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Physician Payment Incentives

Partner Institute: 
Canadian Policy Research Networks (CPRN), Ottawa
Survey no: 
(13) 2009
MacAdam, Margaret
Health Policy Issues: 
Remuneration / Payment
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no yes no no


A powerful approach to implementing health policy goals is to align physicians payment incentives to policy-related goals. The Canadian province of Ontario recently negotiated a revised physician services agreement with the Ontario Medical Association, which includes certain primary care reform incentives. This report summarizes the key features of the new agreement.

Purpose of health policy or idea

The Ontario government reimburses most medical care on a fee-for-service basis.  A fee-for-service physician payment system emphasizes volume over quality, and encourages episodic care instead of coordinated care across providers and over a period of time (Guterman et al, 2009).  In 1997, the Ontario Ministry of Health and Long-Term Care (MOHLTC) and the Ontario Medical Association (OMA) agreed to construct a joint OMA-MOHLTC model of primary care reform.  The agreement ended a few years of physician unhappiness with Ministry actions relative to their payment levels while recognizing the government's need to address increasing growth in utilization in an era of constrained financial resources.  An important feature of the agreement was to create a bilateral negotiating committee, the Physican Services Committee (PSC), which uses evidence to enhance the decisions made at the bargaining table.  Since then, the agreement has been revised several times.  As well, other provinces, such as British Columbia, have followed Onatrio's lead in creating Physicians Services Committees as the vehicle for negotiating physican payment levels.    

Physician payment incentives are powerful tools for shaping patient care, including what services patients will receive, as well as reflecting government priorities, a critical need in a publicly-funded single payer system such as Canada's.  Although the new agreement did not implement fundamental change in the basic fee-for service payment system, it advanced the Province's health reform agenda and established new building blocks which align physican payment to health goals.

The main features of the agreement that address the issues of the stakeholders are:

  • Non-inflation adjusted rate increases to base payments levels will total 12.25% over the four years.  Fee increases were the primary goal of  physicians.
  • The Government is increasing the bonus (by 30%) for enrolling unattached patients and expects physicians to ensure the stability of current patient rosters.
  • The agreement calls for $100M to be dedicated to a Local Health Integration Network (LHIN) physician collaborative to provide physician incentives to work more closely with other service providers.  LHINs are Ontario's version of Regional Health Authorities.  Among the targeted projects to be covered by the fund are: 

    -  The employment of 500 full time nurses to be added to eligible practices to deliver shared care with physicians.  The nurses will assist physicians to provide care for patients at end-of-life, with mental health issues and addictions, and for elderly people participating in Aging at Home projects.

    - A fund of $33 M is being created to recognize physician groups at the hospital and LHIN level who meet established targets related to effective management of hospital patients.

    - A fund of $22M is being created to increase on-call coverage.
    - An ED Collaboration Initiative Fund of $14M is being created to reduce avoidable use of EDs.
  • All family physicians will be eligible for a bonus incentive to care for patients with diabetes and a separate bonus will be paid to physicians who enroll their diabetic patients in the Diabetes Registry, when it is active.  
  • A variety of incentives are included to address the need to encourage psychiatric care for those with mental health issues and addictions.
  • A new model of interdisciplinary care will be put into place for the provision of specialized services for the frail elderlyPayments to geriatricans will be increased and there is a goal of recruiting 10 geriatricians to participate in the model.  

The agreement also includes a number of clauses addressing smaller specific issues.

Main points

Main objectives

In September 2008, the Government and the OMA announced a tentative agreement to revise physician payment for the period 2008-2012.  The agreement was ratified by 79% of the membership of the OMA by the middle of October.  The agreement calls for an injection of $1.1 billion (CDN) over the next four years (2008-2012) bringing the total bill for physician services in Ontario to more than $8 Billion.   

