All of the following are discounted fee-for-service healthcare payment methods except

Physicians

As is typical internationally, fee-for-service (FFS) payment is the norm in France. In 2011, an estimated 94% of payments to primary care physicians were FFS-based, with the remaining 6% from salary or based on financial incentives, although since that time the latter number has doubled or more.d Physicians are increasingly rewarded financially on a per-patient basis for care coordination for their chronically ill patients, complying with quality guidelines, and using electronic means of filing claims. The payment methods for specialists, in contrast, are more varied, with a little over one-third paid on a FFS basis with many of the remainder being paid a salary by hospitals or having a mix of income sources [8].

The fees are set by the health ministry based on negotiations between SHI and physician trade unions [11, p. 20]. As noted, balance billing is common in France, but whether a physician is allowed to do so is based in part on their “sector.” Sector 1 doctors cannot balance bill, while those in Sector 2 (an estimated 42% of specialists and 11% of GPs) are permitted to so long as they demonstrate “tact and moderation,” [27] which is obviously subjective. Because of the financial and equity problems that can result from balance billing, the SHI controls who and how many physicians can join this sector, limiting new entrants to those with full-time public hospital appointments [11, p. 96, 164].

Interestingly, French primary care physicians are far more likely than those in the other countries covered here to express unhappiness about their incomes. In 2015, 44% of French primary care doctors expressed dissatisfaction. This was higher than any of our countries (Japan, which was not included) [28]. The results are intriguing because the estimated incomes of generalist physicians in France were slightly higher than in the Netherlands and Australia, and almost 30% higher than Swedes [29] (only 18% of whom expressed dissatisfaction) [28].

3.1 Physicans

Of the three main methods of reimbursing physicians—fee-for-service, salary, and capitation—fee-for-service is the most open-ended and has been the most difficult to control. Governments (as payers) have attempted either to limit overall increases in fee schedules (as in Canada) or to specify prospective rates for procedures (as in the American Medicare Fee Schedule) (Table 2). In countries with social insurance systems, efforts to exercise these controls are frequently encumbered by corporatist negotiations involving representatives of employers, workers, and physicians. Private insurance companies have found it very difficult to impose reimbursement controls or develop other disincentives to increased utilization of physician services under fee-for-service plans, perhaps because the main competitive edge of private insurance is the greater choice it offers consumers who are willing to pay for higher-priced physician services. Because fee-for-service reimbursement controls encourage physicians to increase the number of patient visits in order to maintain their level of income, governments in Canada and Germany have begun to monitor the volume of physician services.

Table 2. Physician reimbursement

Physicians tend to be salaried when they work in public hospitals, health centers, or certain types of health maintenance organization (HMO). While salaries are inherently easier to control, they may elicit reduced service provision, especially when specialists also have private fee-for-service practices outside the health care facility. Capitation payments (a specified annual or monthly amount for each patient) commonly accrue to primary care physicians or general practitioners. Although there are outer limits on the number of patients on a physician's list, in order to control costs there must be strong disincentives to refer patients to specialist physicians or services.

Greater control over physician reimbursement has been facilitated by the introduction of managed care. Managed care is also responsible for ushering in a shift away from fee-for-service reimbursement toward either modified fees (with prospective fee schedules of some sort) or increased capitation if not salaried reimbursement within a physician's portfolio. Managed care plans rely on primary care physicians to serve as gatekeepers to the system of care, referring patients only when they deem it necessary. Various incentives exist to reward physicians for their efforts, ranging from bonuses in American HMOs to managerial independence among fundholding GPs in Britain. Fundholding GPs are allotted a lump sum payment for their practices and allowed to make all expenditure decisions themselves. Developments such as GP fundholding also represent an attempt to increase provider cost consciousness by making providers purchasers of health care with significant budgetary discretion.

Managed care has also introduced increased forms of competition among providers. Some managed care organizations negotiate contracts with selected providers for their services, encouraging providers to devise attractive offers that promote the goal of ‘value for money.’ Some managed care organizations simply enlist providers who are willing to offer their services for a discount; physicians are motivated to participate in these plans because of the promise of increased volume. In many countries competition is occurring among providers within the public sector, but, while reimbursements levels are affected, the practice is oriented more toward enhancing cost consciousness than achieving any significant reduction in overall expenditure on physician services.

