Monthly Archives: June 2017

Provincial governments asking for the wrong thing from physicians

 

Currently labeled by the federal Minister as “mediocre”, healthcare in Canada should be producing world-leading rather than sub-standard health outcomes. To achieve this provincial governments have to do much more than focus on physicians’ pay and reining in cost increases. They do have to hold the line on costs but they also have to enlist all providers, physicians especially, in a joint endeavour to transform our healthcare system so that it achieves better outcomes and does more than it does now to optimize the health of Canadians.

In 2014, the latest year for which the Canadian Institute for Health Information has complete data, physicians’ pay accounted for 15.3 percent of health care costs. That share is little changed since the late 1980s although it has risen in recent years due to increases in the number of physicians. Compensation per physician did not change in 2014-15 and over the previous 5 years increased at almost the same rate as the CPI, meaning the real income of physicians has not increased in recent years. Physicians’ pay does account for a large share of the total but it has not been a principal driver of healthcare cost increases.

The problem with physician compensation is not how much it costs or its rate of increase but rather how it’s determined. A pay system should focus on outcomes and provide incentives to achieve them – healthy people. In the fee-for-service model, compensation is based on inputs that reward doing lots of consultations and tests whether or not they are the most appropriate form of care. On the other hand, they discourage physicians from sharing their responsibilities with nurse practitioners and other providers or referring patients to where they can be closely monitored against evidence-based standards, a heart failure or diabetic clinic for example, and their medications adjusted to prevent the recurrence of symptoms and the need for treatment.

Fee-for-service accounts for almost three-quarters of physician compensation, a share that has not changed much since 2008. The remaining quarter constitutes alternative pay plans, salaries, and capitation whereby physicians receive monthly payments for the number of patients rostered with them. In most cases alternative pay plans are combined with partial fee-for-service payments, and are rarely tied to health outcomes and therefore offer little or no transformative advantage. Indeed, it is a fundamental problem in Canada in that there is little capacity anywhere to measure health outcomes.

It is inevitable that conflicts arise when dealing with a flawed payment structure. This is perhaps nowhere illustrated more graphically than in Ontario where physicians have not had a contract in 3 years. In the meantime, the government has applied a unilateral, across-the-board fee cut, physicians have rejected a proposed contract recommended by the Ontario Medical Association, and now there are suggestions of job action. The across-the-board cut was inappropriate and could perhaps have been averted had the OMA been open for changes in relative pay levels as was the case in Alberta where the Medical Association input into how a cut in fees should be configured. The negotiated fee schedule gives undue benefit to specialties in which technological changes have enabled some procedures to be done much more easily and quickly while other physicians have struggled to preserve appropriate incomes. These issues have distracted everyone from the need for transformative reform of healthcare. The public interest is badly served.

What’s to be done? First, governments should clarify they are not trying to take money away from physicians as a group and physicians’ associations do need to negotiate adjustments to fees to reflect technological and other changes. Second, governments should build the infrastructure to measure and monitor health outcomes so they can be used as the basis for incentives in a new pay structure. Third, that pay structure should be geared toward encouraging treatment protocols that promote the achievement of healthy outcomes. Fourth, physicians and other providers should be fully engaged in the transformation of healthcare in Canada. At present many physicians know that the payment system draws them into unproductive uses of their time and undermines the quality of care they want to provide. As partners in transformative change they would see their role in a bigger picture – the health of Canadians – and their creativity would be unleased.

The current battles between governments and physicians are unproductive distractions from achievement of the larger goal of healthy Canadians.


Authored by members of the Queen’s Health Policy Council:

Don Drummond
Chris Simpson
Duncan G. Sinclair
David Walker
Ruth Wilson

The fiscal imperative of health care reform

 

Federal Health Minister Philpott displayed unusual candour when she said recently that Canada spends more per capita on healthcare than many other countries but gets middle-of-the-road results. Her “mediocre” label on Canadian healthcare could also have included “inefficient”. That should have ignited a discussion among federal-provincial politicians and health authorities on how to increase efficiency and raise the quality of healthcare while restraining spending growth. Instead, Canadians have witnessed the tired old fight over how much should be spent on what and who should spend it.

