The Impact of Physician Payment Methods on Raising the Efficiency of the Healthcare System

Abstract

This article reviews policies on physician payment methods that Organisation for Economic Cooperation and Development (OECD) countries have implemented to promote an efficient deployment of physicians. Countries' experiences show that payment by fee-for-service, capitation and salary influences physician activity levels and productivity. However, the impact of these simple payment methods is complex and may be diluted by clinical, demographic, ethical and organisational factors. Policies that have attempted to curb health expenditure by controlling fee levels have sometimes been eroded by physicians increasing the volume of service supply, or providing services that attract higher fees. Flexible blended payment methods based on the combination of a fixed component, through either capitation or salary, and a variable component, through fee-for-service, may produce a desirable mix of incentives. Integrating such blended payment methods with mechanisms to monitor physician activity may offer potential success.