Physicians and patients in the United States have undergone a dramatic and relatively abrupt transition to managed care, but at the same time, this revolution has been stymied by a shortage of primary care physicians. Unlike other countries the government in the United States exercises only weak control over physician supply and distribution, based entirely on monetary incentives. It is expected that the still growing market for managed care will continue to influence physicians to choose primary care as a field of specialization. Meantime, however, experiments are underway (for example, in New York City) in the use of highly trained advanced nurse practitioners as primary care providers. These nurses perform all of the functions of primary care physicians with regard to prescription, referral, and hospital admitting authority, and they are paid at the same rate. They and their employers insist that they are not threatening the livelihood of physicians, simply filling a gap. But their appearance is part of a wider movement to demote the level of skill in certain jobs. In all countries, most types of health care worker are undergoing a deskilling as hospitals cut middle-range positions while hiring lower-skilled replacements, some of whom work only part-time.

Other controls on physicians aim to standardize what in some cases has been wildly divergent practice patterns (Wennberg 1999). Clinical or practice guidelines, also known as medical audits, contain specifications for how physicians should go about treating certain ailments. In most countries these guidelines are developed by the medical profession and monitoring is based on peer reviews, but in other countries (such as the United States) government officials or other interested parties have a hand in the process as well. As protocols for treatment options, clinical guidelines have a dual purpose, for they are also central to efforts to improve quality assurance. Accordingly, in some places they have been extended to include primary care. Finally, in a number of countries, physicians' expenditures on pharmaceuticals are coming under greater control. Britain and Germany are holding physicians directly responsible for spending over a specified limit.

These and related developments have led to the suggestion that the dominance and authority of the medical profession is declining (Mechanic and Rochefort 1996, Raffel 1997). Certainly, managed care has removed much clinical decision making from the sole domain of the physician and muddied it with administrative rules and budgetary constraints. Further proof derives from the British experience. Having once enjoyed considerable clinical autonomy (especially compared to the United States), physicians in Britain are complaining about the introduction of a planned market with its greater managerial control over medical decision making (Harrison 1995). Alternatively, managed care has enhanced the role of primary care physicians in relation to the secondary sector. Even in countries that already had well-developed primary care services, the incorporation of managed care has strengthened the vertical integration of sectors and placed primary care physicians at the intersection.

There can be little doubt that the heyday of physician dominance over health care is past. But we must look beyond the medical bureaucracy to understand the forces behind this development. For example, better patient knowledge, triggered not only by successful health promotion programs but also by the media and increased access to the Internet, has greatly altered patient–physician relations. Medical authority is also being tested by negative reactions against increasingly more invasive technologies and procedures as patients are turning away from overly medicalized treatments and institutional settings. While we can note change, we ought not jump to conclusions about the endpoint. There is no reason why demedicalization cannot exist alongside a continuation of medical authority. Furthermore, demedicalization has generated greater accountability criteria on the practice of medicine. Accountability requirements have perhaps gone furthest in the United States, where some state and local governments are publishing physican (and hospital) ‘report cards,’ ostensibly to provide consumers with the information they need to make their health care choices. The status of physicians is undoubtedly coming under greater scrutiny, due as much to marketization and its competitively-based principles as to broader social changes in the culture of health care.

Physicians

In most provinces, primary care physicians are paid on a FFS basis, comprising an estimated 70% of total payments nationally [31, p. 68]. There is some experimentation with pay for performance (P4P) incentives for meeting specific treatment goals, and with capitation and other forms of non-FFS payment for primary care physicians. FFS is also the dominant method of paying specialists, but some provinces are using alternatives in a minority of cases. Rates are set in negotiation between the provinces and the provincial medical associations [12, pp. 23–25].

Ontario provides the clearest example of experimentation with payment. Since the early 2000s, the province has adopted some innovative primary care models with the aim of achieving better service coordination, improved quality, lower costs, and, at the same time, encouraging new physicians to choose primary over specialty care. The percentage of primary care physicians paid on a purely FFS basis fell from 94% in 2002 to less than 25% in 2015—and half of that reduced number were providing more specialized services. For primary care physicians, total reliance on FFS was replaced by a combination of capitation, salary, and performance-based reimbursement systems with some incentive to control volumes [17].

Innovations in Health Care Delivery

Health care provided by physicians has traditionally been on a fee-for-service basis in the USA. Since the 1930s demonstration programs called prepaid group practice developed the idea of a group of physicians contracting to provide care for construction sites in remote communities, such as the Hoover Dam or for mining communities, to registered clients, including workers and families lacking access to other arrangements for medical care.

Prepaid group practice came to prominence in the USA during World War II to provide care for war industry workers and families. The Kaiser Permanente system grew to cover millions of people in many states and other similar programs developed with doctors having incentives to promote preventive care and reduce hospitalization and unnecessary interventions. This model later developed into health maintenance organizations (HMOs) and more recently into accountable care organizations (ACOs), which are becoming increasingly common methods of organization of health care for Americans and will be fostered by Obamacare in the coming years (see Chapter 13).

