Are OHIP Fees to High? – Part 1

Ontario’s recent decisions to cut fees for doctors’ services and move more services from hospitals to community facilities, called independent health facilities (IHF), raise numerous questions about doctors incomes, fee-for-service payment and for-profit clinics.

The Ontario government is arguing that they need to cut many fees because technology has changed making it less costly for doctors to perform certain services.  The government wants “better value for money”.  These arguments leave the impression that there is some measurable process to determine the value of medical services.

Predictably doctors are crying foul.  They argue that the technologies are expensive, staff costs are ongoing and services will need to be cut if fees are cut: once again reinforcing the idea that there is some objective logic to fee setting.  A position supported by doctor’s organizations which for a century have had committees of doctors that determine the value of a service.

The problem for both parties is that the relationship between fees and the actual cost of providing that service is tenuous.  There is a ‘ballpark’ relationship: a visit to a doctor for a sore throat is paid less that a cardiac catheterization.  But below this level of generality the precision falls away dramatically.

This is not a new observation. From my own research, when lab fees in the 1970’s were set by committees of doctors, pathologists earned millions of dollars from their connections to the expanding for-profit laboratory industry. When this became public the resulting political storm – a million dollar income from the public purse was even more outrageous back then – alleged conflict of interest, inflated fees and, if not fraud, highly questionable billing practices.

The Ontario Medical Association (OMA) responded by establishing a new and improved fee structure for laboratory services.  Within two years of the new fees being introduced the Ministry of Health found that there was no reliable data to determine what a fair fee for a laboratory test was. A finding identified again, this time by Ontario’s Auditor General, in 2005.

In 1996 and 2004 Ontario’s Auditor General also found that it was not possible to adequately assess whether the fees paid to independent health facilities reflected their costs.  In 2007 the Ministry of Health said that they were still working with the OMA on solving the problem.

Marketplace, an American TV show, found similar problems in the United States. Marketplaces’ analysis of the Relative Value Update Committee (RUC), the committee of the American Medical Association that recommends fees for medical procedures, detailed how physicians, specifically specialists, can increase the values of certain procedures in their favour.  One commentator said “that if you want to know what is wrong with health care, Google the RUC…a process that for all intensive (sic) purposes isn’t a public process, and doesn’t appear to be accountable to much of anybody.”

I can safely say that these three examples are just the tip of the iceberg of problems with fees paid to medical professionals.  In all instances procedures and technologies change so quickly that, even if fees start out being relatively appropriate to the service, they quickly become obsolete.  There is also the overwhelming problem of conflict of interest with doctors setting their own fees than solely determining what required care is.

So are physician’s fees exorbitant?  Who knows from a technical point of view?  The bottom line is that what we pay doctors is a social decision that reflects technical considerations, training, cultural norms, economic factors and political power. Historically doctors have demanded, and been given the right to set their fees and bill what they want.  Ironically, over the last forty years, as the world has lurched towards greater corporate control, doctors, as private practitioners, have come under greater government control.

At the same time setting prices for medical services through some sort of bidding process in a market environment or administrative procedure has become more common: mechanisms that work well with the private delivery of health care and for-profit medicine.

The recent conflicts between the OMA and the Ontario government raise other issues that will be discussed over the next weeks in an ongoing evaluation of the changes in the fee schedule and the push for more Independent Health Facilities.

Explore posts in the same categories: Funding-Cost For-profit Delivery, Ontario Government Policy

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