The need to reform the way in which primary medical care services are provided has been a consistent theme in recent reports and reviews of the Canadian health-care system. The Claire report in Quebec, the Fyke report in Saskatchewan, the Mazankowski report in Alberta and the Kirby reports in Ottawa have all referred to the need to change the way the primary care system works.

The fact is the primary medical care system has changed very little since medicare was introduced in the 1960s. There are exceptions, but much of it resembles a cottage industry of individual producers who are undercapitalized, lack good information systems, wasteful of physician resources, and highly inefficient. The integration of management and specialization of service that were features of other service industries in recent decades have never taken place in our primary medical care system.

Since the publication of the Hastings Report 30 years ago, many observers have recommended that general practitioners be encouraged to work in group practices, that nurse practitioners and other non-physician providers be introduced into primary care settings, that evening and weekend primary care services be available in the community to ease pressure on hospital emergency services, and that governments move away from fee for service reimbursement toward capitated forms of payment. (By capitated, I mean a system of reimbursement in which physicians are compensated at regular intervals for assuming responsibility for the care of a patient, rather than being paid a fee for each individual service provided to each patient.)

Governments have promised change. Two years ago the Ontario government said it would move 80 percent of its primary care physicians into new organizational arrangements within four years. The First Ministers Health Accord of September 2000 set aside $800 million to assist in covering the transitional costs of primary care reform. Progress has been glacially slow.

I suggest that one of the critical barriers to reform is the unique nature of the government-physician relationship in the Canadian health-care system. I am referring to the open-endedness of the contractual relationship between physicians and the provincial agencies that pay them for insured medical services provided to Canadian residents.

Legislation in most provinces requires the provincial Medical Services Plan to issue a “billing number” to any licensed physician who applies for one. A billing number, in effect, is a contract. It requires the plan to pay the physician for insured medical services that he provides to residents of that province.

However, the billing number contract places few, if any, requirements on the physician. For example, it does not specify location of practice, type or number of patients seen, organization of practice, relationship of the practice to other health-care services in the community or region, or even the requirement that the physician actually practice. A billing number, in other words, is a very one-sided contract””specific with respect to the responsibilities of the payer, but openended with respect to the responsibilities of the provider. (Hospital-based physicians do of course require privileges from the institutions where they practice, and these privilege arrangements can be prescriptive. My comments relate principally to community physicians.)

I suggest that these open-ended billing number contracts that provincial medical services plans hand out are a principal cause of the inertia which has stalled reform of primary medical care services. Billing numbers permit general practitioners to practice independently or in very small groups, rather than in association with nurses, pharmacists or other providers. They allow physicians to choose practice locations that do not always correspond to population needs, putting rural areas, inner cities and some ethnic communities at a relative disadvantage. And they guarantee compensation regardless of practice pattern, so that suburban walk-in clinics proliferate, while medical management of the chronically ill and the elderly suffers.

The fault does not lie with physicians, because most of them want only to serve their patients, earn a decent income and have sufficient time to enjoy a personal and family life. Physicians simply respond to the incentives placed in front of them by governments. But one can certainly ask why governments ostensibly committed to primary care reform leave in place these open-ended contracts for both existing and new physicians. Certainly, attempts to introduce population-based funding for primary medical care services (which in effect are attempts to introduce closed-ended contracts with specific performance commitments by providers in exchange for compensation guarantees) will be much more expensive and difficult to arrange if open-ended billing numbers remain an alternative available to physicians.

As an alternative to the current open-ended contracts, a provincial medical service plan could remove the legislated right of a licensed physician to a billing number, and instead offer meaningful closed-end contracts to all new general practitioners who wish to practice in that province. A similar offer could also be made to all general physicians in practice. The contracts could specify compensation, and the human and physical resources that would be provided at public expense to support the physician’s practice. They might also specify the location of the practice and patient load as well as outline expectations for the working relationships with other local health-care services.

Alternatively, the contracts might provide for a patient roster, compensate on a population basis, and leave the physician free to build a practice in competition with other physician groups. In effect, the contracts would define the business relationship between the payer and the provider. They would not interfere in any way with the clinical relationships between physicians and patients.

I believe that many new physicians would find such contractual arrangements quite acceptable. Many established physicians might as well, though there would be significant transitional costs that the public payers would need to accommodate. The result should be a much more equitable distribution of physician resources and improved access to medical care for many people. The efficiency of delivering primary medical care should also improve, as physicians and other providers work more closely together, though this is likely to take a good deal of time to work out.