The link between medical care and public health has been a distant goal for those who see a need to link prevention and curative services, including health promotion and long-term support systems for patients with chronic illnesses and problems of aging.

The development of HMOs in the USA since the 1990s has been accompanied by a decrease in acceptability of private for-profit programs and a sense of substandard services. Nevertheless, the principles of organized group practice with the emphasis on preventive care came to be recognized as vital to controlling costs and reducing inequities in care. The introduction of the Patient Protection and Affordable Care Act (PPACA) will promote new approaches to medical care with group practice, social and preventive support systems, and the ideas of community-oriented primary care. Innovations under development include the patient-centered medical home (PCMH), ACO, and population health management system (PHMS). They include new payment arrangements that reward health outcomes achieved rather than payment of a fee for each service rendered. Evidence on the performance of such innovations will be needed to promote their wider adoption (Shortell et al., 2010).

Episode-of-care

In order to mitigate risks of unanticipated costs in the fee-for-service reimbursement method, insurance companies can use an “episode-of-care” payment structure. This method divides patients into different groups according to the different conditions that they have and assumes responsibility for all of the costs associated with the medical care for that condition. These costs will be lumped into one envelope that will be assigned a specific amount of reimbursement for each episode of care. There are three main options for episode-of-care payments: capitated payment, global payment, and prospective payment.

Capitated payment: In this model, the payer will reimburse a healthcare provider with a fixed amount of money per patient for each specific condition, regardless of the amount and type of provided services. Often called a “per member per month” (PMPM) model, it greatly reduces uncertainty otherwise inherent in the healthcare service for the payers.

Global payment: Global payment is similar to capitated payment, but reimburses a set of multiple healthcare providers with a block of money, called a grant, for treating the same patient for a particular condition. Medicare’s plan A for home health service is a good example. When a Medicare-insured patient receives different services from various providers, as long as they are for the same condition, the government will reimburse all of those services from a single payment envelope even if more than one provider is involved.

Prospective payment: Prospective payment is a method in which insurance payers will negotiate the price for each healthcare service for a certain period of time regardless of condition. Then, any service received by a patient within the prescribed time frame would be reimbursed by the agreed amount. The payment amount in this case is based on the average level of service needed across many patients. If the providers give more services than average to a single patient then that added cost will have to be offset by the fewer services for other patients in the same funding envelope. The risk of the insurer is managed because the overall cost of the service package for a group of many patients is set in advance but this method may pose more risk for the provider.

For all of the episode-of-care models, the mutually agreed-upon payment amount comes from a statistically large and reliable database. Such a system is challenged if insufficient patients yet exist who have had the new treatment for a particular condition because the necessary information on which to base the reimbursement amount would not be available. Thus, it would be difficult for the payer and provider to put a price tag on reimbursement for that particular type of condition and treatment. Because many engineered products are relatively new, they are not considered to be standard of care. Thus, a traditional episode-of-care approach is not ideal for the reimbursement of engineered products because it is so difficult for both insurance payers and healthcare providers to establish a price tag for the novel treatment.

Physicians

The large majority of primary physician payments are paid on a fee-for-service (FFS) basis through a national fee schedule. As in the case of hospitals, fees are negotiated through a corporatist organization with representatives from physicians and insurers, called TARMED. Until 2018, it had revised fees for individual services but had not carried out any systematic revision to try to achieve more equity between generalist and specialist physicians. Beginning in 2018, however, the federal government intervened to make broader changes that are designed to reduce these differences [27]. This included a 10% reduction in payment rates for such common procedures as cataract operations, colonoscopies, and radiation therapy [11, p. 244]. In contrast, hospital-based physicians typically are paid on a salary basis [22].

While FFS dominates, there is some use of capitation and salary in managed care plans. An estimated 10% of payments were made in this way from payers to managed care plans in 2012 [6, p. 117], although most likely not all physicians in these managed care plans were paid via capitation or salary.

2.28.3.1 Previous Fee for Service Funding System and Professional Inertia

Historically mental health care has been funded by third party payers according to a fee for service basis (Foos et al., 1991). This had encouraged the practice of treating patients for as long and as intensively as possible, the opposite of the evidence-based practice weakest that works rule of thumb presented earlier. At times, perhaps, this lengthy and intense therapy schedule format was motivated by the therapist's goal to guide the patient to a fully selfactualized state of optimum functioning or in some sense a cure. There is virtually no existing data that any form of therapy has been effective in helping patients achieve such an end-state and that such a therapeutic goal should be the target for intervention. In addition, unfortunately, there has been a lack of financial incentives to change this style of clinical practice but rather strong incentives to keep it going (Cummings, 1987). Bruce Thyer (1995) highlights that not only did this incentive system encourage more lengthy treatments than was necessary but also less concern about tracking progress and adjusting treatment accordingly; irrespective of outcome payment was the same. He observed further,

