Updating the Fee Schedule for Physician Reimbursement: A Comparative Analysis of France, Germany, Canada, and the United States

FEE SCHEDULES FOR PHYSICIAN REIMBURSEMENT: GENERAL ISSUES

1. Adjusting Relative Values. Such adjustments must be made in response to technological improvements in practice or other factors which affect practice costs and relative work.
2. Refining the Coding System. This may refer to the addition of new codes for new medical technologies or procedures, the elimination of old ones, the bundling of several codes under one or more aggregate categories, or the modification of existing codes or their definitions to reflect accurately the work involved in performing particular procedures.
3. Valuing New Procedures. When new medical technologies and procedures are introduced and a decision is made to include them on the list of reimbursable codes, their values must be determined.
4. Modifying Policy on Specialty DifferentiaLs. In cases where services provided by different specialists under the same procedure code represent differences in work, policies on specialty differentials may have to be modified.
5. Modifying Policy on Balance Billing. In cases where there are problems of access to medical services, it may be necessary to encourage or even require some or all physicians to accept assignment.
6. Adjusting Geographic Multipliers. Such multipliers could be used to compensate for geographic differences in practice costs as well as to promote services in under-served areas.
7. Setting Conversion Factors. This decision, which transforms the relative value scale into a schedule of relative prices or fees, is essential for projecting medical care expenditures and physicians' incomes.

Comparison of Relative Value Scales in France, California, and Quebec

	Codes	France	California	Quebec
1	Orthopedic Treatment of a Closed Fracture Necesitating a Reduction, with or without Anesthesia
	Clavicle	0.40	0.31	0.19
	Scapula	0.20	0.29	0.39
	Astragulus calcaneus	0.60	0.31	0.39
	Femur	1.60	0.74	0.51
	Arthroplasty of the hip	4.40	4.21	1 .58
	Arthroplasty of the hip	3.60	2.10	2.37
	Osteotomy of the femur	3.00	2.00	1.84
	Syneovectomy of the hip	2.00	2.10	1.84
	elbow	1 .60	1 .47	1.02
	knee	1.60	1.80	1.31
2	Drainage of subdoral or hemodoral	2.40	2.94	2.85
3	External ventricles	0.80	2.94	1.05
4	Surgical treatment of the chalazion	0.30	0.12	0.11
5	Cyst of the eylids	0.80	1 .05	0.41
6	Surgical removal of blockage of the tear duct	0.80	1.26	0.66
7	Graft of eyball covering	1.00	1.47	0.63
8	Excision of the wall of lacrimal sac	2.00	1.47	1.10
9	Replacement of vitreum	1.40	1 .26	0.83
10	Removal of the eyeball	1.00	1.05	0.83
11	Removal with implant of the eyeball	1.40	1.26	1.09
12	Surgical treatment of the pterygion	0.80	0.63	0.41
13	Cataract	2.00	2.10	1.89
14	Iridectomie	0.80	1.05	0.86
15	Excision of bone tumor	1.20	1.26	0.54
16	Peracentesis	0.20	0.06	0.11
17	Mastoidectomy	1.50	1.26	0.97
18	Excision of turbinate bone	0.30	0.63	0.13
19	Adenoidectomy	0.40	0.29	0.17
20	Tonsilectomy	0.80	0.50	0.19
21	Parotid excision	1.60	0.63	0.84
22	Tracheotomy	1.00	0.55	0.42
23	Thyroidectomy	2.40	1.58	2.30
24	Laminectomy	2.40	3.37	2.37
25	Drainage of breast absess	0.40	0.27	0.26
26	Mastectomy	1.00	0.84	1.13
27	Benign tumor removal	0.60	0.52	1.89
28	Mastectomy w/axillary dissection	2.00	1.26	1.58
29	Thoracotomy	2.00	1.26	1.58
30	Pneumamectomy	5.00	3.15	2.89
31	Labectomy	3.60	2.73	2.52
32	Plural drainage	0.24	0.07	0.27
33	Diaphragmatic hernia	3.00	2.00	1.94
34	Congenital esophageal stenosis	5.00	3.15	3.37
35	Cardiorhaphy	4.00	2.52	1.89
36	Pericardectomy	5.00	3.58	1 .84
37	By-Pass surgery 1 artery	5.00	4.00	2.85
38	Hernia repair	1.00	0.94	0.92
39	Laparotomy	1 .00	1 .02	1 .00
40	Gastrectomy	4.00	2.94	3.07
41	Pyloraplasty	1.60	1 .37	1.31
42	Segmental resection of ulcer	2.00	1.80	1.74
43	Appendectomy	1.00	1.00	1.00
44	Mackelsdiverticulum	1.20	1.05	1.18
45	Total colectomy	5.00	2.73	3.81
46	Partial colectomy	2.40	1.89	3.16
47	Cholecystectomy	1 .20	1.26	0.92
48	Anastamosis of bile duct	3.00	1 .52	3.07
49	Hemorrhoidectomy	0.60	0.50	0.35
50	Surgery for megacolon	4.00	2.73	3.16
51	Reconstruction of anal sphincter	2.00	1.05	0.92
52	Treatment of vesicocoele	2.40	2.10	1.79
53	Treatment of vaginocooele	2.40	1.52	1 .47
54	Splenectomy	2.00	1.52	1 .94
55	Pancreotectomy	6.00	3.58	4.60
56	Cysts hydatid liver	2.00	1.52	1.47
57	Kidney or liver biopsy	0.60	0.25	0.95
58	I & D for renal abscess	1.20	1.47	0.89
59	Renal stone	1.20	1.58	0.87
60	Nephrectomy	2.00	2.10	1.58
61	Nephrostomy, pylectomy	1.60	2.10	1.02
62	Rx of horseshoe kidney	2.40	2.94	2.10
63	Removal ureter	1.60	1.89	1.16
64	Ureteral exploration	2.00	2.21	1.10
65	Ureter bladder anastamosis	3.00	2.31	1.37
66	Partial bladder removal	2.40	1.89	1.31
67	Partial amputation of penis	1.20	1.05	0.52
68	I & D perineal abscess	1.00	0.84	0.25
69	Prostatectomy	2.40	2.10	1.53
70	Surgery of torsion of testicle	0.80	0.84	0.79
71	Castration	3.00	0.84	0.87
72	Excision bartholin cyst	0.80	0.50	0.27
73	Cervix excision	0.80	0.50	0.63
74	Hysterectomy	2.00	1.58	1.31
75	Myomectomy	2.00	1.47	0.79
76	Caesarion section	1.00	1.05	1.18
77	Cystoscopy	0.40	0.12	0.18
78	Laryngoscopy	0.30	0.42	0.27
79	Gastroscopy	0.60	0.42	0.26