A goal of the agreement is to focus on measurable outcomes that can transform the health system and foster renewal while delivering results for patients.  The deliberations of the bilateral negotiating committee, the Physician Services Committee, are based on research information that is developed initially by the OMA's Central Tariff Committee which prepares a set of recommended changes based on research and submissions from a wide variety of medical specialists.  These recommendations are based only on the evidence and not on public sector budgetary considerations.  The Committee's annual report is reviewed by government staff , which is concerned about financial as well as quality and access issues.  The final recommendations for payment adjustments are negotiated within the PSC, and brought to Cabinet for approval and then enshrined in the MOHLTC budget.

Type of incentives


Groups affected

primary care physicans, specialist physicians, unattached patients and patients with chronic conditions

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Characteristics of this policy

Degree of Innovation traditional rather innovative innovative
Degree of Controversy consensual rather consensual highly controversial
Structural or Systemic Impact marginal rather fundamental fundamental
Public Visibility very low low very high
Transferability strongly system-dependent system-dependent system-neutral

Political and economic background

A goal of the Ontario government has been to stimulate the provision of primary care services for Ontario residents while managing utilization.  In 2006 it was estimated that 500,000 residents of Ontario did not have access to a regular primary care physician.  Poor access to primary care has been cited as one reason that Emergency Department (ED) use has been increasing, resulting in long wait times for patients in EDs.  Another goal of the Government was to focus physician attention on reducing avoidable Emergency Department use.  A third and ongoing goal of the MOHLTC has been to improve care for those with chronic conditions such as those with diabetes and the elderly.  The government will be facing an election in 2012 and will want to be able to report progress to the public, espcially on the high profile issues of improving access to primary care by unattached patients and reducing long wait times in EDs.  Both issues are frequently reported in the media.

From the physician perspective, the primary goal was to increase remuneration.

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? no no no no yes no no

Origins of health policy idea

The agreement builds on earlier agreements as well as the discussions of a joint working group on primary care access.  

Initiators of idea/main actors

  • Government
  • Providers
  • Patients, Consumers

Approach of idea

The approach of the idea is described as:
renewed: The agreement builds on an earlier commitment to primary care reform.

Stakeholder positions

Stakeholders had varying perspectives on the goals for the agreement.  The OMA was clear that its top priority was to increase physican payment levels while the Ministry of Health and Long-Term Care was equally concerned about reform issues such as improving access for unattached patientsencouraging physicians to work more closely with other health providers, and reducing unnecessary use of hospital services, including EDs (The Medical Post, 2008).  The final agreement was supported by the MOHLTC and the OMA.  The Coalition of  Family Physicians (COFP) urged rejection of the agreement because they felt that payment increases were inadequate (Canadian Medicine 2008).  Emergency Room physicians raised other concerns about the conditions under which some payments were to be made (OMA: Section on Emergency Medicine 2008).  Despite this opposition, the agreement was ratified by 79% of physicians.   

An ingredient in the acceptance of the agreement may have been the results of a national review of physican payment systems in Canada which was commissioned by the OMA in 2006.  The results of the study indicated that no model exists in other jurisdictions that could improve the process used in Ontario for its almost 24,000 practicing physicans and the government (The Medical Post, 2007).  The study results were shared with physicians at the OMA annual meeting in 2007.

Actors and positions

Description of actors and their positions
Ontario Ministry of Health and Long-Term Carevery supportivevery supportive strongly opposed
Ontario Medical Associationvery supportivevery supportive strongly opposed
Ontario Physiciansvery supportivesupportive strongly opposed
Patients, Consumers
unattached patientsvery supportivesupportive strongly opposed

Influences in policy making and legislation


Actors and influence

Description of actors and their influence

Ontario Ministry of Health and Long-Term Carevery strongvery strong none
Ontario Medical Associationvery strongvery strong none
Ontario Physiciansvery strongvery strong none
Patients, Consumers
unattached patientsvery strongweak none
Ontario Ministry of Health and Long-Term Care, Ontario Medical Associationunattached patientsOntario Physicians

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

The agreement will be implemented in stages as the details of its features are negotiated.

