Should more Australian doctors be salaried than paid by fee-for-service? — No

The first claim is that payment on a fee-for-service basis encourages overservicing.1 Theoretically, this could be true, but it is a small-volume threat. The reality is that the overwhelming majority of doctors are flat out doing the necessary work for their patients. They simply don’t have time to overservice. In fact, salaried remuneration encourages underservicing. While many salaried doctors do work excessive hours to cope with ever-expanding workloads, it is the human condition to watch the clock and not put in the maximum effort when you are paid by the hour. This risk outweighs the risk of overservicing under fee-for-service arrangements. In addition, the transparency of fee-for-service makes employers more accountable to doctors, reducing the potential for exploitation of doctors’ goodwill in both the public and private systems at all pay grades.

Fee-for-service is also said to result in people being unable to afford medical care. However, the method of remuneration of doctors does not determine the cost of a service to the patient. For example, general practitioners who bulk bill are paid on a fee-for-service basis, but their patients have no out-of-pocket expenses. Conversely, private radiology and pathology companies often pay salaries to doctors, but patients pay out-of-pocket expenses. It is the quantum of remuneration to doctors, not the method, and the level of rebates from third parties that influence the end cost to patients.

There are concerns that fee-for-service encourages doctors to try to provide more services in a given period of time, with resulting compromises to the quality of services provided. This is a theoretical problem, as proven by decades of high-quality fee-for-service work in Australia. Doctors have been and can be trusted to provide quality work in a fee-for-service environment.

Fee-for-service is said to cause doctors to work excessive hours to their detriment. I contend that many salaried full-time doctors, in both the public and private systems, work excessive hours to their detriment, motivated by work addiction or greed. Work addiction and greed are difficult issues, which in themselves are the problem — not the method of remuneration.

Another misconception is that, because fee-for-service is tied directly to patient services, there is no incentive for doctors to maintain continuing medical education (CME) or other quality improvement (QI) activities. However, QI can be incorporated into fee-for-service remuneration2 — for example, practice incentive payments are, in reality, fee-for-service payments related to QI. In any case, regulators are stepping into the quality field — CME is mandatory in order to maintain registration, and practice accreditation is spreading through all forms of medicine. Even if, in the past, fee-for-service meant you could theoretically ignore QI and CME, that era has gone.

The area for which fee-for-service is not an appropriate funding model is research and teaching. Research work should be salaried. Likewise, remuneration for teaching should be time based, or if a doctor wishes to do it for nothing, so much the better. The fee-for-service model should have no impact on teaching and research.

It might be argued that governments and other employers are ideologically opposed to fee-for-service, but what they are opposed to is uncapped, uncontrolled expenses, and to paying doctors remuneration deemed to be “excessive”. Most public-system fee-for-service schemes that have been stopped were uncapped and consequently led to budget blowouts, and were discontinued for that reason. In fact, governments are rushing headlong into fee-for-service remuneration at the macroscopic level in health, as shown in the establishment of the Independent Hospital Pricing Authority;3 it is just that it is called “activity-based funding”. Block funding (the equivalent of a “salary” model of funding) is on the way out because fee-for-service is better for all parties.

In summary, I believe that fee-for-service remuneration encourages productivity, is more transparent and provides better accountability for all parties than a salary-based method of remuneration.