How Doctors Are Paid and Where the Money Goes

This information is provided in conjunction with this post about the February 2020 UCP termination of its contract with Alberta doctors.

  • As a rule physicians are usually not salaried employees – they provide medical service either inside government health facilities or private clinics, and then “bill” Alberta Health and wellness (AH) for the work they do. This is called “fee for service.”
  • The fee paid for each service is set in the “Schedule of Medical Benefits” (SOMB). The rates and any changes are negotiated periodically between the government and the Alberta Medical Association (AMA) which represents doctors for collective negotiations.
  • With the money received through billing, doctors must first pay their operating expenses. For doctors working outside a hospital, this includes rent for the clinic, salaries and benefits of all the staff working at the clinic, and all the medical supplies, office supplies and utilities and services needed to run the clinic – normal business operating costs. Most clinic doctors report these costs represent about 30-40% of their billings. This is called overhead.
  • All doctors must also regularly pay substantial fees for the ability to continue practicing medicine. Currently in Alberta these include:
    • Annual license with the College of Physician’s and Surgeons: $2,360 (legally required)
    • College of Family physicians (required to maintain status as a registered family physician): $1,113
      • Specialists will pay a similar (or higher) fee to their own regulatory body
    • Optional but important membership dues in organizations like the AMA, or a sub-specialty focused association. My costs for these are typical and run about $2,760 a year.
    • There is a regular continuing medical education requirement (to keep up to date with changes in the field of medicine). This can include medical journals, conferences and online subscriptions. Obviously cost varies, but they usually cost me in the neighbourhood of $2,000-$4,000 per year.
    • Liability insurance to protect physicians and payout successful lawsuits to patients. This is also mandatory and varies by specialty – higher risk practices like surgery or obstetrics pay more. This currently varies from about $2,050 to $47,350 per year.
  • After all this, is your gross take home pay (what most people see on their paycheck before deductions). Then like everyone else you pay taxes, and then you deal with your personal budget.
  • Keep in mind that unless they came from a wealthy family, most new physicians end their education with at least $100,000 to $200,000 in educational debt to pay off. Canadian banks currently will offer up to about $320,000 in credit to doctors and doctors in training to manage their expenses over time. This is in addition to government student loans. In Alberta the lifetime cap for medical education is currently $175,000. Individuals like me who were married with young children during our medical education tend to use a lot of that credit. I’m still paying loans off 8 years into practice with a son graduating from high school himself in 2 years.
  • Physicians also have no paid benefits: no health plan, no pension, no sick leave, so need to plan for their own unexpected expenses and retirement out of what is left.
  • Physicians have a skill set that is in high demand for good reason, and should be compensated accordingly. Personally, if I need to miss a shift at work for any reason, there are only about 15 other people in my whole community of 90,000 people that are qualified to “cover for me,” 6 of whom are already working a different shift that day. If a few others are out of town or busy with other commitments, there are very few coverage options, and you can’t just not have a doctor working in a busy emergency department. I have to be very sick before I avoid a day of work. Family doctors who miss work often cannot be replaced, and need to cancel entire clinics.

 

What about ARPs?

ARPs (Alternative Relationship Plans) are an alternative to fee for service billing that is used in some places. Each plan is unique and the rules can be complicated. The general idea is that a hospital physician is paid a fixed rate for a specific number of hours of work. If you work less, you don’t get the full amount, but if you work extra you do not get paid anything extra for it. In a rural or clinic setting, an ARP physician group is paid a fixed amount every year for each patient on their roster, and sees them as often as necessary. If your patient is seen by an outside clinic, there is usually a penalty deducted from your payment as incentive to make sure you are available for timely appointments. There are also blended models that use some of each to account for the many physicians with complicated work schedules who work in multiple different capacities. Just as in a fee system, this money is all paid before expenses, and there are no benefits provided.

 

ARPs are attractive to governments as they make payments to doctors a more predictable expense than fee for service. They also decrease the unfortunate revenue generating “pill-mill” practice some walk-in clinics are accused of where good patient care is sacrificed for high volume billings. They can and do work well in many different places, but as they should not create either unfair work hours or payments when compared to fee billing, they tend to be complicated to setup and monitor. Most are tailor made agreements between doctors and government in certain practices or communities that take a long period of study and consultation to develop.

 

One potential downside to ARPs can be the volume of patient care provided. Imagine you are working in a busy clinic with a waiting room full of people waiting to see you. There is always an incentive to help as many people as possible, but when you are being paid for each person you see, it is human nature to be more willing to skip taking a break, miss lunch, or stay late to fit a few more people in, because at least you are being paid to do the extra work. However, if you get paid the same amount of money to take work at a more reasonable pace, there is little incentive to run yourself into the ground, or work unpaid overtime, especially day after day, year after year. While ARPs make budgets more predictable, implemented inappropriately they can result in lower output per physician and longer waits for patients. Physicians within ARPs tend to lose some autonomy to alter their practice, and become very dependent on the government holding up and not unilaterally altering the deal. This is one reason they tend to be complex to establish, and require a high level of trust between both parties.

4 thoughts on “How Doctors Are Paid and Where the Money Goes

  1. I think you are missing the point of this UCP exercise. It is not to reduce AHS costs but to drive doctors into private practice. This New Framework will degrade the AHS, and dismayed doctors will leave the public system. In the near future look for enhanced incentives and possibilities provided by the UCP, for doctors to go into private practice.

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  2. In the hospital ARPs are sometimes promoted as a way for surgeons (or other specialists) to have a stable income while they look after patients, do research, teach medical trainees, etc. But in the operating rooms there is no incentive to get more cases done. Whether the surgeon does one case or three before lunch, the pay is the same. It’s not that care is rushed under FFS, since you can only go so fast doing a gall bladder or lung tumour. But under ARP you can go a lot slower. And enjoy your coffee break.

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