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Making sense of Ontario’s fee codes


Most of Ontario’s doctors bill the Ontario Health Insurance Plan for their services on a “fee for service” basis.

The amount doctors are paid for each service is established through negotiations between the Ontario Ministry of Health and Long-Term Care and the Ontario Medical Association.

Although fees are reviewed every few years, there is disagreement about the success of this review process. Some feel that specific fees do not reflect the time and expertise required to perform that service or procedure, or its impact upon patient outcome.

How doctors are paid influences how they practice. In Ontario, there is a single public health care insurance program, the Ontario Health Insurance Plan (OHIP), by which the vast majority of doctors bill for their services. Most of Ontario’s doctors are paid, at least in part, by “fee for service,” although an increasing number of doctors, such as those working within family health teams or at academic health science centers are paid through alternate payment arrangements which include a mix of salary, fee for service and targeted incentive payments.

Healthydebate.ca previously covered the debate about how doctors working in hospitals should be paid.

There is a rationale for the fee for service system. It encourages doctors to see many patients and to work efficiently. When the fee is appropriate for the service, it encourages doctors to work in areas of patient and public need, such as preventive health services.

However, if the fees are not properly aligned with needs, they create incentives for doctors to preferentially provide services that are lucrative, and disincentives for providing lower paying services.

John Wade, an anesthesiologist and former deputy Minister of Health in Manitoba, notes that “as a general rule, the cognitive specialties (e.g., psychiatry) don’t do as well as the procedural groups (e.g., surgery)”. A review of doctors’ income in Ontario in 2006 found that net earnings of dermatologists were nearly double the earnings of family doctors.

In 2010, it was reported that the cost of paying doctors is the fastest growing health care expense nationally, with remuneration to doctors accounting for $26.3 billion of $191.6 billion spent on health care in Canada. Making sure that the fee schedule appropriately rewards doctors is important if the system is to work well. This article describes the process of setting fees in Ontario.

How the fee schedule works

OHIP provides coverage for physician services in Ontario, and 95% of Ontario’s doctors receive some reimbursement from OHIP for their services. Fees for various consultations and procedures which are performed by Ontario’s doctors are listed in the Schedule of Benefits, which contains more than 8000 different fee codes. In theory, each of these fee codes is based on the time and complexity associated with a specific procedure or consultation. However in practice this is not always the case, especially as technology and practice methods change. The Schedule of Benefits is updated approximately every 4 years through a negotiation processes between the Ontario Ministry of Health and Long-Term Care and the Ontario Medical Association (OMA). How fees are set is a mystery to many members of the public, because the process happens behind closed doors.

Healthydebate.ca spoke with some key informants about how this process takes place, and the key considerations used to decide who gets paid, and how much.

The negotiation process

The Ontario Medical Association (OMA) represents the “political, clinical and economic interests of the province’s” doctors and consists of elected doctors who represent their region, as well as their medical specialty.

During the fee setting process, representatives from various specialties and clinical areas are consulted by the OMA negotiating team about the fees related to their clinical areas. Due to rapidly changing medical technology and practice, the complexity and time it takes to do certain procedures or consultations can change. Primarily for this reason, the OMA is continually re-evaluating the fee codes to determine which fees are felt to be too high and which are felt to be too low.

The Ministry of Health and Long-Term Care goes through a similar exercise. Both parties also use benchmarks from other provinces and even some mathematical formulas. An informant involved with this process at the Ministry of Health said “this is a very technical business – its easy to criticize and easy to praise.”

This same informant said that “in the last eight years there has been an approach taken to negotiating money and distributing funds in a more targeted way.” One example of this is the reduction of cataract surgery fees recently announced by the Ministry of Health and Long-Term Care. Cataract surgery used to be a major surgical procedure, which took more than an hour. However with changes and improvements to technology and patient flow management, many surgeons can do the procedure in 15 minutes or less. Scott Wooder, a Stoney Creek family doctor who chaired the OMA Negotiations Committee in 2008 and is the current Chair of the Board of Directors notes that there was “a diversion of funds from cataract fees that went into undervalued fee codes in ophthalmology, such as retinal surgery.”

Ontario is not alone in dealing with fee codes that no longer reflect clinical realties. For example, a recent newspaper article reported that the British Columbia Ministry of Health was looking to reduce “artificially high fees”, showing evidence that in BC ophthalmologists are paid $28.17 per minute during cataract surgery, as compared to orthopedic surgeons who are paid $4.89 per minute during hip replacement surgery.

Changes to the fee codes: enter “relative value”

The need for the fee code to reflect the value of a service remains an ongoing issue in Ontario. In fact, inequities within the fee code motivated the development of the Resource-Based Relative Value Schedule Commission of Ontario, in 1997. This commission had the mandate to develop a new fee schedule with a “more equitable and rational approach for evaluating and compensating medical services”.

