September 3, 2014, President's Letter

Thoughts on the Physician Compensation Committee

September 3, 2014





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Dear Member:

In this letter:

  • Commenting about ongoing work of the Physician Compensation Committee.
    • The Alberta Medical Association’s objectives relate to our physician compensation strategy and the four elements: access; equity; productivity and quality.
    • Over the short- and long-term, the work of the PCC will emphasize: new compensation models; individual fee review; Relative Value Guide; overhead and Academic Alternative Relationship Plans.
    • A five-step process has been established for an initial fee review of a small number of codes as part of a long-term relativity exercise. Affected sections are being engaged.
  • The long-term goal is a payment system that is aligned with meeting the needs of our patients.

As you may recall, the Physician Compensation Committee (PCC) was formed under the 2011-18 AMA (Alberta Medical Association) Agreement and met for the first time in December 2013. It is comprised of Alberta Health (AH) and the AMA with an independent chair who has a strong background in arbitration. Our AMA representatives (past presidents Dr. G.N. (Gerry) Kiefer, Dr. Linda M. Slocombe and Assistant Executive Director Health Economics Jim Huston) have been guided by the Board of Directors.

The AMA and AH jointly own the PCC process, but the AMA is only one voice at the table. When information comes out of PCC, it must meet with the approval of all the parties. The committee has its own communication channels.

Out of respect for the PCC’s mandate, I have not made many detailed comments about its work. In this letter, though, I want to write about what PCC is doing and the AMA’s role in the overall process. I know that sections have been engaged, but section leaders and members have asked some good questions that deserve detailed answers from the AMA.

What are the AMA’s objectives at PCC – and why?

The PCC offers an integrated approach to physician compensation by connecting it with system objectives of access, productivity and quality. This approach represents a strategic partnership between physicians and government on how to reach those common interests and make our health care system the best that it can be.

There is nothing like the PCC process in Canada and it has been a work in progress. The PCC has completed a number of the tasks it was asked to complete in the early stages and much more work is underway. Throughout the year, the AMA has been in contact with sections to guide our background work and positions at the table. Section input will be even more important in the future.

The AMA’s approach at the PCC table is based on our own physician compensation strategy. That strategy has been evolving over the years, led by the Board of Directors and advised by an internal AMA Compensation Committee. The AMA physician compensation strategy is focused on accomplishing four objectives:

  • Access:
    • For all Albertans to timely, quality health care, which requires:
      • The appropriate supply of physicians by specialty and location. 
      • An appropriate spectrum of services within groups of physicians.
  • Equity:
  • At a fee level, between services or groups of services.
    • At an income level:
      • Within sections.
      • Among sections.
      • Among physicians paid through different payment methods.
  • Productivity:
    • Physician remuneration supports efficiency and cost-effectiveness in the use of physician time and skills.
  • Quality:
    • At individual and system levels.
    • There are compensation strategies that can be used to enhance and align payment mechanisms with quality:
      • Sections.
      • Clinical and Academic Alternative Relationship Plans (AARPs).
      • Strategic Clinical Networks. 

What are the PCC priorities?

Through our AMA Agreement and a set of provincial strategic requirements, the PCC has identified a number of priorities. Some can occur fairly quickly. Some will take years to accomplish. In either case, the emphasis will be:

  • New Compensation Models – PCC will determine appropriate rates to be paid to physicians in new compensation models.
  • Individual Fee Review – PCC will develop a fee review process to identify and address necessary changes in existing codes that are found to be over- and under-valued. This is a small step toward ensuring physicians of similar training are being remunerated equitably. Over time, fees can be aligned to make it possible for sections to move towards full relativity within their own fee codes (intra-sectional relativity).
  • Relative Value Guide – Once intra-sectional relativity is reached, PCC will develop a Relative Value Guide that results in inter-sectional fee relativity.
  • Overhead – PCC will enhance the business cost model by reviewing physician expenditures in both hospital and community settings.
  • Academic Alternative Relationship Plans - PCC will redevelop AARP clinical rates to more accurately reflect the work in these academic settings.

The AMA will judge our success in all these activities against the four objectives I mentioned above. We intend to monitor results and check in with sections throughout the lifecycle of these initiatives to ensure that our objectives are met with the best interests of physicians in mind.

How have physicians been affected so far?

With the AMA Agreement, physicians have asked to improve care for patients by changing the way we work and how we are paid. I am very proud of the profession’s leadership in this way.

