Download Capitation

Paying the Physician
Dr. Shahram Yazdani
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The principal methods of provider
payment
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2.
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Salary
Capitation
Fee-for-service
Case-based reimbursement
Dr. Shahram Yazdani
Salary
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The most common system of physician
remuneration
Physicians and other health care
personnel are paid a fixed amount for
predetermined hours of work.
The amount of salary does not depend on
the number of patient visits, number of
cases, severity of cases, etc.
Dr. Shahram Yazdani
Salary
Countries that follow a salary-based system for
remuneration of health care personnel
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Albania
Bulgaria
Croatia
Estonia
Finland
Greece
Lithuania
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Poland
Portugal
Romania
Slovenia
Sweden
Turkey
Dr. Shahram Yazdani
Salary
Incentives
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Salary-based remuneration systems
provide almost no financial incentives to
physicians for longer working hours, or
seeing more patients, or spending more
time and effort with each patient.
Dr. Shahram Yazdani
Salary
Potential Impact on Patients
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Salary-based remuneration system is
likely to have both beneficial and adverse
effects on the nature, quantity and quality
of care that a patient receives.
Dr. Shahram Yazdani
Salary
Beneficial Effects:
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2.
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Physicians have no incentives to deny access
to any patient. Since the compensation
package is decided prospectively and is fixed,
physicians have no reason to deny treatment to
any patient.
Physicians have no incentive to provide
excessive treatment, since the extent or type of
treatment is not likely to alter their
compensation in anyway.
Dr. Shahram Yazdani
Salary
Adverse Effects:
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2.
3.
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Patients may not receive adequate attention
from the physician, which may adversely affect
patient satisfaction.
Access to care may be somewhat limited by
the limited time that the physician may allocate
to his duties.
Patients may potentially receive less than
optimal care, and both quality and quantity of
care may be compromised.
Dr. Shahram Yazdani
Salary
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In the absence of incentives, performance
becomes an ‘individual’ function that is not
guided by ‘institutional' considerations.
Dr. Shahram Yazdani
Salary
Administration
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Probably the biggest advantage in the
salary-based remuneration system lies in
the ease and simplicity of administration.
There are no patient bills to be processed,
no patient lists to be prepared, and no
case-based groups to be formed.
Dr. Shahram Yazdani
Salary
Administration
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Physicians are treated like other employees of
the administration, and their service records and
payrolls maintained in the same manner.
Their promotions are usually time-based, like
rest of the staff.
Personnel costs are known in advance, and can
be built into any planning exercise of the health
department.
Dr. Shahram Yazdani
Salary
Measures to mitigate adverse effects of a
salary-based remuneration system:
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Governments/payers can offer non-pecuniary
incentives to physicians,like awards, favorable
posting, status-related designations etc.
Even pecuniary benefits can be built into a
salary system. One example of such incentives
are performance-related financial bonuses.
Governments/payers can set in place a system
of quality control to monitor and maintain quality
levels.
Governments/payers can improve monitoring to
ensure greater availability of physician time.
Dr. Shahram Yazdani
Salary
salary-based remuneration system
Characteristics
High
Limited
Physicians have appropriate incentives to provide optimal
quantity of care
×
Physicians have appropriate incentives to provide high quality
of care
×
×
Physicians have appropriate incentives to keep costs down
Patients are not denied access
×
×
Patients can exercise choice
The payment system is easy to administer
The payment system requires a sophisticated information and
cost accounting system
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Low
×
×
Dr. Shahram Yazdani
Capitation
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Physicians and other providers receive a fee for
each enrollee to cover a specified level of health
care and offer a defined package of services, for
a specified time period.
Physicians under capitation are usually
responsible for all costs of providing the full
package of treatment, including diagnostic tests,
specialist consultations, and some minor,
ambulatory surgery.
Dr. Shahram Yazdani
Capitation
Geographic capitation
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The physician receives capitation-based
block funds to provide health care to the
entire population in a given geographic
area.
Dr. Shahram Yazdani
Capitation
List capitation
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The physician receives per-enrollee
capitated funds to provide health care to
all individual enrollees on a list.
Dr. Shahram Yazdani
Capitation
Package of services
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The defined package of services can include
many different types of services.
Packages of services that include primary and
family care are more common, since the cost of
primary and family care is usually known with a
high degree of certainty and the range of
possible procedures is rather well defined and
limited.
