Fee-Scheduleincreasesincanada: Implication for Service Volumes among Family and Specialist Physicians

Abstract

Physician spending has substantially increased over the last few years in Canada to reach $27.4 billion in 2010. Total clinical payment to physicians has grown at an average annual rate of 7.6% from 2004 to 2010. The key policy question is whether or not this additional money has bought more physician services. So, the purpose of this study is to understand if we are paying more for the same amount of medical services in Canada or we are getting more bangs for our buck. At the same time, the paper attempts to find out whether or not there is a productivity difference between family physician services and surgical procedures. Using the Baumol theory and data from the National Physician Database for the period 2004–2010, the paper breaks down growth in physician remuneration into growth in unit cost and number of services, both from the physician and the payer perspectives. After removing general inflation and population growth from the 7.6% growth in total clinical payment, we found that real payment per service and volume of services per capita grew at an average annual rate of 3.2% and 1.4% respectively, suggesting that payment per service was the main cost driver of physician remuneration at the national level. Taking the payer perspective, it was found that, for the fee-for-service (FFS) scheme, volume of services per physician decreased at an average annual rate of -0.6%, which is a crude indicator that labour productivity of physicians on FFS has fallen during the period. However, the situation differs for the surgical procedures. Results also vary by province. Overall, our finding is consistent with the Baumol theory, which hypothesizes higher productivity growth in technology-driven sectors.