Perspectives
Health services administration
Volume 195 - Issue 5

Should more Australian doctors be salaried than paid by fee-for-service? — Yes

Author:  Brian B Peat

Med J Aust 2011; 195 (5): 256. || doi: 10.5694/mja11.10898
Published online: 5 September 2011
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Obstetrician Brian Peat believes salaried doctors are favourably placed to provide best-practice care

That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity.

George Bernard Shaw, The doctor’s dilemma (1906)1

A number of studies have consistently shown that fee-for-service payment is associated with an increase in the number of diagnostic tests and procedures performed when compared with payment by salary or capitation.2 It is more difficult to show that this is a bad thing; however, as imperfect tests are applied to populations of lower prevalence for a condition, we would expect more false-positive results. Also, since all procedures carry complications, we would expect there to be more complications.3 Even if salaried doctors, on the other hand, may be at risk of underservicing, this is addressed by peer review and outcome audit.

Salaried payments have the advantage of lower administration costs. A substantial cost of the fee-for-service system is in recording individual items and arranging payments. This may be relatively simple when the item of service is a simple consultation, but more difficult when the items are complex. A portion of the cost is also in preventing fraud, rorting of the system and simple overservicing. In private practice, overheads, including rent and clerical staff, are substantial and may be important in giving a competitive edge in the pursuit of patients.4

Overall, the cost of a fee-for-service system looks greater than a salaried workforce; however, this is not necessarily so. It depends on supply and demand. General practitioners are in relatively high supply and receive low fee-for-service payments. Competition means they can only charge a modest patient copayment. Specialists, on the other hand, are in low supply and can generally charge large copayments. Salaried specialists, being currently in low supply, are able to negotiate relatively high salaries with money for holidays, professional development and superannuation.

Salaried doctors have no conflict of interest in the doctor–patient relationship, which engenders a patient’s trust, and reduces anxiety for the practitioner. They are in a better position to consider all aspects of the patient’s health, and to appropriately delegate tasks knowing they will not be out of pocket. This is particularly an issue as we see more lifestyle-related, chronic illness that does not fit into the short-consultation model. Fee-for-service items created for the management of chronic illness are an improvement. However, they can still distort best practice if seen merely as dollar amounts requiring expenditure. In a practice where patients with chronic illnesses are treated, a doctor may be required to take on the role of team leader, a difficult role to provide an item of service for; however, it is one well suited to a salary package.5

A list of items of service that are funded by a third-party payer may, in practice, limit the doctor to offering only those options — otherwise, the patient may feel pressured to accept and cover the full cost of the service. If it were possible to provide a fee for service that was linked to an improvement in health, it may be difficult to attribute any improvement to the actions of the doctor. Unfortunately, in many areas of medicine, especially surgical procedures, good evidence from clinical trials that links health interventions to better health is lacking. Without such evidence, doctors may be likely to choose to perform the better-remunerated procedures.

How does the method of payment affect relationships between doctors? When I started as a staff specialist I was told by a visiting medical specialist colleague that I was “a coat not a suit”. Nevertheless, I think if we perform our respective roles the relationships should not have problems. However, beware of salaried doctors undercutting doctors paid through fee-for-service arrangements at the local private hospital! Bitter fighting can break out between doctors if one craft group thinks it is getting a worse deal than another.

It would be simple to change the current balance of numbers of salaried doctors and those receiving fee-for-service payments. Simply roll back some of the more outrageous subsidies to private practice, such as the thirty per cent health insurance rebate and the safety net, and direct that money to providing more salaried positions. Private hospitals face the difficulty of doctors acting in concert to resist moves by the hospital or the health insurers to lower costs by employing salaried doctors. Perhaps, as the medical workforce increases in number over the next few years, we will see a relative oversupply in some areas break this deadlock.

Finally, in talking to our trainees and medical students, I have found there is enthusiasm for a salaried payment system. They do not see medicine as a business in which a craftsperson hawks their wares among the populace for a fee. Rather, they see themselves as providing a social service.

Author

  • Brian B Peat MB BS, FRANZCOG1
  • 1. Women’s and Children’s Hospital, Adelaide, SA.

Correspondence: brian.peat@health.sa.gov.au

Competing interests

I am a full-time salaried hospital doctor.

References

View this article on Wiley Online Library