Once one has graduated with a professional degree and obtained a state license to practice as a mental health services provider, there are few if any strictures as to what constitutes suitable treatment. Quite literally almost anything goes. (p. 93)

The two components of employing empirically proven protocols and monitoring ongoing measures of patient progress which we have presented as central to the evidence-based practice model were clearly not being encouraged by these fiscal contingencies. With no external pressure or patient outcome data to motivate change, providers were likely to stay with what was familiar to them in their treatment strategies. Again, this is quite inconsistent with evidence-based practice and choosing a therapy protocol not because it feels comfortable for the therapist but because it has been proven to be a right one for the patient. This calls for the therapist to be much more flexible, be open to new and more effective techniques, and to go where the data supports to go.

Unfortunately, the increasing costs generated by this tendency of what Giles (1993) calls the “overprescription of services” contributed to what we have already presented as the managed care revolution in health care delivery. Furthermore, with the discovery of unnecessary or self-serving tests and care being ordered, third party payers developed an increasing loss of faith in health care professionals' judgment, competence, and ethics (Ludwigsen & Enright, 1988). To illustrate some of the consequences of this distrust, we can look at a statement of a medical professional looking in at the mental health care system. John Montgomery (1988), a physician representing Aetna Life & Casualty writes,

Employers also should be aware of the policies or practices of different treatment facilities. For example, some institutions continue to believe that patients with demonstrated psychological problems usually require a minimum of one full year of treatment. (p. 89)

It appears reasonable to assume that this physician would have a much more positive and trusting response to an evidence-based practice psychologist who was oriented toward offering the treatment that had the best chance of producing successful results for a particular patient in the shortest period of time rather than demanding an excessive minimum amount of time for all patients. Burlingame et al. (1995) propose that given the low ebb in professional trust, it is more critical than ever for providers to document clinical results at the end of treatment as well as by ongoing monitoring of patient progress. This is clearly consistent with the evidence-based practice model.

Physicians

Hospital-based physicians are salaried. Ambulatory care physicians generally are paid on a fee-for-service basis subject to fee schedules, one applying to SHI patients and the other to PHI patients. The fee schedule for SHI patients is, according to Konrad Obermann and colleagues, “exceedingly complex,” [17, p. 206] in part because fees are reduced for physicians who provide a quantity of services that exceeds a threshold. However, all SHI insurers pay the same fees to doctors for specific services so there is not a financial incentive for a physician to seek one patient over another. This is sometimes called an “all-payer system” (see Chapter 16). This does not apply to PHI patients, who, as noted below, are financially more attractive to providers.

The sickness funds do not pay the doctors directly. Rather, each makes an aggregate payment to the regional association representing physicians in that geographic area. The regional association, in turn, pays physician on a fee per service basis, based on a “points”—a measure of the quantity of patients in the practice and the number of services each physician reports during a calendar quarter. These points are determined by the Uniform Value Scale, which are determined by another corporatist committee composed of representatives of sickness funds and physicians. The points are similar to the relative value units used by payers in the United States.

Each physician is allotted in advance an anticipated aggregate maximum number of patients and points per patient during the calendar quarter, which is based on the volume provided during the previous year. Additional quantities of services delivered that cannot be justified result in a decline in fees; this is a common occurrence as the total number of points submitted by physicians in a region collectively often exceeds the regional budget [22]. Some research has found that some of the practices that reach their reimbursement cap, and thus face declining revenues for providing more services, reduce the number of SHI services they provide at the end of March, June, September, and December; this, in turn, results in a substantial increase in the use of emergency care [25]. Similarly, if physicians prescribe more drugs than an individual target volume established for them by the above committee and are unable to adequately justify it, they are required to return the difference—specifically, the difference between how much they actually prescribed and 115% of their target [2 (p. 149–154, 215), 13].

In contrast, physicians treating PHI patients are not subject to volume restrictions as they are when they treat SHI patients. There is a uniform fee schedule set by the Ministry of Health, but physicians typically charge about double that rate [2, p. 156–157]. Usually, the patient pays the physician directly for care and is reimbursed by their insurer [2, p. 139, 156]. Moreover, unlike in SHI, physicians are not subject to volume restrictions, making such patients financially more attractive [19].

How to Appeal

An appeal must be made in writing to the NHSLA within 30 days from the date on which the decision letter is sent. The appeal must contain a concise and reasoned statement of the grounds for appeal.

An appeal under Schedule 3 can generally only be made by the applicant or by a contractor who has been formally notified of the decision.