Fixing relativity: a path to progress

Part 1: A pernicious problem

As a doctor, it’s easy to despair about fee and income inequity in Canada. The problem has been around for a long time, definitely since the start of medicare. During my research for this article I even came across a 1986 document from an Ontario Medical Association (OMA) special committee on economic disparities that said the OMA “has been struggling with the issue of relativity since it first approved a tariff in 1922.”

Attempts to fix relativity have seen some modest successes—but mostly failure. The acronyms for the initiatives in Ontario alone start to blur: OMA RVS, RBRVS, RVIC and CANDI.

Vancouver’s Dr. Brad Fritz, chair of the Doctors of BC overhead committee and chair of the negotiations forum, said there was the big Relative Value Guide effort in the mid-1990s in British Columbia “that actually got right to the end and had some pretty good numbers, but the board of the BCMA in the day ... kowtowed to pressure from the high-earning sections which said they would all leave the association. Even though the constitution said they had to implement the results, (the board) refused to do that and then they just went back and changed the constitution the next year. There’s never been very good efforts since to (do) a broad relative value fee approach.”

This has been the challenge for provincial and territorial medical associations across Canada: Even when relativity fixes are developed, the political will to use them has often faltered.

“While there is constant talk, debate, etc. on relativity in many provinces—Ontario especially—there has been very little implemented action. People say that relativity has not worked or it’s a failure and that is not the appropriate view in my opinion,” said Boris Kralj, a health analytics, economics and management consultant now in private practice. However, for 23 years—until December 2017—he worked for the OMA, ending as chief information and analytics officer. “Given how little it was used, is it any wonder that one does not see tangible results? I think (any methodology/formula) needs to be used for a sustained period of time before one can declare success or failure.

“The other challenge, in my opinion, for gauging success on relativity is that no one has a specified tool (to track) progress—what exactly are you trying to do with the relativity formulas? What is the measure used? Most are, I would think, trying to minimize the dispersion or variation of standardized incomes, but how exactly?”

With this issue of the Medical Post we’re examining physician income inequity in Canada, attempts to fix it, and how doctors feel about it. In the article you’ll see the 20 Years Chart where we asked the Canadian Institute for Health Information to provide custom data to illustrate how the income of full-time doctors has changed by specialty and province over two decades. It has some stunning findings in it but an income relativity chart can only be part of the picture. It doesn’t get at all the factors we need to consider when we think about the value of physician labour such as risk, technical skill and effort, and the number of patients a doctor sees.

Three income bands

When looking at our 20 Years Chart, the current pay data for doctors offers important context. Here are the average gross clinical payments per doctor by province in 2015/16. The figure for Quebec doctors is $325,096 but is not listed below because Quebec doesn’t provide data we used in the 20 Years Chart.

Top band

Alta.: $380,384

P.E.I.: $366,934

Middle band

Sask.: $353,856

Ont.: $348,056

Man.: $343,944

Low Band

N.B.: $290,457

B.C.: $284,918

N.L.: $275,781

N.S.: $262,154

Click here to view the '20 Years' chart of compensation increases by province and specialty

Part 2: Better data on expenses

We’ve seen ham-fisted attempts to fix relativity by attacking high billers. The Ontario government has imposed a series of unilateral cuts since 2012, some across-the-board and others that were targeted. As Kralj noted, “the Ministry of Health and Long-Term Care has justified some of the cuts as relativity-based, in that they were made to higher-billing specialties that they deemed over-valued. But that is not based on any methodology other than gross billings.”

Simply cutting high-earning specialties is unsophisticated and wrong because it isn’t necessarily reflective of net income. Expenses play a major role. A well-known 2012 study on overhead conducted by researchers at St. Michael’s Hospital/ICES found that though Ontario ophthalmologists had the second-highest gross billings in the province, their overhead was much higher than most. Judged by net income, they were only the eighth-highest earning specialty.

Up until the 1990s it was possible to get physician overhead information from Revenue Canada but a policy change nixed that and since then we have been relying on self-reported estimates of overhead (the St. Michael’s Hospital study came from National Physician Survey data, which is all self-reported). Now, two new association projects are set to produce more sophisticated numbers.

I spoke to Dr. Fritz of Doctors of BC by phone just before my flight from Toronto to Victoria for the holidays. He explained that the association is in the final stages of a three-quarter-million-dollar project where they have enlisted chartered accountancy and business advisory firm MNP LLP to get detailed overhead data. “It has to do with a bunch of different things: How much do you spend on rent? How much on professional dues? How many staff do you have?” MNP provided phone numbers doctors could call for instant feedback during the survey in case they had questions about any aspect of the survey. As well, all survey participants had to provide their tax returns.

