
This type of ARP might be used to treat a specific cluster of hard-to-manage patients, such as urban aboriginal diabetics. In basic terms, a physician group agrees to provide the necessary services, then receives funding based on a calculation of the number of doctors required to handle the job. The annualized model is the most common type of ARP in Alberta, with about 30 contracts currently running.
2 . CAPITATION
Typically used in family care practices, this model again provides a block of funding to look after a group of patients. But unlike the annualized model, where funding is based on the number of doctors needed, capitation-based practices receive money according to how many patients they have on their roster. This roster could be the patients a family practice already has enrolled, or it could be all the patients in a defined geographic area. Alberta currently has just two of these operations, one in Calgary and one in Cardston, but the province has shown interest in moving more practices to this type of model.
3 . SESSIONAL MODEL
This pays a doctor by the hour to participate in small, specialized programs. It might be used for a general practitioner who spends two days a week at an inner-city walk-in clinic. As of 2011, there were 16 such ARPs in Alberta.
4 . ACADEMIC ARPS
These are special plans that pool together funding from various sources — health authorities, universities, governments and research institutions — to pay physicians who divide their time among clinical practice, teaching, research and administrative roles. The province says about 60 per cent of the medical faculty at the University of Alberta and University of Calgary are paid through such agreements. Alberta’s 25 neurosurgeons, for example, are all part of an academic ARP. Other specialists, such as cardiac surgeons, may be on more of a “blended” model, in which they bill fee-for-service for treating patients, but also receive an academic stipend for their teaching duties.
In addition to payments, the Alberta government also provides physicians with a handful of benefits. Among these is the Rural, Remote and Northern Program, which offers physicians up to $60,000 a year for practising in small communities. The province also covers all but $1,000 of a doctor’s annual costs for medical liability protection.
PHYSICIAN EXPENSES
Important to note in any discussion of doctor compensation is that most physicians, unlike nurses, are not employees of Alberta Health Services. Although they are paid by the government, and often use AHS operating rooms and facilities, physicians generally operate as small private businesses.
That means they must use a portion of their earnings to cover overhead costs, just like any company. After all, the $25 a customer pays for a meal at a local restaurant doesn’t mean the owner takes home $25. He must subtract the cost of the food, wages for the staff, the gas and electric bills and other expenses.
For doctors, their major costs are tied up in running their own offices, particularly staff pay and benefits, utilities, rent, medical supplies and equipment.
Unfortunately, trying to pin down numbers for those expenses is difficult, in part because it can vary widely by specialty. While one national study suggested overhead costs represent, on average, about 25 per cent of a physician’s revenue, the AMA has said such expenses are typically much higher in Alberta, eating up 40 to 60 per cent of a doctor’s income. They say doctors are also taxed at a high rate, while many young MDs have big debt loads from their numerous years at university.
However, some observers point out that many doctors choose to have joint practices with other physicians to share office expenses. They further note that as business owners, doctors are eligible for significant tax advantages.