Many physicians around the world, including the United States, are paid through a fee-for-service (FFS) model, receiving a fee for each service they provide. According to a recent Health Policy article, there is an increasing interest in alternative payment models among healthcare providers, such as salary, capitation, episode-based payment, and pay-for-performance, as well as a strategic blends of these models.
The study points out that such models may be more aligned with broad health policy goals like fiscal sustainability, delivery of high-quality care, and physician and patient well-being.
The payment models covered in the study can be described as follows:
- Salary: A preset level of income where a physician is typically contracted to achieve defined levels of productivity and quality. A positive for this model is it provides a guaranteed salary, but a negative is it lacks incentives for innovation or cost reduction efforts.
- Capitation: A fixed amount of money per patient per unit of time is paid in advance to the physician for delivery of healthcare services. A positive of this model it that it controls the use of healthcare resources, but a negative is it puts physicians at financial risk for the services provided.
- Episode-based payment: Instead of separate compensation for each service, episode, medical event, or provider along the way, the total allowable remittance for a patient’s sequence of care is predetermined. A positive is that, based on projected costs, an all-inclusive payment gets issued to all healthcare providers and institutions that work the same case, encouraging them to coordinate care. Negatives include a lack of cost savings for certain conditions and potential difficulties in efficiently coordinating care.
- Pay-for-performance: Financial incentives are tied to achieving predetermined performance goals. A positive is critical quality and performance targets are incentivized, encouraging innovation, while a negative is higher complexity of program administration.
- Blended: Combines multiple payment models. By combining models, an organization can better align incentives for individual physicians with those driven by the market. Negatives include greater associated administrative complexity and a potential lack of clarity if the blended model is overly complicated.
The study investigators used qualitative interviews with 32 specialist physicians in Alberta, Canada, to examine factors that influenced their preferences for FFS versus other payment models. The study’s main findings were as follows:
- A desire for flexibility or autonomy and professional interests were key factors that influenced payment model preferences.
- Female physicians who were early- to mid-career tended to value payment models that provided flexibility and work-life balance.
- Physicians early in their career were more likely to find attributes of alternative payment models appealing.
- Alternative payment models that optimize nonmonetary incentives were more likely to be selected voluntarily.
It was concluded that to encourage physicians to both prefer and select a specific payment model, the model must appeal to them in both income potential and nonmonetary quality-of-life values. It is hoped that the findings will support constructive discussions about the merits of different payment models and assist policymakers in considering the impact of payment reform.