MNP has asked over 1,200 full-time B.C. doctors across a range of specialties to participate and is expecting just under 50% of them to complete the survey. “We have what they (MNP) feel is a statistically significant number of responses for each section,” Dr. Fritz said.

The data is going to be used to develop something Alberta already has: model offices by specialty. “If you’re a family doctor working in a group,” Dr. Fritz said, “your model office would cost so much per square foot for rent, professional dues, auto expenses ... staffing. And we would put together what looks like a model office. Now that doesn’t mean everyone’s office is the same as the model but it would give us an idea. And the advantage of the model office is it frees you to update in the future: if rents were so much per square foot in 2017 and in 2022 they are so much per square foot, you just change the number.”

Data from these studies should be applicable elsewhere in Canada. For example, any differences between the overhead of a vascular surgeon in Vancouver and one in Toronto could be easily adjusted with a model office approach.

Part 3: Other relativity components

Better overhead data will take us a long way but after that there are some questions about the value of different types of physician work. It does not make sense, of course, to say the take-home pay for all doctors should be the same. The Alberta Medical Association’s (AMA) big Income Equity Initiative is aiming to unpack some of the other components.

Calgary pediatrician and AMA president Dr. Neil Cooper said the association decided to start the Income Equity Initiative—a shared project with Alberta Health conducted by Deloitte LLP—about a year ago. At present, an overhead study similar to the one in B.C. is underway but the initiative includes two other studies: one on the number of hours worked, and one on training. “We’ll come up with a model now to start studying how many hours people work at things and how much time they spend doing things; comparing their hours during the daytime versus the hours during the evenings and weekends; comparing on-call times, all that is going to be part of this time study,” Dr. Cooper said. “And then also to look at the effect of training. So how many years do you need to train to get to that position and ... how does that affect your length of career.”

Though those three—overhead, hours worked and training—are the big components of the Income Equity Initiative, it’ll also examine competitiveness (how much specialists earn in other provinces) and other factors, Dr. Cooper said. The studies should be complete by summer 2018 and the AMA is going to decide what to do with the results at its fall Representative Forum (RF).

I was back in Toronto in early January and something they were calling a “bomb cyclone” was barreling up the east coast. Rumour had it that might close the Doctors Nova Scotia (DNS) offices in Halifax for a day—and cancel my interview with Kevin Chapman, director of finance and partnerships for DNS. But the storm didn’t drop any snow and although incredible winds took out power for much of the city, Chapman did make it into the office where he explained how the Physician’s Manual Modernization Project has worked. The five-year long project to completely redo the fee schedule is in its final stages and was co-sponsored by DNS and the N.S. Department of Health and Wellness. Chapman was the co-chair for DNS and Dr. Anne Tweed, a plastic surgeon, was the co-chair and medical consultant for the department of health.

Chapman said the project came out of the sense that the physician fee manual was out of date. “We ended up with all kinds of difficulties. Physicians would get audited and because the manual was outdated . . . they might have performed a procedure that wasn’t in the manual. So, they used a lookalike code. And when you compared it to the operative record, it said ... you did one thing and the operative record would say something else. So, we had a bit of a disconnect.” But “we (also) had a lot of concerns around integrity of information. If we wanted to learn how many rhinoplasties were done, for example, we didn’t have confidence in the data because physicians could have used any number of different codes.”

To develop a “new book” the project leads looked around and ultimately went with SNOMED CT for diagnosis and CPT (Current Procedural Terminology) for service delivery. Now CPT is what is used by the U.S. Medicare/Medicaid system and because it uses a resource-based relative value unit (RVU) system it essentially has relativity “baked in”—which gives Nova Scotia doctors some interesting options.

How do RVUs account for relativity?

Relative Value Units (RVUs) are the backbone of how the U.S. determines the value of physician labour. Not only are RVUs the foundation for the giant Medicare/Medicaid programs, most U.S. private insurers use them and in many cases they are used to measure productivity for salaried doctors. RVUs have a practice expense and work component. U.S. specialty societies play a role in keeping RVU values as accurate as possible because their physicians are asked to estimate the time and intensity (mental effort, physical effort, technical skill and psychological stress) of a service and compare that to other services.