PATTERNS IN THE FEE SCHEDULE UPDATE PROCESS AND PHYSICIAN/PAYER RELATIONS

1. The French RVS is not a technical valuation of medical procedures based on time, complexity, intensity, and other factors. Although the values of surgical procedures are clearly a function of time, the relationship between value and time varies by medical specialty sometimes reflecting differences in intensity but often reflecting interspecialty medical politics and/or societal preferences for different branches of medicine according to their prestige.
2. The French RVS has been developed and modified largely by the medical associations and by the health insurance funds' physician-controllers/medical advisers. Disagreements over this process have largely been resolved among these parties. Although, in 1985, the Ministry of Social Affairs affirmed its unilateral authority to modify the RVS, it is likely to continue to rely on the recommendations of the standing commission on the RVS and all of its subcommittees. Thus, adjustments in the RVS, refinements in the coding system, and valuation of new procedures are likely to continue to result from consensual working group processes relying on few technical studies, much expert judgment and the participation of medical association representatives and health insurance physicians.
3. With the exception of fostering (ever so slightly) general practice as opposed to specialty services by adjustments in the RVS and through negotiations over the value of conversion factors (Fig. 1), the French fee schedule has rarely been used explicitly as an instrument to promote health policy objectives. First and foremost, it has served as an instrument of price policy and incomes policy for physicians. For example, from 1962-1979, the real income of' general practitioners and specialists increased, respectively, at an average annual rate of 1.7% and 0.5% (5).
4. The French system of negotiating national agreements (conventions) every 4 or 5 years, and adjustments in conversion factors every year, has created effective working relationships, with regard to technical issues focused around the RVS, between the two major medical associations and the NHI funds. However, the issues concerning physician profiles and incomes have often resulted in acrimonious debate. What is more, in spite of the apparent two-sided nature of these negotiations, the government has had the upper hand in matters of price policy by circumscribing the terms of the agenda and often by setting unilateral constraints.
5. Since 1980, the foremost strategy for gaining the acceptance of physicians to abide by the national fees has been accomplished by allowing the emergence of a large second sector within which physicians may "extra-bill" over the amount of the nationally "negotiated" rate. In 1987, 27% of French physicians chose to join this sector. The figure is lower for general practitioners and very much higher for specialists. It is also much higher for physicians in urban areas. For example, 50% of physicians in Paris decided to join the second sector.
6. The open-ended commitment of French NHI to finance private medical practitioners, on a fee-for-service basis, according to a national fee schedule, has resulted in persistent but largely unsuccessful attempts, on the part of the NHI funds, to control the volume of medical services (6). Despite physician profiles, "selective controls," and continuing education programs to promote "le bon usage des soins" (appropriate use of services), there is no evidence of any trend indicating containment in the growth rate of the volume of medical services (Fig. 2; the rate ges back up in 1988).