If not for the sake of quality and efficiency, we will see reform! The fiscal imperative will see to that. The federal government is insulating itself from the worst of healthcare’s fiscal squeeze; that will be borne by the provinces, especially those with older populations where health spending will grow faster and revenues slower. The federal government can and should play a supporting role, but much of the action will have to come from provinces and territories.

With healthcare spending rising at an annual pace of only 2.8 per cent over the past 6 years, it might seem that the fiscal challenge has been licked. That conclusion is premature and likely incorrect.

First, remember the 1990s where spending was restrained for a while only to explode subsequently? Second, a disproportionate share of the current restraint has resulted from deferral of capital spending, a future liability. Third, in the period 2011 through 2014 drug costs were stable, in part because of government efforts to reduce costs, especially on generics. That permanently lowered prices but the effect has waned. This was also a period when a number of expensive drugs came off patent and few new ones came to market. Drug costs can turn quickly. In 2015 the cost of public drug programs soared 9.2 per cent, driven by the cost of new drugs, almost half of which are used to treat one disease, hepatitis C.

A fourth reason why restraint is unlikely to endure is that for the most part it was a result of squeezing budgets; that can only continue for so long. Therein lies the fifth reason why the current restraint will not likely endure. Without proper measures of outcomes and the quality of healthcare, with on-going spending restraint governments are entering dangerous territory. Budget squeezing may compromise quality but with few canaries in the mine, this and the decline of beneficial outcomes might only become apparent as a crisis. That too could be reminiscent of the late 1990s when perceptions of increased wait times, at a time when wait times were hardly measured, was one factor that brought spending restraint to an end and ushered in an extended period of rapid growth in spending.

Implicit in the arguments Premiers have been making for more federal money is an expectation that healthcare spending will grow at an average annual pace of 5.2 per cent over the longer-term. This would far exceed the pace of provincial nominal GDP and revenue growth, which on average are expected to increase around 3 ½ per cent annum over the next 10 and 20 years according to a project done for the Council of the Federation in 2015 by the Centre for the Study of Living Standards. The result would be some combination of extreme crowding out of other government spending, persistent tax increases and rising provincial deficits and debt.

Keeping health care spending growth to 5.2 per cent per annum would require some ongoing element of reform or restraint. Most projections of cost increases under the “status quo” start with the core of 1 per cent growth in population and a 2 per cent increase in inflation. Add to that 1 percentage point for population ageing, a similar amount for the fact inflation tends to be higher in the health sector than the general economy, and at least another 1 percentage point from the trend rise in the intensity of healthcare use which, given the development of precision medicine may be a serious under-estimate, and you have at least 6 per cent growth per year. If provincial revenues grow at 3 ½ per cent and budgets are to be balanced, the other half of provincial spending, everything other than health, including education, could not grow more than 1 per cent per annum, a decline of 2 per cent each year on a real, per capita basis. That is neither desirable nor likely feasible.

Something will have to give, hopefully not health outcomes and the quality of care. The result will have to be an improvement in the efficiency with which money is spent. The fiscal imperative for reform will be particularly intense in the provinces with older populations, like New Brunswick with its largest share of seniors. They will face both greater pressure on cost growth and slower government revenues. The C.D. Howe Institute projects that health care spending could rise from the current 10 per cent of New Brunswick’s GDP to more than 20 per cent over the next 50 years. New Brunswick’s revenues will likely only rise 2 ½ per cent per annum compared to a provincial average of 3 ½ per cent. These desperate fiscal realities may explain why New Brunswick, Nova Scotia and Newfoundland and Labrador have made health care funding agreements with the federal government to lock down one element of the reforms they will have to introduce.

The coming healthcare reform will be driven by bean counting. To ensure the exercise goes beyond that, one of the first elements of reform will have to be good measures of outcomes, quality of care, and of efficiency. Then progress in Canadian health care can be measured in more than dollars.