To map and validate the new fee codes over the old codes, the project got input from about 250 N.S. doctors—called “beacons”—including representatives from every specialty. At present the new fee code book is nearly complete, Chapman said. Now a new fee committee with more autonomy under the new contract is going to look at how to roll it out, likely this fall. But there’s a big question: Do they keep the same fee dollar value for any given procedure as the old fee schedule or do they change the pay for that procedure to what the RVU framework within CPT suggests? The new fee committee has not yet addressed this issue.

Chapman said, “if all I want to do is look at what is the percentage change by service, say plastic surgery under the old system was 12% of everything billed. Under the new system, they might be 14% of everything billed. What would tell me, relatively speaking, plastic surgery was undervalued in the old system?” But because the exercise was intended to be revenue-neutral, if the RVU system finds that some fees are undervalued, it is also going to find that others are over-valued and that might suggest that some specialties are over-compensated.

Now why—some doctors might ask—are exercises like this “revenue neutral”? Well, it is a hard sell to say to a provincial government right now: “Look, we’ve determined that physician fees are inequitable—can you give us a 20% boost in the physician services budget this year and then we can fix it and we’re all good?”

Part 4: The political challenge

Membership-based groups such as medical associations struggle with relativity. It can feel like a no-win situation to many doctors. In some provinces doctors are Randed, meaning they are forced to pay membership fees and the medical associations have an agreement with the provincial government which makes them the official negotiator for the profession. But concern about angry sections quitting an association and trying to negotiate on their own with government is alwaysan issue.

“Even though the Doctors of BC are the official entity for negotiating with the government,” Dr. Fritz said, “there have been various times in the past where one section or another has said, ‘You know, we’re going to go negotiate separately.’ Fortunately, no government (in B.C.) in the past has actually agreed to that, but it doesn’t mean at some point or other they might not decide to divide and conquer like they did in Quebec*. There is a reason that Quebec had the worst fee schedule in the country.”

So even when relativity solutions have been used in Canada they usually take the form of a negotiated fee increase to bring up undervalued specialties. In Ontario in the last couple of decades there have only been three years where there were allocations based on a relativity formula: 2009 (via RVIC) and in 2010 and 2011 (via CANDI). Half of the aggregate allocation for each of those years was given across the board to every specialty regardless of relativity. The other half was allocated to specialties that were considered undervalued according to the relativity formula. The size of the allocation depended on how undervalued they were.

But there’s an inherent slowness to that approach. The initiative for Alberta doctors aims to go further. “We may find out through our studies that there is no inequity,” AMA president Dr. Cooper said. But if there is inequity and if we tried to fix it “just with allocations, we’d probably be looking at 500 years before we achieved equity.” So, the RF voted on approving the use of reallocation—in other words taking money from one area and giving it to another.

“Our goal is to get it done in around five years,” Dr. Cooper said. “That’s the goal.”

Part 5: Final thoughts

As I’ve thought about all this over the last few months, a few things struck me:

• It is important to acknowledge income differences but not fixate on high-earning specialties. “Say you cut some super high fee in half that is billed by just 10 doctors in the province, well that isn’t going to be enough to fund a dollar increase in your GP office visit,” said Dr. Trina Larsen Soles, president of Doctors of BC. That really struck me. Some high-earning specialties are so small that cutting their fees isn’t going to help raise others much. Solutions should be about fairness and relativity formulas are complex. If you use good data and agree to accept the results, it then wouldn’t be fair to reject the results when they aren’t what you imagined them to be (if, for example, they show a high-earning specialty in your province is undervalued).

• Look for ways to make fee code reductions palatable. No one likes to see a fee they use go down but there are ways to make it more tolerable. Under a previous master agreement, a joint Doctors Nova Scotia/government steering group was given the power to lower and raise fees, but they had a rule: “If a fee is going down, it cannot go down any more than 10% a year,” noted DNS’s Chapman. They applied that rule to cataract surgery fees. Look for solutions like that.

• Come with an open heart. Say some relativity initiative comes to your province and say it determines your specialty is over-valued. You’re going to feel like the relativity formula didn’t get all the unique nuances of your specialty’s expenses or how hard you work. You’re going to want to attack the numbers. That’s human nature and psychology of a loss stuff. Just recognize that and try to come with an open heart.

So, if we’re getting better data and an association like the AMA is able to fix relativity in five years (if, of course, their studies determine there is inequity), that is going to put incredible pressure on other medical associations. The phrase that always rings in my head about trying to fix relativity is that it’s “tough but important work.”

Want to see all the other stories from the February print issue? Click here.