1. There is little technical expertise used in updating the RVS in Germany. While unit costs and projected utilization of medical care are considered, the assigned value tends to be determined by a kind of political "give and take" between medical specialty groups. As new medical technologies emerge, their valuation is determined essentially by the politics of acceptability. This is also true of the devaluation and revaluation of old procedures.
2. Since the 1977 Cost Containment Act, a national commission known as "Concerted Action," consisting of representatives of government, unions, employers, doctors, and sick funds, has been responsible for determining the federal expenditure cap. Although Concerted Action is often presented as a nonpolemical, highly technical, negotiation process where the outcome is reached by consensus, it more closely resembles a regulatory process whose outcome is determined according to a formula that relies on measurable economic indices and projected estimates of employee wages and practice costs.
3. With the imposition of federal as well as regional expenditure caps, the German system of reimbursing ambulatory care physicians has shifted the burden of cost-control from the health insurance funds to the association of insurance doctors (AIDs). There is, consequently, little effort on the part of government and health insurance funds, either to analyze patterns of medical care utilization or to evaluate the appropriateness, let alone effectiveness, of medical care.
4. Within a system that combines regional expenditure caps with item-of-service payment to physicians on the basis of a relative value scale, the fees for services performed are automatically linked to the total volume of services provided by all physicians and are determined retrospectively. To assure receipt of their expected earnings, although rational behavior would motivate physicians to reduce, collectively, the number of their services so as to be compensated at a higher rate, individual physicians are motivated by what Brenner calls "irrational behavior patterns" (in a collective sense) to increase their volume (7).
5. The regulation of volume (or medical care utilization) has not been a priority in Germany. While the law provides for "economic monitoring boards" to review utilization, this body has merely produced profiles of physician practice patterns. There has been no collection of any case-mix data or any other information which could be helpful in assessing the uncovered patterns. Thus, it appears that economic monitoring has relied largely on deterrent effects based on fear of sanctions rather than on positive incentives to educate physicians.
6. While the expenditure cap has been successful because it derives largely from governmental regulatory authority, the actual distribution of funds by the AIDs across general practitioners and specialists has been left to the federal and regional negotiation processes over the RVS and economic monitoring. The shift from an open-ended NH! system (French-style) to one operating under an expenditure cap whereby the burden of cost-containment is passed on to physicians could, potentially, shift back some of this burden to the public in the form of decreases in access and quality of health care. However, we have no evidence on this score.

1. In most Canadian provinces, the medical profession has independence in determining the RVS component of the fee schedule. The allocation of global fee increases among specialties results from inter-specialty negotiations before standing committees. Specialty groups request increases based on perceived inequities, changes in practice costs, new technologies, utilization, and malpractice premiums.
2. Fee schedules in Canada are far less detailed and complex than the Medicare fee schedule in the United States recently passed by Congress (Omnibus Budget Reconciliation Act of 1989). Past allocations of global fee increases have resulted in disproportionately high payments for procedure-based services to the detriment of cognitive services. The current trend in some Canadian provinces is toward the elaboration of more sophisticated relative value scales based on technical studies. In British Columbia and Ontario, for example, the traditional intra-specialty "eyeball" method of revising the RVS is now being questioned. This method of allocating global fee increases on the basis of "expert opinion" about the clinical substance and relative worth of individual procedures has proven highly subjective and prone to stalemate (8).
3. While the medical profession is largely autonomous in refining the coding system in Canada, the Quebec government brings specific fee schedule codes into negotiations. By eliminating some procedures from the fee schedule and reducing the value of others, the government has been able to slow the rate of increase in the utilization of high volume medical services.
4. Although global adjustments to physician fees in Canada are negotiated between provincial governments and the medical profession, the outcomes are heavily influenced by budgetary constraints. During periods of economic expansion, fee increases for physicians have been generous. When budgets are tight, provincial governments negotiate or impose reductions in the rate of increase in fees. When faced with sustained reductions in fees, physicians have not been able to offset income losses through increased utilization (9).
5. The Quebec government has approached expenditure control in a more draconian manner than any other Canadian province. Two distinct phases may be distinguished. From 1971 to 1977, the government limited expenditures for physician services by allowing only a 1% increase in global fees. Tight control over fees coincided with increased utilization of physician services. During the second phase of expenditure control, the government has linked fees to utilization by accepting a physician-sponsored plan to place quarterly individual income ceilings on general practitioners, a 75% fee reduction on high volume specialty procedures (following an income limit by procedure), and average annual income targets for all physicians.
6. In provinces where third-party arbitration or fact-finding is used to settle disputes between the government and medical associations (Ontario, Alberta, Manitoba, and Saskatchewan), outcomes come more slowly than in provinces where direct negotiation is used (British Columbia and Quebec). However, the ability of provincial governments to implement expenditure targets (British Columbia) or ceilings (Quebec) appears to be more related to political, social, and economic factors than to negotiating structures.