Monitoring and evaluation

There is no formal public mechanism to evaluate the agreement although both sides will be monitoring its effects on physician behavior.  Some goals of the agreement will be publicly reported--such as average wait times in EDs.

Expected outcome

Ontario physicians are among the best paid in Canada with annual payments of $258,090 compared to the national average of $237,492.  There is considerable variation across the provinces in physician payments with the western provinces often  paying more for family medicine and less for speciality medicine than Ontario.  Physicians in Quebec are reimbursed less than physicians in other provinces (CIHI 2008).  In 2004 Canadian physicians were paid at levels that about rank them lower than the US and many other European countries (Britain, Netherlands, Germany, Iceland, Austria, Luxembourg and Switzerland) but higher than others (France, Finland and Czech Republic), using figures adjusted for purchasing power parity (OECD 2009).  

The new agreement in Ontario seems to advance the interests of both physicians and the government but many factors will also contribute to achievement of the government's primary care reform agenda.  These include the speed with which new interdisciplinary models of primary care can be implemented, the supply of physicians, nurses and other staff required for these models, and the implementation of enablers such as shared electronic records and practice outcome data.  A key result of the agreement will be the extent to which new models of care are adopted throughout the province, especially in rural areas. 

Other provinces have different key priorities in negotiating with their physicians.  In British Columbia for example, a new agreement with the BC Medical Association, addresses increased recognition of regional health authorities' role in managing health care delivery.  In BC the regional health authorities (RHAs) manage service contracts with physicians; in the new agreement the health authorities now will have at least one representative on the Physician Services and other committees.  By contrast, the Ontario agreement does not allow for representatives from the Local Health Integration Networks (Ontario's version of Regional Health Authorities) in the bargaining process. 

As well, the new agreement does not fundamentally change the fee-for-service basis of physician reimbursement.  Some policy analyists are calling for stronger measures such as offering physicians more incentives to become more collaborative with other health providers (Guterman et al 2009). 

Impact of this policy

Quality of Health Care Services marginal rather fundamental fundamental
Level of Equity system less equitable system more equitable system more equitable
Cost Efficiency very low neutral very high

The impact on cost efficiency will depend on the extent to which the investments in primary care and interdisciplinary teams are successful in reducing avoidable hospital and other health care utilization.   


Sources of Information

  • Ministry of Health and Long-term Care. 500,000 Ontarians with Access to a Family Doctor as a Result of Investments in family Doctors. June 21.
  • CIHI. Average Payment per Physician Report, Fee-for-Service Physicians in Canada, 2004-2005. 2008.  
  • Canadian Medicine. Coalition Urges Doctors to Reject Ontario Pay Deal. October 9, 2008.
  • OMA. Doctors Vote in Support of New Agreement with Province. OMA Weblink.   
  • Fujisawa, R and G. Lafortune. The Remuneration of General Practioners and Specialists in 14 OECD Countries: What are the Factors Influencing Variations Across Countries? 2008.  
  • Guterman, S, K Davis, C Schoen and K Stremikis. Reforming Provider Payment: Essential Building Block for Health Reform. Commission on a High Performance Health System. 2009. Commonwealth Fund. 
  • "Memorandun of Agreement between the Ontario Medical Association and her Majesty the Queen in Right of Ontario as Represented by the Minister of Health and Long-Term Care. 2008. Personal Communication. 
  • "OMA Still Looking for Ways to Improve Fee Negotiations". The Medical Post.  May 25, 2007. 
  • "Ontario docs have a deal: now comes the vote". The Medical Post. September 26, 2008.
  • 2008 Tentative MOH/OMA Contract. Ontario Medical Association: Section on Emeregncy Medicine. 2008.

Author/s and/or contributors to this survey

MacAdam, Margaret

Senior Fellow, Canadian Policy Research Network

Suggested citation for this online article

MacAdam, Margaret. "Physician Payment Incentives". Health Policy Monitor, April 2009. Available at