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Challenges to the implementation of capitation payments for chronic illness

Fee-for-service medicine has a long history in Australia but its limitations in supporting high quality care, particularly for people with chronic and complex conditions, are well documented. Despite this, there has always been resistance at the political level to moving away from a fee-for-service payment system for doctors, largely due to the risk of alienating the powerful AMA.

In the following piece, Margaret Faux argues that the political climate on fee-for-service medicine is shifting, with the Minister for Health and her Government colleagues prepared to explore alternative options, at least for the management of people with chronic illnesses in primary health care.

This reflects the views of Stephen Jan from the George Institute for Global Health who reported recently for Croakey on the Institute’s recent roundtable meeting on reforming health funding. He reported that moving away from fee-for-service funding was a key theme emerging from the meeting and that ‘A key ‘take-home message’ from the workshop…[was]…that current payment models which reward activity over outcomes need to be fixed.’

However, Margaret Faux warns against rushing to abandon the established fee-for-service system. She argues that the often cited alternative to fee-for-service – capitation funding – has a number of legal, constitutional, economic and practical barriers to overcome before it could be introduced into the Australian health system and urges politicians and policy makers to tread carefully.

Margaret Faux writes:

Moves to introduce capitation styled payments for general practitioners who provide services to patients with chronic illnesses are gaining momentum. Minister Sussan Ley was on message recently, warning that Australian’s would ultimately suffer if primary care reforms targeting chronic disease were not implemented. And health experts at the George Institute were again reported as recommending a capitation payment model for chronic disease, where GPs would be paid per patient for a year in lieu of the current fee for service arrangements.

But capitation may be easier to spell than implement. Introducing capitation payments potentially presents significant legal challenges, and even if these barriers are able to be overcome, changes to GP item numbers in the Medicare Benefits Schedule (MBS) will inevitably create a whole a new raft of other issues and problems, if for no other reason than because GPs are not the only healthcare providers who treat patients with chronic illnesses.

Legal issues

Capitation does not feature significantly in Australia’s health funding landscape largely due to the fact that at law, the relationship between a privately practicing doctor and a patient is governed by contract law. In practical terms this preserves the small business nature of private medical practice, secures the right of patients to enter voluntary private arrangements with the doctor/s of their choice and ensures that Australian citizens cannot have a required relationship with a doctor forced upon them without their consent.

It also provides that Australian doctors are free to set their fees for their private professional services as they see fit and cannot be subjected to any compulsion to charge in a particular way or at a particular rate. The 2009 High Court case of Wong v Commonwealth decisively settled the scope of the constitutional placitum which Justice Michael Kirby described as “a rare constitutional guarantee” because of its unique character in protecting both doctors and the patients that they serve.

This does not mean that the constitutional guarantee is a blanket barrier to controlling health expenditure or doctor’s fees, it’s just that by definition, capitation doesn’t sit well with the constitutional right of doctors and patients to enter private arrangements, free from excessive intrusion by the government.

So whilst capitation as a way of reimbursing doctors for chronic disease services may be a great idea, its implementation will present significant legal challenges requiring creative interpretation of the constitution so as to preserve the rights of patients and doctors to come to their own arrangements if they so wish.

In addition, any implementation will need to deal with the fact that Medicare does not pay doctors – never has. Medicare rebates are payable exclusively to patients, and can only be transferred to doctors with the patient’s consent. Bulk billing is the most common example of this transaction. So if the federal government were to change this arrangement under a capitation model that directly pays doctors a set amount in such a way so as to create a legal or practical compulsion upon them, it may risk constitutional invalidation.

This notwithstanding, incentivising doctors in a similar fashion to the way in which the Medicare Practice Incentive Program already operates, or mirroring the way in which some of the intensivist items in the MBS work (which is a mixed arrangement of capitation for certain services provided in a 24 hour period while still permitting fee for service for additional items not included in the capped amount), may provide opportunities for the introduction of this type of reform. Although the intensivist model is easily scammed.

GP-centric?

But legal barriers aside, the current government’s blind obsession with GPs completely overlooks the fact that patients with chronic diseases are treated by specialists too. General physicians, geriatricians, cardiologists, paediatricians, endocrinologists, renal physicians, rheumatologists, rehabilitation physicians and psychiatrists are but a few of the many specialists who also regularly manage people with chronic illness.

In fact, last year during the co-payment debate a specialist client informed me of an internal bulletin he had received putting him and his colleagues on alert to be ready to take over the regular care of patients with chronic conditions, who it was feared might stop attending their GPs if co-payments were introduced. And because specialist services are paid at much higher rates, the financial impact of this, had it happened, would not have been insignificant.

For example, almost all patients with a chronic disease will meet the criteria for the relevant specialist consultation item 132 for which the rebate is six times the cost of GP item 23 at $224.25. The next two visits, each for the subsequent attendance item 133 will cost tax payers another $112.30 or the equivalent of another six GP visits. Then all subsequent visits will attract item 116, which can continue for the remainder of the 12 month referral period, each costing $64.20 or about double the cost of the same visit to a GP. If you assume one visit per month, the total cost to tax payers if specialists had picked up the chronic disease tab would have been $1,026.65 as opposed to $444.60 if the same services were provided by a GP. In the case of a geriatrician the rebates are higher again.

And it is not always the case that the GP is the gatekeeper of care for the chronically ill. Patients may also fall into a well organised hospital based clinic after a significant event. Consider the diabetic with peripheral vascular disease requiring a hospital based procedure such as angioplasty. The patient may be simultaneously serviced by the GP, the hospital diabetes clinic and the specialist lead high risk foot clinic. Capping GP services might increase their attendances to the hospital, so that the GP becomes de-skilled and acts as little more than a referral service to specialist lead clinics.

The introduction of capitation needs to consider the whole system of health care for the chronically ill (from general practice to specialist care to nurse led clinics and allied health services) so that those with chronic illnesses are encouraged to attend multi-disciplinary clinics rather than public hospitals clinics, emergency departments or seek private specialist services.

At the same time, Australia’s primary health workforce must be supported in its role as a gatekeeper, triaging and remaining intimately involved in the metering out of specialist services.

Minister Ley informs us that this is not change for change’s sake, but change that will actually make things better. It is hard to take the government seriously though, when yet again, just one predictable component across the entire spectrum of health service providers appears to be the target – our embattled GPs.

There are currently 5,769 items in the MBS and focusing only on the handful claimed by GPs has the potential to tip the balance to hospital and specialist services, which are more expensive, and may not always make things better for patients with chronic conditions.

While all ambitious plans are challenging, the successful ones are multifaceted solutions. If the government’s approach to managing the chronically ill starts and ends with the GP it is unlikely to pay off.

Margaret Faux is a lawyer, the founder and managing director of one of the largest medical billing companies in Australia and a registered nurse. She is a research scholar at the University of Technology Sydney

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Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
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Closing the Credibility Gap 2013
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2014 conferences
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AIDA Conference 2014
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Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
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2015 conferences
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Population Health Congress 2015
2016 conferences
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2017 conferences
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Australian Palliative Care Conference
2018 conferences
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