Three further points need to be made about the development of meaningful contractual relationships between public payers and physicians.

First, there is doubt that this process could be undertaken successfully by provincial ministries of health. Senior officials of these ministries often operate in a highly political environment with an intense short-run focus; the technical capacity of some provincial health ministries has been compromised in recent years by downsizing and the transfer of resources to health regions; and the rapid turnover of leadership in health ministries makes continuity of purpose extremely difficult to achieve.

So, to create credible and viable contracts with physicians will require the transfer of physician compensation budgets from provincial health ministries to arms-length health regions, hospitals or other funded agencies, perhaps with certain parameters that apply province-wide.

Health regions have been in place now in most provinces for the better part of a decade, with a mandate and the resources to provide many publicly paid health-care services. But to date these regions have been given virtually no responsibility for the provision of physician services.

Physician payment remains a responsibility of health ministries, which negotiate provincewide contracts with the physicians’ unions. Up to now, these contracts have done little to assist in the integration of physician’s services with regional health-care services, or to promote primary care reform. A notable exception is the decision by Alberta in 1994 to move the responsibility and resources for the provision of all laboratory services, both hospital and contracted private laboratory, to the health regions. This step, which moved about 10 percent of the physician budget to the regions, produced substantial savings and an integrated lab service at the regional level.

Both the Fyke and Mazankowski reports recommend that at least part of the responsibility for the payment of physician services should move to the regions, and Volume 5 of the Kirby report suggests that this should happen in the longer run. Along with the elimination of an automatic right to a billing number, these recommendations if actually implemented would break the gridlock on primary care reform in these provinces.

Second, it may well be that some new physicians might not wish to enter contractual arrangements with public payers. In that case, they could opt out of medicare and practice privately. All provinces permit physicians to opt out of their public medicare plan; most provinces permit opted-out physicians to charge whatever prices they wish for their services; and some provinces permit the sale of private insurance to cover the cost of opted-out physician services. These arrangements have existed since the beginning of medicare, and have never resulted in federal penalties. Admittedly, there are very few doctors who have opted out in Canada. I suggest that this is because the very open-ended nature of the contractual arrangements under which physicians work gives virtually no incentive to opt out.

But, if the provinces tackle the billing number issue, move physician compensation responsibility to the regions, and begin to wrestle with the issue of primary care reform in a comprehensive way, some physicians may well prefer to market their services privately. Perhaps this would become feasible, at least in the larger urban areas. Perhaps a small private sector operating in parallel with the public system is the price we must pay for progress in reforming primary medical care and integrating physician and regional services. Certainly, the kind of change in physician compensation and organization that I am suggesting will not come without a price.

If, in exchange for that private option, we were able to establish multidisciplinary primary care practices, well linked to other regional services, funded on a population basis, would that be a choice worth making? The question needs to be asked, because the massive budgetary increases for physician services that have been provided in some provinces in recent years following the federal reinvestment of funds have not bought change. The provinces cannot afford more massive increases. If change is to occur, what’s the quid pro quo going to be?

Third, an explicit private option might help deal with the demands for choice and speedier access that will emerge over time from those patients who can afford to purchase private services. Individuals with the financial ability to buy their medical care will seek ways to circumvent the accessibility rule of the Canada Health Act, which prevents private purchase of medically necessary care and thereby ensures access on the basis of need rather than ability to pay, and the more entrepreneurial physicians will try to find ways to accommodate private purchase of service within the public system, by bending or breaking the rule.

Might we not be better off recognizing an explicit opted-out private option, while strengthening the procedures that ensure equity of access for the overwhelming majority of individual Canadians who will choose the public system? Is it possible to design a system in which private services provided by opted-out physicians can coexist with the broader public health-care system, as private education coexists with the public education system? Are we prepared to tolerate an arrangement in which physicians work both sides of the public-private fence, as some do in the United Kingdom, or should we maintain a firewall between public and private services? Again, these questions need asking.

One final point. Two previous attempts in British Columbia to address the billing number issue have been challenged before the courts, and have not survived. This legal experience is sometimes used by supporters of the status quo to argue against any attempt to introduce an element of accountability into payer-provider contracts. However, these earlier plans provided explicit exemptions for British Columbia graduates and the courts could not support the exception.

There is no doubt that a move to reform the physician contracting process that treated all physicians equally could be successful over time. A billing number is a privilege, not a right, and a carefully designed plan to enable necessary reform to occur in the primary medical care system is not doomed to judicial dismissal.