In Ontario, new ways of paying doctors have been introduced in an attempt to improve the quality of their services. 

One approach is pay-for-performance, which pays doctors for meeting certain treatment goals.

However, there is little high quality evidence that pay-for-performance improves the quality of care, and it appears to have had limited impact in Ontario so far.

Over the last ten years, Ontario has significantly changed how it pays doctors – particularly family doctors.  Prior to 2003, nearly all doctors in Ontario were paid through “fee for service”, which paid them a set amount for each medical service they provided.

Fee for service has been widely criticized, because it is thought to promote quantity over quality.  Rick Glazier, a family doctor and researcher with the Institute for Clinical Evaluative Sciences (ICES) explains that “around the world, there is virtually no high-functioning health care system that still pays doctors on a strictly fee for service basis.”

Over the past decade, the Ontario Ministry of Health and Long-Term Care has introduced a number of new payment plans, with the goal of improving quality of care and access. Brian Hutchison, professor of family medicine at McMaster University explains that “Ontario’s move away from fee for service was primarily about changing the system from being driven by the goal of providing many services, to being driven by the need to  improve peoples’ health. It was really aimed at getting Ontarians to sign up with family doctors and remove the barriers to establishing family practices where care is delivered by a group of health care professionals.”

However, this change has come at a price. Earlier this year an ICES* report found that payments to doctors increased roughly in line with inflation until 2005, when they began to increase sharply.  From 2005 to 2010, payments to doctors rose by 10% per year, compared with only a 2% increase in inflation.


One of changes that Ontario made that contributed to the increase in physician salaries was to introduce payments for family doctors who met certain care goals, such as vaccinating their elderly patients against the flu.  This approach is known as pay-for-performance. Some suggest that the costs to Ontario’s health care system have been considerable – estimated at over $50 million in 2010. However, research from other jurisdictions suggests that there is a relatively weak link between pay-for-performance and quality of care, and recent studies from Ontario appear to bear this out.

In 2002, Ontario introduced a special incentive for family doctors whose patients with diabetes received three designated monitoring tests (glycated hemoglobin levels, cholesterol levels, and eye tests).  The hope was that this incentive would encourage all physicians to ensure that their patients with diabetes were carefully monitored and appropriately treated.  However, a study on the effectiveness of this program showed the incentives had limited impact, and that the doctors who claimed the incentives tended to be those who had already been providing the three tests before the incentive was introduced.

Another Ontario-based study examined the effects of performance incentives on the delivery of preventative services (flu shots for seniors, toddler immunizations, pap smears, mammograms and colorectal screening).  It found only a modest improvement for most of these services, and no improvement for toddler immunizations.  Only the rate of colorectal cancer screening experienced a substantial increase at the same time as pay for performance was introduced.  The same study also evaluated incentives to increase some services provided by family doctors that are more complex or time consuming such as obstetrical care, hospital care, palliative care, office procedures, prenatal care and home visits. The study found that financial incentives did not lead to an increase in these services.

A major review of pay-for-performance programs in the United States found a few small positive impacts in quality associated with the incentives, but no evidence of any major quality improvements.  “Given the state of the evidence, it seems there’s been a tendency to overestimate the effects of payment mechanisms on doctors’ behavior and medical outcomes,” says Brian Hutchinson. “The general picture is that you can spend a lot of money and not achieve very much.”

The future of funding incentives & quality

While pay-for-performance as currently designed appears to have had only a small impact to date, many experts believe it can be successful in the future.  However, all the experts interviewed agreed payment reforms will not substantially improve quality of care unless several important shortcomings are addressed.

One limitation of Ontario’s approach to date has been a lack of monitoring and enforcement to ensure doctors are actually providing the services they are collecting incentives for.  For example, a recent Ontario Auditor General’s report found that many doctors groups were not providing the after-hours care stipulated under their contracts.  To be successful in the future, any incentive-based payment system must have sufficient monitoring and follow-up to ensure targets are being met.

Another limitation is raised by Rick Glazier, who explains, “In Ontario, we haven’t aligned our payment reforms with our larger goals for our health care system.” He suggests that “moving forward, incentives should be targeted at our key priorities which include reducing emergency department visits, hospital readmissions and improving timely access to primary care.” However, again the challenge remains developing the right set of incentives that will lead to the intended positive outcomes without causing any unintended negative consequences – something the literature on pay-for-performance suggests is easier said than done.

Brian Golden, chair of health sector strategy at the University of Toronto Rotman School of Management adds that “it is essential that any payment reforms address not just motivating doctors to change, but – as needed – changing the environment in which they practice so that they have the capacity to change.”

What should be done to better align quality and the way doctors are paid?

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* Andreas Laupacis and Irfan Dhalla were co-authors on the February 2012 ICES Investigative Report: Payment to Ontario Physicians from the Ministry of Health and Long-Term Care, Sources 1992/93 to 2009/10.