This commission presented a detailed report in 2002, with a ‘Relative Value Schedule’ aimed at replacing the previous Schedule of Benefits. This Relative Value Schedule promised to “permit comparisons across all services and … correct any distortion in the relativity of fees that may have occurred over time.” This was done through developing a formula which measured the time, intensity (including communications, knowledge, risk and technical skills) and practice costs associated with each service.

Wade co-chaired the commission, and says that “at the time, it was too politically sensitive for either party to adopt [the recommendations of the report]”. However, he points to some changes over time, including a fee increase for specialties such as geriatrics and psychiatry where it was shown that “their fees were inappropriate relative to other fees”.

Wooder notes that while the ‘Relative Value’ approach was not adopted fully, “the recommendations were brought in at a high level”, with “very successful relativity adjustments taking place at the specialty level, rather than comparing each fee code”.

Does the Fee Schedule negotiating process focus on the right things?

The current fee-setting process focuses largely on the “input” side of the equation. “Relative benefit” refers to the relative effort needed by physicians to provide a service or procedure. Since our health care system is meant to serve the needs of patients, should “relative benefit” instead be established using measures of the impact of a particular service or procedure on patient outcomes?

Camille Orridge, CEO of the Toronto Central Local Health Integration Network says she’d “like to see the negotiation process married to system accountability” given the tremendous influence that doctors hold over health care costs, and their patients. Orridge says that “physicians drive too much of the systems’ costs to not participate in system accountability”.

How should physicians’ fees be established?

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6 comments

  1. Ron Worton

    Are these the right three choices? Maybe the best system would have two components – one based on time and skill, the second on benefit to patient/society. The first component would recognise expertise and training as well as the time involved in delivery, while the latter component could be used to direct physicians into high impact care, where necessary.

  2. Ritika Goel

    Thanks so much for tackling this important issue. FFS definitely has significant issues as a payment model. Also potentially problematic is the capitation model as it only takes into account age and gender of the patient, therefore creating a perverse incentive for physicians to find the healthiest patients in any given demographic. Such a system may work better if it took into account existence of chronic disease (eg. a 24yo man with HIV will be much more arduous a patient than a healthy 24yo man), as well as socioeconomic status, given that income is the #1 determinant of health.

  3. Charles J. Wright

    In the discussion of fee codes it is more than a little disingenuous to state “Some feel that specific fees do not reflect the time and expertise required to perform that service or procedure, or its impact upon patient outcome……..”. There is abundant evidence to make a clear statement that the current inappropriate discrepancies (having arisen in history) no longer reflect the realities of current practice. The excellent opportunity to correct the situation (at least in Ontario) through the Resource-Based Relative Value Schedule (RBRVS) in 2002 was rejected – another triumph for the entrenched vested interests of the groups that have already been over-privileged for too long – to the great discredit of our professional leadership. If the Ontario Medical Association is unwilling or unable to deal with this unacceptable situation then it will ultimately be necessary to legislate the necessary changes.

    I think that the whole issue of physician remuneration is going to be a major topic in the health system reform strategy that is coming. In this context, the questionnaire at the end of this HealthyDebate essay does not adequately cover the range of options that need to be on the table. In fact current balanced opinion is coming around to some kind of variation of a system that is not even on your list, namely a combination of the second and third involving a fixed remuneration base, with a proportion of total income based on activities related to a contract.

    If you have not already seen it you may be interested in the recent NEJM paper on appropriate care and remuneration – http://healthpolicyandreform.nejm.org/?p=15165&query=TOC

  4. Nicholas Leyland

    Physician remuneration must be alligned with the patient’s, societies’ and their own interests. Fee for services is a powerful incentive to be efficient and to work long and “unsociable hours” but it also encourages “increased utilization” or unnecessary interventions. Salary for doctors works in the opposite direction.
    Capitation has benefits to allign prevention, and to minimize expensive interventions but may reduce appropriate interventions especially if there are disincentives to refer patients for such things. There is the above noted problem of cherry picking for healthier patients. Capitation is not appropriate for specialties such as subspecialty surgical practices.
    Therefore, what is very clear is that there is no ideal system to fairly compensate health providers. The only solution is a mixed system with better accountability for allignment to best practices, resource stewardship and health outcomes.

  5. Don Husereau

    We recently explored the use of value rather than strictly costs to inform provider fees in Canada . The report can be found here – http://tinyurl.com/3rtrl5f

    We have argued that value-based fees could actually avoid net expenditure while providing income incentives to providers. US Medicare has legislated value-based modifiers into their fee for service system for 2014 and similar approaches are being piloted in Australia. This is above and beyond a resource-based relative value-based fee schedule, which does not strictly take the economic value of a service into account.

  6. Kim EIJA

    There is needless duplication of services. Patient is required to get a referral from family doctor to see a specialist. Often the visit to a family physician is mere formality. Family physicians merely dispatch patients to a specialist, thus, wasting money.

    Family physicians nowadays insist one health problem per visit!!!! This hardly holistic health care!!! Seniors, diabetic patients always have more than one health care issue.

    Scandinavian countries even chronic medications and braces are paid by the government while allowing private clinics.

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