Dr. Shahram Yazdani
Capitation
Capitation formula
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The capitation formula is usually based on
variables on which reliable information is
available and easy to get.
Dr. Shahram Yazdani
Variables commonly used in
capitation formula
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Number of individuals
Age
Gender
Marital status
Socioeconomic
conditions
Urbanization
Mortality and
morbidity
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Capitation
Number of individuals
disabled
Number of individuals
under rehabilitation
Number of individuals
with substance abuse
problems
Epidemiological
indices
Dr. Shahram Yazdani
Capitation
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Physicians thus receive a fixed amount
per enrollee, and after meeting all costs of
treatment, retain the surplus as their
income.
Dr. Shahram Yazdani
Capitation
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In some countries the principle of
capitation is used to define provincial and
district health care budgets.
Fund allocation across different
administrative areas follows use of
capitation formulas that typically include
demographic and epidemiological indices.
Dr. Shahram Yazdani
Capitation
Countries that follow a capitation-based system
for remuneration of health care personnel
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Hungary
Ireland
Italy
Holland
Croatia (private sector)
Dr. Shahram Yazdani
Capitation
Example1
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The simplest capitation formula reimburses
physicians according to the number of patients
enrolled.
Consider the case of Dr. A who has 2,836
persons enrolled on her list. The capitation
formula used in her reimburses 5.50 $ per
enrollee per month.
Calculation of compensation for Dr. A
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Basic capitation remuneration:
2,836*5.50 = 15,598 $ per month.
Dr. Shahram Yazdani
Capitation
Example2
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Dr. A has 2,500 persons on his list, of whom 1,500
are female and 1,000 male. Further, 500 persons are
under the age of six, 1,500 are between 6 and 65,
and 500 are above the age of 65. Dr. A has 16 years
of experience.
Dr. B has less than 1 year of working experience.
She has 3,000 persons on her list, of whom 2,000
are female and 1,000 are male. Further, 400 persons
are under the age of six, 2,000 are between the ages
of 6 and 65, and the remaining 600 over 65.
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Dr. Shahram Yazdani
Capitation
Example2 (ctd.)
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The monthly capitation formula awards 1 point per
enrollee for the first 2,500 enrollees, and 0.5 points
per enrollee thereafter.
Enrollees below the age of 6 and above the age of
65 are awarded an additional 0.5 point each.
Female enrollees are awarded an additional 0.1
points.
Physicians with more than 10 years of experience
are awarded an additional 2% for every additional
year of experience.
Each point is worth 1$
Dr. Shahram Yazdani
Capitation
Example2 (ctd.)
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Calculation of compensation for Dr. A:
Basic capitation fee: 2500*1 = 2500
Age-specific additions: (500*0.5+500*0.5) = 500
Gender-specific additions: 1500*0.1 = 150
Total: = 3150
Experience bonus: (16-10)*0.02=12% = 378
Grand total = 3528
Dr. Shahram Yazdani
Capitation
Example2 (ctd.)
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Calculation of compensation for Dr. B:
Basic capitation fee: 2500*1+500*0.5 = 2750
Age-specific additions: (400*0.5+600*0.5) = 500
Gender-specific additions: 2000*0.1 = 200
Total: = 3450
Experience bonus: nil = 0
Grand total = 3450
Dr. Shahram Yazdani
Capitation
Incentives
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Capitation provides a number of financial
and professional incentives to the
physicians. Some of these are positive and
beneficial incentives while others are
adverse.
Dr. Shahram Yazdani
Capitation
Beneficial Incentives:
1.
2.
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Physicians have strong incentives to minimize
financial costs. Since the compensation package
is decided prospectively, physicians can
maximize the difference between their earnings
and costs by simply keeping costs down.
Physicians have strong incentives to make
efficient the whole episode of care. Preventive
medicine that is likely to save expensive
treatment later on is thus favored.
Dr. Shahram Yazdani
Capitation
Adverse Incentives:
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2.
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Physicians have an incentive to enroll
relatively healthy patients, who are likely to
require less frequent and less costly
treatment.
Physicians have an incentive to limit the
quantity of services provided to the patient,
as this would reduce their operating costs.
Dr. Shahram Yazdani
Capitation
Adverse Incentives:
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4.
