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Physician Payment Discounts End Effective April 1, 2019: An Overview of the Arbitration Process and Other Key Outcomes

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Health Law Bulletin

Today, April 1, 2019, marks the end of the payment discounts that have applied to fees of Ontario physicians since 2012.[1] The end of the practice marks one of the most significant aspects of the arbitration process engaged in by the Ontario Ministry of Health and Long-Term Care (the "Ministry") and the Ontario Medical Association ("OMA") to determine terms of a new Physician Services Agreement between the Ministry and the OMA (the "Agreement").

The arbitration board, consensually selected by the Ministry and OMA, was struck to settle outstanding matters respecting the Agreement. The parties engaged in 11 days of hearings between May 2018 and January 2019. On February 19, 2019, the arbitration board's decision was released. The resulting Agreement will be effective retroactively from April 1, 2017 to March 31, 2021. 

The Binding Arbitration Framework ("Framework") was designed to suit the unique contractual relationship between physicians and the government.  It has two phases. Phase one dealt with past cuts to payments and programs, the OMA's proposed fee increases, the Ministry's proposed hard fee cap on the Physician Services Budget, and proposals by both the OMA and Ministry respecting the delivery of primary care through Family Health Organizations ("FHOs"), among other matters. Phase two will consider adjustments to the allocation of the Physicians Services Budget among different specialties.

This bulletin discusses key outcomes of the first phase of arbitration. Notably, effective today, physician fees will increase with an end to payment discounts. At the same time, a new working group is scheduled to identify billing changes that will create $100 million in savings in the coming months. 

Ending Payment Discounts and Increasing Fees

In eliminating the discounts to physician fees, the arbitration board acknowledged that physicians are unique among other publicly funded professions in that they did not merely have a wage freeze over the last few years, but instead saw cuts. Despite this, the arbitration board rejected the OMA's claims for compensation for all periods prior to the commencement of the new Agreement.

However, fees will be increased by an average of 1% annually over the course of the term of the Agreement (going back to 2017).[2] The 1% increase ordered by the arbitration board is in accordance with the Ministry's proposal. The arbitration board rejected the Ministry's attempt to exclude cardiology, radiology and ophthalmology from the increase.

Similarly, the arbitration board did not accept the Ministry's proposal to implement a hard fee cap on physician billings or a 1.9% utilization increase on the Physician Services Budget. Utilization refers to growth in the number of services. The Ministry argued that growth in the Physician Services Budget is a result of physician behaviour leading to inappropriate or overused services. The arbitration board determined that the Physician Services Budget and utilization are the responsibility of the Ministry. It found that the Ministry's proposal was unfair and unprecedented compared to other Canadian jurisdictions. The OMA asserted, and the arbitration board agreed, that the Ministry's proposal would require physicians to subsidize the public system. The arbitration board noted that it is within the Ministry's power to delist any inappropriate and medically unnecessary services from the Schedule of Benefits for Physician Services Under the Health Insurance Act. The arbitration board did not disagree that particularly high billing physicians should be investigated.

In refusing the Ministry's proposed hard fee cap, the arbitration board observed that a number of recognized factors have led to growing costs of health care – including population growth, aging, chronic disease prevalence, increasing patient complexity, technological change and innovation, entry of new physicians, patient preferences, and expectations and demands.

New Working Groups

The decision establishes two working groups.

  • Appropriateness: While the arbitration board rejected the Ministry's position that a hard fee cap could address inappropriate billing, it did find that more should be done so that the right care is provided at the right time, in the right place, by the right provider. The arbitration board ruled in favour of the creation of an Appropriateness Working Group ("AWG") composed of representatives of the Ministry and the OMA. The goal of the working group is to identify, by May 1, 2019, changes that will result in savings of $100 million to be realized between June 1, 2019 and March 31, 2020. The AWG will then endeavor, by September 20, 2019, to identify changes that will result in savings of a further $360 million between April 1, 2020 and March 31, 2021. 
  • Primary Care: The other working group will look into primary care matters. The arbitration board stressed the urgency of this matter. The purpose of the Primary Care Working Group is to consider why patients who are part of FHOs (which receive per-patient funding) are also accessing walk-in care or other services outside the FHO, resulting in services being publicly paid for twice. The arbitration board's decision notes that FHOs are expected to integrate after hours care into their services. The current model is not functioning as intended.

The Arbitration Process

The Ministry and the OMA entered the Framework in June 2018.  The Framework includes decision-making criteria intended to guide the arbitration board, including the following factors:

  • the achievement of a high quality, patient-centred sustainable publicly funded health care system;
  • the principle that compensation for physicians should be fair (in the context of such comparators and other factors as the arbitration board considers relevant) and reasonable;
  • such comparators as the arbitration board considers to be relevant;
  • the economic situation in Ontario;
  • economic indicators that the arbitration board considers relevant, including but not limited to, the cost of physician practice;
  • evidence-based relativity and appropriateness considerations; and
  • data sources agreed to by the parties to be reasonable or otherwise the most reliable data available.

The arbitration board emphasized the first two factors. Sustainability was viewed from a multi-faceted perspective: including appropriateness, timeliness, value for money, accountability and funding limitations. The arbitration board also recognized the significant portion of the Ministry's budget (22%) spent on physician compensation and that resources are not infinite. Appropriateness was found to be an area with real opportunity to reduce costs. The arbitration board's decision acknowledges that its mission is patient centred, but also that it must keep in mind fiscal resources.

[1]       A 0.5% fee cut was put in place with the 2012 Physician Services Agreement. An additional 3.95% discount was applied to fee for service billing codes, and 2.65% applied to non-fee for service billings, from 2015 onward (together with the 0.5% discount from 2012, 4.45% and 3.15%, respectively).

[2]       Removal of the 0.5% fee cut in the 2012 Physician Services Agreement is taken into account in the average increase.


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