   While the individual quarterly income ceilings are high enough so that physicians can, and do, earn incomes in excess of the projected average income targets, profiles of physician billing patterns are monitored to discourage large increases in services rendered by individual physicians. When a physician's activity profile is found to include services of questionable medical necessity, a peer review committee may impose sanctions whereby the physician must return a portion of the income derived from these services.

7. While provincial governments in Canada have relied on the fee schedule update process as an instrument for controlling physician expenditures largely by limiting increases in global fees, there is currently a trend for government authorities to take an interest in patterns of medical care utilization, and in some cases, to link prices and quantities (10). Such a policy of controlling both price and quantity of physicians' services is, quite bluntly, an incomes policy. It has provoked much resistance from the medical profes

INFERENCES AND INTERPRETATIONS

1. The experience of Western Europe and Canada suggests that health systems which combine NHI and private fee-for-service medical practice are able to reconcile these elements with global expenditure control-at least in comparison to the United States. But no one could ever examine the evidence and conclude that this is easy. Even one of the staunchest advocates for the use of fee schedules under NHI has likened the challenge of reconciling fee-for-service payment with global expenditure control to "squaring the circle" (Ref. 11; in this paper, Robert Evans goes well beyond lamenting the difficulties to devising an ingenious scheme for linking fee adjustments to the control of volume).
2. The formal negotiating machinery in France, Germany, and Canada is actually tightly circumscribed by imposed governmental constraints. Success in achieving relative expenditure restraint for physician services-in comparison to the United States - appears to have been accomplished through the use of strong price controls, usually binding fee schedules (France); global fee adjustments, expenditure targets, and incomes policies (Canada); or direct expenditure caps (Germany).
3. The structure of physician fee negotiations in France, Germany, and Canada is largely corporatist, that is, closed to all but the principal "social partners"-physicians, government, and payers. Consumers, patients, or beneficiaries are not formally represented. In fact, parts of the negotiating process are so secretive that it is difficult, even in retrospect, to learn what transpired.
4. Compared to the United States. France, Germany, and Canada rely far less on technical studies which can provide a basis to adjust the RVS, refine the coding system, and value new procedures. Their fee schedules have been developed largely by the medical associations on the basis of "expert" judgement and a kind of political "give and take" between medical specialty groups.
5. Fee schedules in France, Canada, and Germany tend to reward, disproportionately, procedure-based services to the detriment of cognitive services. The process of updating the RVS component of fee schedules has been slow. Although efforts have been made to increase the value of management and evaluation services of general practitioners as well as specialists, there are still powerful financial incentives for physicians to perform ancillary services and procedures.
6. In contrast to the United States, France, Germany, and Canada have virtually no government or payer intrusion in clinical practice. This observation supports what may be called "Reinhardt's irony" (12):

   The less tightly society controls the overall capacity of its health system and the economic freedom of its providers to practice as they see fit and to price their services as they see fit, the more direct appears to be the private or public payer's intrusion directly into the doctor-patient relationship-the less clinical freedom at the level of treatment will payers grant providers.

7. Reinhardt's irony can be understood in the context of the Marmor and Thomas hypothesis that governments or payers, irrespective of the structure of bargaining or negotiating systems, prefer gaining physician concessions on amounts of payment in exchange for concessions on methods of payment (13).

   The evidence about physician fee negotiations in France, Germany, and Canada supports this hypothesis insofar as neither the health insurance funds nor the government has ever seriously challenged the legitimacy of fee-for-service medical practice on the basis of a fee schedule. But as volume has become more of a problem, payers, while not questioning the methods of payment, are gradually extracting physician concessions on utilization control, not merely on payment levels.

8. In France and Canada, the health insurance funds are not nearly as active as Medicare, Medicaid, and private payers in the United States, in performing utilization review, quality assurance and getting involved more generally in the reform of health care organization and finance. Nevertheless, over the past decade, French and Canadian payers have slowly become more active in managing the health care system. Although French physicians have refused the principle of expenditure targets for ambulatory care, two Canadian provinces-British Columbia and Quebec- have been leaders in what Jonathan Lomas and colleagues call "minding our Ps and Qs" (10).

   In Germany, since the health insurance funds simply transfer a global budget for physicians' services to associations of insurance doctors (AIDs), there is no incentive for the payer to control use of medical care. The problem of control and management is simply shifted to the AIDs.

CONCLUDING OBSERVATIONS ON THE UNITED STATES

ACKNOWLEDGMENTS

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