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Physicians have an incentive to save on
high quality treatment, since such
treatment is usually expensive.
Physicians have an incentive to refer
patients to next higher levels of care, such
as to specialists and hospitals, so as to
save own operating costs
Dr. Shahram Yazdani
Capitation
Potential Impact on Patients
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A capitation-based remuneration system is
likely to have both beneficial and adverse
effects on the nature, quantity and quality
of care that a patient receives.
Dr. Shahram Yazdani
Capitation
Beneficial Effects:
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In many capitation-based settings, the patient
receives most kinds of care from the same
physician. Besides being convenient, it also
strengthens the relationship between the
physician and the patient.
The patient is likely to receive only those
services and interventions that are necessary.
Over-treatment and unnecessary interventions
are unlikely in this system.
Dr. Shahram Yazdani
Capitation
Adverse Effects:
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Patients requiring many and complex treatments
may be excluded from the enrollment lists of
physicians receiving capitation-based
remuneration.
Patients may potentially receive less than optimal
care, since the physician has an incentive to
keep costs down. Both quality and quantity of
care may thus be compromised.
In many capitation-based settings, it is not easy
and straightforward for the patient to change her
physician.
Dr. Shahram Yazdani
Capitation
Administration
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The capitation system requires little
administration, as there are no patient bills to be
processed.
Once the lists are finalized, computing an
individual physician's reimbursement does not
require many calculations.
Health expenditures under this system are
entirely predictable, and there is good control
over costs.
Dr. Shahram Yazdani
Capitation
Administration
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However, governments and payers may incur
high administrative costs in preparing and
maintaining the list of enrollees.
High administrative costs are also associated
with negotiating contracts, setting capitation rates
and formulas, and monitoring physicians to
ensure that appropriate levels and quality of care
are being provided to the patients.
Dr. Shahram Yazdani
Capitation
Measures to mitigated the adverse
incentives facing the physicians:
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2.
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Governments/payers can mandate open
enrollment, such as across a given geographical
or administrative area.
This prevents the physicians from selecting the
relatively healthy patients into their pool.
At the same time, the potential risk to the
physicians is also minimized, since spreading the
base from which to select enrollees reduces the
chances of relatively unhealthy members
dominating the pool.
Dr. Shahram Yazdani
Capitation
Measures to mitigated the adverse
incentives facing the physicians:
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Governments/payers can encourage
competition among physicians. If the
patients have the choice to periodically
select their physicians, the potentially
adverse consequences for quantity and
quality of care can be overcome.
Dr. Shahram Yazdani
Capitation
Measures to mitigated the adverse
incentives facing the physicians:
5.
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Governments/payers can define the package of
services to include many (not necessarily all)
such services that are usually provided at a next
higher level. Thus, if family care physicians are
required to provide diagnostic services as well,
there will be fewer incentives for the physician to
refer patients for additional tests. Similarly, if
visits to a specialist are covered by the physician
as part of the capitated services provided, there
will be fewer incentives to refer patients to
specialists.
Dr. Shahram Yazdani
Capitation
Measures to mitigated the adverse
incentives facing the physicians:
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Governments/payers should set in place a
system of quality control and monitoring so
as to mitigate the adverse incentive that
the physician faces of compromising on
quality.
Dr. Shahram Yazdani
Capitation
Capitation-based
remuneration system
Characteristics
High
Limited
Physicians have appropriate incentives to provide optimal
quantity of care
×
Physicians have appropriate incentives to provide high quality
of care
×
Physicians have appropriate incentives to keep costs down
×
Patients are not denied access
×
Patients can exercise choice
×
The payment system is easy to administer
The payment system requires a sophisticated information and
cost accounting system
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Low
×
×
Dr. Shahram Yazdani
Fee-for-Service
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Under this system the physician and other
workers are reimbursed according to the
number and type of different services
provided to the patient.
A specific price is set for each service,
which may be fixed or variable.
Dr. Shahram Yazdani
Fee-for-Service
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In the fixed system, the physician and the payer
agree to a schedule of rates at the beginning of
the year, and all bills within the agreed timeperiod are based on this schedule.
In the variable system there is no such
schedule, and the physicians and other
healthcare personnel charge the current usual
and customary fee.
