Kerry Waddell - Headshot

Kerry is a third year student at the University of Western Ontario studying Health Sciences and pursuing a career in Health Policy.

By Kerry Waddell

Since the introduction of medicare in Canada in the 1960s, doctors have been paid on a fee-for-service basis. Each time a doctor sees a patient, he or she bills the provincial health care system at a set rate per service provided. While provincial governments have experimented with funding alternatives, the foundation for payment has remained relatively stagnant. Doctors’ services are the second largest expenditure in the health care system, costing $24.3 billion in 2010 (Picard, 2012), and they continue to rise.

The problem with fee for service in a health care system trying to constrain costs is that it is open ended (Picard, 2012). Physicians are able to see as many patients as they can regardless of whether those patients could be more efficiently or effectively treated by alternate caregivers. Rewarding physicians for the quantity of service they provide rather than its quality encourages overuse of acute health care and becomes a drain on health care dollars. When the health care system was designed, Canadians would seek medical intervention for sporadic acute episodes. During this time the fee for service model appeared to fit the public’s needs from the system. However, with our aging population, there is now a greater focus on chronic care, which is best funded through an alternative to fee for service.

A change of funding models is essential for Canadians to continue to afford a health care system that provides universal coverage. The idea of a pay-for-quality approach for compensating physicians has recently emerged, but the difficulty in defining measurable standards of quality care limits its potential.

One alternative is to shift to a capitation system in which physicians are paid an annual lump sum per patient for providing care to a roster of patients. One of the shortcomings of this system is that it lacks an accountability mechanism for ensuring that patients receive care that improves their health (Greive, Sehkon, Bloom _ Wu, 2008). A better option is a mixed method funding model of 70 percent capitation, 20 percent tied to best practice and quality indicators, and 10 percent for integrating community services into physician practice. Furthermore, payment models should include special fees or premiums paid to physicians for providing priority services such as care of seniors, enrollment of new patients, and after-hours care. This model has the potential to serve our health realities while maintaining the values that Canadians support.

This funding model motivates physicians to keep their patients healthy, as it allows them to spend more time with each patient. Instead of paying physicians to treat a patient’s illness, doctors would be paid to keep their patients well. This shift in philosophy would normalize health care in Canada and help to create a more accessible system. By relating quality outcomes and best practice guides to their pay, physicians will be forced to make system decisions about where to send their patients. These decisions will promote competition and increase quality within health care.

Over the past decade, a shortage of family physicians has placed an increased burden on general practitioners to expand their practice. However, family and other commitments mean many of these physicians are uninterested in working the cumulative number of hours that physicians had previously undertaken. A fee for service model drives doctors to work these hours but changing to a capitation model and related incentives can help ease this transition in physician demographics. Furthermore, physicians would now be rewarded through additional incentives for working late or odd hours, increasing the chances of keeping physicians’ offices open.

A mixed method model offers benefits for the provincial and federal health ministries by cutting costs and increasing efficiencies. The new model would decrease visits to general practitioners by allowing multiple concerns to be addressed during one visit. By tying incentives to the integration of community resources, doctors can transfer some of their services to other health care organizations because they are no longer being paid for each service. This leads to a more efficient use of government money in the community, a reduction in the excessive workload of physicians and an increase in inter-professional cooperation. This cooperation is fostered by eliminating the incentive for physicians to perform services that could be provided by nurses or community care workers, and integrating these professions into their practices. A mixed method model rewards physicians coordinating and overseeing a patient’s plan of care. Furthermore, as physicians will be paid an annual per patient lump sum, there would be less paperwork, freeing time for health care managers and reducing the government’s administration costs.

As patients are being rushed through to maximize profits, a fee for service model emphasizes quantity and limits the relationship with the health care provider (CMA, 2009). A mixed method model will address this issue as physicians are no longer billed for time, increasing the opportunity for more productive patient-physician communication. As physician incentives are dependent on keeping their patients healthy, this will encourage them to create trusting and open relationships with their patients and will encourage better health practices. With additional incentives based on providing senior and chronic care, these two issues will be better addressed by primary physicians, helping to alleviate unnecessary hospital admissions.

By altering the method of payment for physicians we are able to offset current deficiencies in Canadian care and transition them to meet the future visions of the healthcare system. The current fee for service model constricts the system’s ability to adapt to changes in public health needs and instead reduces many patients’ illnesses to values. Changing the model of physician remuneration is unlikely to reinvent Canadian care, but it is a necessary step in transitioning to more accessible and inclusive care at a reduced cost.



Canadian Medical Association Journal (2009, May 25). Health Care Reform Option? Fee Capitation Vs. Fee-for-service Primary Care. ScienceDaily. Retrieved November 12, 2012, from­/releases/2009/05/090525173432.htm

Grieve, H., Sehkon, J., Bloom, J., _ Wu, T. (2008). Evaluating health care programs by combining costs with quality of life measures: Comparing fee for service and capitation. Health Services Research, 43(4), 1204-22. Retrieved from;jsessionid=2E7F7101867F8D0921AF45E12F18A85B.d02t02?deniedAccessCustomisedMessage=_userIsAuthenticated=false

Gulli, C. H. (2007, 09 17). Where have all the men gone?. Macleans, Retrieved from

Picard, A. (2012, 09 10). It’s time to find a cure for the problem of how md’s are paid. Globe and mail. Retrieved from


This article is published under the Bright Ideas project, a joint Ivey International Centre for Health Innovation and initiative aimed at promoting ideas of future leaders and generating dialogue.  Over the course of the next three months, Bright Ideas will profile blogs from Ivey health stream students. 

The views expressed in these blogs are the opinions of their authors, and do not necessarily reflect those of the International Centre for Health Innovation or