At the same time, it’s fairly easy to agree on a principle. It can be more difficult when the rubber begins to hit the road and when we are no longer talking only theoretically. Individual physicians have seen (or may see at some point) the impact of our physician compensation strategy at the level of the individual fee code and practice.

For example:

  • In the April 2014 allocation, the Board of Directors asked the sections to adjust their fees in ways that would improve relativity in the section and reward the kind of care that those groups of physicians want to be able to deliver.
  • The PCC is beginning to review some fee codes for possible adjustment. This is being done as a precursor to larger (but long-term) effort to modernize the fee schedule and establish full fee relativity among the sections.

These are significant changes. Physicians deserve good communication about what is happening, transparent processes based on good evidence and adequate consultation with those groups that will be impacted. We may not be able to foresee all the outcomes, but this is the AMA’s commitment to the profession.

What is the initial fee review process?

The PCC has identified a set of criteria that can assist the individual fee review process:

1. Documentation in the peer-reviewed literature or other reliable data that there have been changes in physician work associated with a billing code.
2. Codes that have undergone substantial changes (up or down) in practice expenses.
3. Evidence that technology has changed physician work.
4. Data analysis on time and effort (intensity or complexity) measures.
5. Evidence of utilization extremes associated with a billing code.

The five criteria were given to a working group identified by the PCC. The AMA appointed three experienced representatives to this working group (two physicians and one staff member from health economics) and it was led by the independent PCC chair.

The working group used best efforts to come up with a set of codes to be reviewed. Not all the information to support the five criteria was immediately available, but we are gathering information from the sections involved going forward. In the interim, the initial focus based on available information was criterion five: evidence of utilization extremes.

To appropriately assess available and future information, the working group constructed a set of filters. They ran an initial analysis with the filters and the result was a list of 22 codes. The 22 codes were selected only for review. They were not pre-selected to be adjusted.

In terms of defining “extreme utilization,” the filters were designed to identify billing codes that create outliers in a section. Outliers are codes whose frequent use leads a physician to earn a much higher daily income than his/her colleagues working in the same section.

The PCC has begun arranging meetings with the sections owning the codes in question and a few meetings have been held. Throughout this consultation, sections will be asked to comment on how technology has changed and how this has affected physician time to perform the examinations and procedures involved with the code – as well as the relevant matter of physician overhead.

The PCC will be assessing the value of the 22 codes following these discussions.

  • A consultant has been appointed by the PCC to develop a set of metrics to perform a fee assessment.
  • The PCC will complete its first interviews with relevant sections by November 14.
  • Following the interviews, PCC will make a preliminary decision on rates and will invite sections to provide any feedback.
  • A final decision will be made after all information is considered.

This process will be refined and repeated as we move forward toward our long-term objectives in the years ahead.

What should we expect?

Adjusting up to 22 fee codes is a small first step. It will not result in full fee relativity in the Schedule of Medical Benefits. It will not give us a fully modernized fee schedule. We should be realistic in what we expect.

The agreement requires that any adjustments in prices, rates, fees and subsidies arising from a reallocation are to be expenditure-neutral. The point of the exercise is not to reduce the physician services budget.

However, the end result of the initial fee review may be that high codes will be adjusted downward. In another phase and with a similar process, fees that are too low may be adjusted upward. The overall budget remains the same in either case. Funds that move as a result are likely to shift among sections. There may be some income redistribution.

When we started down this road, we agreed that the long-term goal is a payment system that is aligned with meeting the needs of our patients and improving access, productivity and quality.

We also recognized that we won’t get there in one jump or one year. Like most things worth striving for, we probably won’t get there without some discomfort along the way.

We understand that physicians have concerns. At every point, we encourage continuing feedback from your section representatives. Those representatives need to hear from you, particularly in the run-up to the September 19-20 Representative Forum meeting.

Please let me know, also, what you think. Comment below or email

1 comment

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  • #1



    7:50 AM on September 04, 2014

    I am starting to wonder that we are spending more time coming up with frameworks of discussion rather than getting any real work done in reviewing fee schedules and adjusting them accordingly. I think one thing that our leaders must understand is that you cannot make everyone happy and that there are certain areas of medicine that have long been deprived of a fair compensation. It is time for strong leadership rather than beating about the bush and wasting precious time. Rather than wasting our time with frameworks, I would suggest the powers that be work on an actual proposal and present it for debate or voting. Let's get some work done leaders, we believe in you and you can do it. Thanks.

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