Authored by members of the Queen’s Health Policy Council:

Don Drummond
Chris Simpson
Duncan G. Sinclair
David Walker
Ruth Wilson

Now for a Useful Federal-Provincial Discussion on Healthcare

 

Canadians tuned out the recent federal-provincial meetings on healthcare, dismissing them as just another spat over money. Instead of a national agreement, the process led to bilateral agreements with some provinces and suggestions that the discussion needs to move to the First Ministers’ table. Without a fundamentally different approach, however, Canadians won’t be any better served. Discussions must go beyond discussing funding healthcare and focus on how to improve a (non)system the federal Health Minister has correctly labelled “mediocre”.

To get beyond the money issue the federal government needs to sweeten its offer to provinces and territories. It has offered to increase the Canada Health Transfer 3.5% per year but let the growth rate floor sit at 3%. Premiers have somewhat arbitrarily landed on a demand of 5.2% in annual growth rate. In 10 years, the difference in federal funding between 3 and 5.2% growth is $11.4 billion. The federal add-ons offered for mental health, home care, pharmaceutical drugs and innovation would close that gap by a bit over $1 billion. A great deal is at stake fiscally.

Why are the federal and provincial perspectives on funding so different? The federal government has noted that since 2011 total healthcare spending in Canada has grown slightly less than 3% per annum on average and implicitly argues that what worked for the past should work for the future. The Premiers know the recent past is not sustainable because the slow growth rates were accomplished in large measure by deferring capital spending and squeezing rather than reforming budgets.   They look back to the decade after the 1990s squeeze when healthcare spending growth rebounded to an average of 7.4% per annum and forward, mindful that under the status quo, demographic and other pressures will lead to spending increases in healthcare of at least 6% a year.

Goldilocks would judge the previous 6% per annum increases in federal transfers too hot and the proferred 3% too cold even when warmed to 3.5%. Total healthcare spending will likely increase at an annual average pace between 4 and 5% over the next 10 years. Achieving this outcome will require considerable transformative reform on the part of Governments, health authorities, and providers to create efficiency gains, especially as they must strive simultaneously for quality improvements.

In this environment, the federal Government could close off the money discussion by offering to keep the transfer growth rate rule tied to GDP, but raise the minimum growth rate to 4% per year. In light of the long-term fiscal projections just released by Finance Canada, this would increase the envisioned federal deficits or spending would need to be trimmed elsewhere. In brief, the federal government would face a milder dose of the same fiscal disease the provinces and territories have caught. There is nothing necessarily untoward in this; Canadians always indicate health is their number one interest and concern and they deserve better than “mediocre”.

With the money issue out of the way, the discussion could finally turn to the more productive one of how to improve the quality and efficiency of healthcare, to make it fiscally sustainable and of better value to Canadians. But those discussions must be held in an appropriate institutional setting, one in which the federal government is neither host nor cast in the role of “demandeur”. This setting could be the Council of the Federation with the federal government invited. The talks would be billed as “national” rather than being divided along federal and provincial lines. Each entity could contribute much on their own.

Buried beneath the recent federal offer is reference to further support for electronic health records (EHR) and innovation. Canada is woefully behind other countries. A national effort could provide the scale and portability to on-going provincial EHR initiatives. In a similar vein, the federal government could support the creation of national measures of health and healthcare outcomes and how they could be monitored, possibly by the Canadian Institute for Health Information.

Each province and territory could contemplate their own transformative reforms but all could benefit from collective discussion in critical areas like team approaches in primary care and expanding its compass to include home and community care, how to shift hospital and longer-term care to home care, expanding the scope of practice of several health professions, access to community mental health supports, and developing and monitoring the use of appropriate clinical practice guidelines. These are just a few of the real contemporary issues Canadians would expect their politicians to be discussing. Then it might seem like their governments were working in the interests of the people of Canada instead of squabbling over the beans.


 

Authored by members of the Queen’s Health Policy Council:

Don Drummond
Chris Simpson
Duncan G. Sinclair
David Walker
Ruth Wilson