Did Family Physicians Who Opted into a New Payment Model Receive an Offer They Should Not Refuse? Experimental Evidence from Ontario

It is widely believed that the traditional way of remunerating primary care physicians—namely, the fee-for-service (FFS) mechanism—generates suboptimal incentives to health care providers. The alternative payment scheme that is typically preferred involves some form of capitation. The objective of this paper is to investigate the degree to which family physicians (FPs) benefited financially after having switched from the traditional FFS mode of payment to a blended scheme involving capitation. The setting is Ontario over the period 2000–2004, during which two new payment models were implemented. We utilize a special survey of FPs that is merged with unique administrative data describing their medical practices as well as with income data drawn from their tax returns. We apply the methods of the non-experimental program evaluation literature to assess the impact of a change in remuneration scheme on FPs' income levels. Applying a battery of empirical techniques, our findings support the Ontario government's claims that adopting a blended payment model would increase the incomes of FPs. We estimate that physicians who switched remuneration schemes earned incomes that were approximately 25 percent higher, ceteris paribus.