Dr. Shahram Yazdani
Fee-for-Service
Countries that follow a Fee-for-Service system
for remuneration of health care personnel
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Germany (private
physicians and
dentists)
Belgium
Czech Republic
France
Switzerland
Ireland (private sector)
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Holland (private sector)
Bulgaria (private
sector)
Greece (private sector)
Slovenia (private
sector)
Turkey (private sector)
Dr. Shahram Yazdani
Fee-for-Service
Incentives for Physicians
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Fee-for-service provides a number of
financial and professional incentives to the
physician. Some of these incentives have
a beneficial impact while others have an
adverse impact.
Dr. Shahram Yazdani
Fee-for-Service
Beneficial Incentives:
1.
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Physicians have strong incentives to
increase both the production and quality
of health care. Thus, the physician is
likely to see more patients and provide
many services, which is likely to be
satisfying for most consumers.
Dr. Shahram Yazdani
Fee-for-Service
Adverse Incentives:
1.
2.
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Physicians have a strong financial incentive to
increase the volume of services, even to levels
higher than required. This is likely to increase
total spending on health care.
Physicians have a strong incentive to induce
demand. Consumers of health services tend to
base their decisions of health care needs on
the advice given by the providers. Since the
providers have an incentives to increase the
volume of services, there may be a tendency
to oversupply and overuse services.
Dr. Shahram Yazdani
Fee-for-Service
Potential Impact on Patients
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Fee-for-service based remuneration
system is likely to have both beneficial
and adverse effects on the nature,
quantity and quality of care that a patient
receives.
Dr. Shahram Yazdani
Fee-for-Service
Beneficial Effects:
1.
2.
3.
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The patient is likely to receive optimal level
and quality of care, though there is always the
risk of over-treatment and unnecessary
interventions.
Patients requiring many and complex
treatments are not likely to be excluded from
receiving care.
It is relatively easy and straightforward for the
patient to choose and change physicians at
any point.
Dr. Shahram Yazdani
Fee-for-Service
Adverse Effects:
1.
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The biggest risk for the patient is that the
physician may prescribe excessive
treatment and interventions. This
phenomenon, also known as “supplier
induced” demand, is observed to be
widespread in countries where physician
remuneration is based on fee-for-service.
Dr. Shahram Yazdani
Fee-for-Service
Administration
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Under the fee for service system,
reimbursement is made on the basis of
services actually provided.
Physicians keep a detailed record of quantity
and types of services provided, and send this
information periodically to the government.
Each item of the bill is scrutinized at this level
before being cleared for payment. Thus, the
administrative costs of such a system are likely
to be high for both, the physicians as well as
the government.
Dr. Shahram Yazdani
Fee-for-Service
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Fee for service system is likely to
increase the production and the
productivity in the health care system,
but usually at a cost.
Experience in countries where this
system is popular has shown that rapid
increases in costs is a common feature.
Dr. Shahram Yazdani
Fee-for-Service
Measures to mitigated the adverse
incentives facing the physicians:
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Governments/payers can increase control over
utilization of health care.However, this involves
high monitoring costs.
Governments/payers can introduce cost sharing
through a system of co-payments, that is,
requiring patients to pay some percentage of the
total fees
Governments/payers can introduce upper limits
of reimbursement, thereby fixing a maximum
level of services that would be supported.
Dr. Shahram Yazdani
Fee-for-Service
remuneration system
Characteristics
Fee-for-Service
High
Physicians have appropriate incentives to provide optimal
quantity of care
×
Physicians have appropriate incentives to provide high quality
of care
×
Limited
×
Physicians have appropriate incentives to keep costs down
×
Patients are not denied access
Patients can exercise choice
×
×
The payment system is easy to administer
The payment system requires a sophisticated information and
cost accounting system
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Low
×
Dr. Shahram Yazdani
Case-Based Reimbursement
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Under the case-based reimbursement system
the physician and other medical personnel are
paid a predetermined amount that covers all
services per case or episode of illness.
The amount paid per case is calculated on the
basis of expected procedures that follow
established or agreed treatment protocols.
Dr. Shahram Yazdani
Case-Based
Countries that follow a Case-Based system for
remuneration of health care personnel
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United States of America
Germany
Argentina
Brazil
Dr. Shahram Yazdani
Case-Based
Incentives for Physicians
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The case-based reimbursement system
provides a number of financial and
professional incentives to the physician.
