'Risk-sharing' at centre of Alberta's modified doctor pay deal

Physician compensation has been rising by seven to nine per cent each year. Health Minister Sarah Hoffman said an amended deal with the AMA should put the increases in the range of two to five per cent.

Amendments to final 18 months of seven-year deal expected to save $500 million

Health Minister Sarah Hoffman says the amended physician compensation bill should limit increases to two to five per cent a year. (CBC)

Amendments to the Alberta physician compensation agreement have financial implications if the amount set aside to pay doctors is exceeded in the next two years.

The deal, approved by 74 per cent of physicians who took part in last month's ratification vote, modifies the seven-year agreement, which expires on March 31, 2018.

"This deal is very significant in that we are introducing a risk-sharing model in terms of how doctors are paid," said Dr. Padraic Carr, president of the Alberta Medical Association.

Physician compensation has been rising by seven to nine per cent each year. Health Minister Sarah Hoffman said the new measures should put the increases in the range of two to five per cent.

Hoffman said AMA and health officials worked together to bring down costs while taking into account Alberta's growing health-care needs. 

"I think we've really struck that right balance and I know it's not every day that you have an amending agreement," she said.

The financial penalties for doctors are calculated by a complicated formula. 

An "available amount" of compensation will be determined using the actual payout amount from 2015-16, the impact of new physicians in the system, and additional costs from extraordinary events like a disease outbreak.

'Blended capitation'

If actual billings exceed that amount, doctors will give up the equivalent amount in retention benefits they are paid each year in 2016-17.

The amount ranges from $5,184 to $12,852 per physician, which totals $73 million overall. 

If costs exceed the ceiling in the following year, physicians will give up part of their cost-of-living adjustment in addition to the retention benefit to make up the difference. 

The agreement is estimated to save $500 million over the next two years.

A peer review committee made up of physicians and officials from Alberta Health will look at billing patterns and advise physicians on how to avoid excessive costs, a measure that could save as much as $35 million in the 2017/18 fiscal year.

A physician resource committee will be set up to decide how many doctors the province needs and where they should go.

Physicians will work with the government to eliminate or reduce procedures in the fee schedule that provide little value to patients.

The agreement also allows doctors to voluntarily test a payment model known as "blended capitation," where doctors are paid per registered patient in their practice instead of per procedure.

This pay model makes it advantageous for doctors to spend more time with patients, with an aim at making them healthier, which reduces costs in the long-term.

The model still allows doctors to bill for each service performed, if they treat someone who is not registered with their clinic.

The Alberta government paid physicians $4.06 billion in compensation and benefits last year.