Some of these incentives have a
beneficial impact while others have an
adverse impact.
Dr. Shahram Yazdani
Case-Based
Beneficial Incentives:
1.
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Physicians have a strong incentive to
contain costs per case. The physician is
paid according to the diagnosis of the
case and not according to the treatment
content. Thus, the physician can
maximize the difference between
earnings and costs by keeping down the
resource content of services.
Dr. Shahram Yazdani
Case-Based
Adverse Incentives:
1.
2.
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Physicians have an incentive to prefer patients at
the low-cost end of the diagnosis category. In such
cases the expected costs of treatment are less
than the expected return for that category.
Physicians have an incentive to reduce the
quantity and quality of services. Since earnings do
not depend on treatment but on diagnosis alone,
physicians can maximize return by minimizing the
resource content of services and keeping costs
down.
Dr. Shahram Yazdani
Case-Based
Potential Impact on Patients
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Case-based remuneration system is likely to
have both beneficial and adverse effects on
the nature, quantity and quality of care that
a patient receives.
Dr. Shahram Yazdani
Case-Based
Beneficial Effects:
1.
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The patient is likely to receive only those
services and interventions that are
necessary. Over-treatment and unnecessary
interventions are unlikely in this system.
Dr. Shahram Yazdani
Case-Based
Adverse Effects:
1.
2.
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Patients requiring many and complex treatments,
particularly those who are on the upper-cost end of
the diagnosis-related group, may face limited
access.
Patients may potentially receive less than optimal
care, since the physician has an incentive to keep
costs down. Both quality and quantity of care may
thus be compromised.
Dr. Shahram Yazdani
Case-Based
Administration
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The case-based reimbursement system
requires relatively costly management
information systems and cost accounting.
The biggest challenge is in preparing the
different categories of diagnosis.
Dr. Shahram Yazdani
Case-Based
Measures to mitigated the adverse
incentives facing the physicians:
1.
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The number of categories should be
“manageable”. There is no optimal
number of categories, and a lot depends
on the available management
information systems, accounting skills,
and general data transfer and
management capacity.
Dr. Shahram Yazdani
Case-Based
Measures to mitigated the adverse
incentives facing the physicians:
2.
3.
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Each category should be relatively
homogenous with respect to resource use so
that the incentive that the physician faces of
preferring patients at the low cost end of the
category are mitigated.
Effective monitoring and auditing systems are
critical to ensure that quality of care is not
compromised.
Dr. Shahram Yazdani
Case-Based
Case-Based
remuneration system
Characteristics
High
Limited
Physicians have appropriate incentives to provide optimal
quantity of care
×
Physicians have appropriate incentives to provide high quality
of care
×
Physicians have appropriate incentives to keep costs down
×
Patients are not denied access
×
Patients can exercise choice
×
The payment system is easy to administer
×
The payment system requires a sophisticated information and
cost accounting system
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Low
×
Dr. Shahram Yazdani
Mixed Systems
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In an effort to optimize efficiency, equity and
quality of care, many countries have
experimented with mixed systems of
remuneration.
These systems use more than one method of
payment in an attempt to draw on the best that
each method has to offer, and at the same time,
mitigate the worst of each.
Dr. Shahram Yazdani
Mixed Systems
Example
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A mixed system using both capitation and
fee-for-service remuneration methods
provides benefits of both the methods and
has the potential of mitigating the adverse
incentive the physicians have in a pure
capitation method of producing and
delivering less-than-optimal quantity of
care.
Dr. Shahram Yazdani
Mixed Systems
Example
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Combining salary and fee-for-service
introduces financial incentives for
physicians that are not available in a pure
salary system.
Dr. Shahram Yazdani
Examples of countries
with mixed systems
1.
Capitation, salary and fee-for-service:
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2.
Great Britain
Capitation, fee-for-service:
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Mixed Systems
Austria
Denmark
Iceland (excluding health
centers)
Poland
Dr. Shahram Yazdani
Examples of countries
with mixed systems
3.
Capitation, salary:
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4.
Iceland (health centers only)
Capitation, case-based:
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Israel
Spain
Salary, fee-for-service:
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5.
Mixed Systems
Norway
Dr. Shahram Yazdani
Thank You !
Any Question ?
72
Dr. Shahram Yazdani