.J-.

Attachment 01

2017-02-09

Fee and Income Relativity 101

For Purposes of Discussion at Spring 2017 Representative Forum

I. Background
The environment around physician compensation in Alberta is shifting. Fiscal pressures and
rapidly rising physician expenditures have resulted in increased attention to physician
compensation. The potential for a public disclosure of individual physician payments (i.e., the
sunshine list) is expected to significantly increase this attention, both from the public/press
standpoint as well as funders.

Physician equity (fee equity vs. income equity) is also a growing concern amongst physicians.
Under the Amending Agreement, the AMA has new responsibilities that go along with co
management of the physician services budget. Equity is becoming a common theme amongst
many of the Agreement initiatives (e.g., SOMB Rule Changes, Peer Review, and Reconciliation).
The move towards greater physician stewardship of healthcare resources emphasizes the need
for improved allocative efficiency, sustainability and compensation equity.

Several of the Physician Compensation Committees (PCCs) mandated priorities relate to

equity and relativity, and a current high priority is to upgrade the physician business costs
model (PBCM), as it is a vital component in almost all relativity work. AMAs representatives to
PCC are seeking a mandate to proceed. At the same time, the AMA Compensation Committee
has been considering strategies for moving towards equity with principles, goals and timelines
for deliverables.

The objective of this paper is to provide some background and context around fee and income
relativity issues, outline past AMA efforts to achieve relativity, and explain the current state of
income and fee equity in Alberta and Canada.

II. Some important concepts around relativity

Relativity in physician compensation refers to the establishment of payment rates based on the
average input requirements of providing a service. Over the past few years, the AMACC and
PCC have been working to standardize these input requirements, which are typically expressed
as follows:
Physician time (direct and indirect patient care).
Complexity (special skills required, judgement, experience and education).
Intensity (physician stress, potential for an adverse result to patient, risk to the
physician) and
Overhead costs (examples include staffing, leases, equipment, medical supplies).
We sometimes make the distinction between fee relativity (time, intensity, complexity,
overhead associated with a particular health service code) and income relativity (work hours,
work conditions, training, overhead) associated with providing a typical set of services within a
section. These relativity perspectives represent two ways of measuring input requirements: one
from a micro (fee-level) perspective and one from a macro (section-level) perspective.

We also distinguish between:

Intrasectional relativity relativity differences within a section, and
-

Intersectional relativity relativity differences between sections

Equity is defined as having a fair or just difference in the distribution or allocation of a

resource between groups. The term equality means to treat everyone the same. In this sense,
relativity is typically associated with equity. Not everyone is paid the same, but the differences
are based on physician effort (time, intensity, complexity) after accounting for the direct cost of
providing the service (overhead). With perfect relativity, differences in payments for services
can be fully accounted for by the differences in physician time, intensity, complexity and
overhead costs.

It is important to note that there are other ways to value the services that physicians provide
other than measuring input costs (such as time, intensity, complexity and overhead). One
alternative method that is receiving increasing attention is to pay physicians based on the
results they achieve (e.g., patient outcomes). However, to be successful, these schemes generally
need to accurately measure and link patient outcomes to societal value. As a result, the patient
outcome reward model is almost always done supplementary to input costing models
(otherwise, funding would flow inequitably to select interventions with high probability of
successful outcomes and/or to physicians with relatively compliant patient groups, while
funding is more restricted for difficult, time consuming work with less clear outcomes or
marginalized patient populations).

III. Why is relativity/equity an issue?

Physician compensation is intended to meet the goals of providing patient access to medical
services and quality medical care as well as ensuring efficiency and productivity of physician
resources. Assuming there are limited resources on a global scale, fees that are set inequitably
will negatively impact these objectives. In addition, there are other good reasons to avoid
inequitable payments that are not based on relativity:

1. Inequity negatively impacts social cohesion. In a medical association context, this can
lead to disunity, a breakdown in collegiality, an us versus them attitude and in
extreme cases, a splitting off of certain groups (e.g.; specialists versus general
practitioners [GPsfl.
2. Inequitable payments provide skewed price signals. Services that are over-valued are
often over-delivered. Physicians are attracted to these services (either individual doctors
or entire specialties) as they provide a higher level of compensation for the cost and
effort of providing them. Similarly, under-valued services can lead to under delivery.

Page 2 of 24
 3. A dis-unified profession with inequitable fees is fertile ground for government
intervention. In our medicare system, government has a responsibility to ensure that
services are provided at reasonable cost to taxpayers. Physicians have long taken a
leadership role in the establishment and maintenance of fees. If they are seen to be
failing in this responsibility, government could potentially act unilaterally (or in some
cases, such as Ontario, take advantage of the situation to reduce rather than redistribute
fees).
4. The new Amending Agreement has physicians taking on a greater stewardship role over
health system resources, to help bend the cost curve in this time of scarce resources.
Demonstrating leadership of the fee schedule within Alberta is an important part of this
stewardship role.

IV. Is there a problem in Alberta?

All analyses and observations in this paper (exception to Figures 9 and 10) are based on
aggregated data from the Alberta 2015-2016 fee-for-service claims data. The methodology
looked at a core group of physicians who:
Bill FFS exclusively (i.e., all ARP and blended ARP physicians are assigned to the
non-core group even though some of them have high FFS billings).
Provide services at least 100 days annually with at least $200 in daily billings.
Have at least $100,000 in annual billings.
Are outside of the section of pathology (as the claims for a single pathologist may
include services paid within the same clinic but performed by another physician).
Figure 1 shows the distribution of annual gross fee-for-service claims for Alberta physicians.
Approximately 66% of physicians bill $500,000 or less each year (note: this may include
some part-time physicians). At the same time, there were 404 physicians who billed over
$1M in the fiscal year.
3000

Distribution of Annual Billings

2015-16 Billing Data
P0-6084
2500

2400

1300

1209 izss

5400

ala

139

0 I

-2S0 250- 500- 750- 1000-1250.1500-1750-2000.5250-2500-2750-3000.3250-9500 3750-4-42Se4S00-4?1D- 5400-5210-5500-5750-

540 750 1100 1250 1500 1750 2500 7250 2500 2750 3000 3250 3500 3750 4000 4250 4300 4750 5400 5250 5500 5750 6
Annual Billings (SOOOs)

Figure 1- Number of Physicians by Annual Billings 2015-16 Billing Data

Page 3of24
 Figure 2 demonstrates that average gross earnings before overhead vary significantly by
section, with an approximate 4:1 ratio between the highest billing section (Diagnostic
Imaging) and the lowest billing (General Practice). Note that fee-for-service data on
Endocrinology & Metabolism, Rheumatology, Infectious Disease and Neurosurgery are not
shown as the high proportion of Alternate Relationship Plan (ARP) earnings in those
sections makes fee-for-service data unreliable for comparison purposes.

1800000
Average Gross Annual Payments per Physician
1600000
by Section
2015- 1.6 Billing Data
1400000

1200000

1000000

800000

Iii i iii i:ii1 liii

600000 -

II

I- D = - I- - )Z L U) X V

Figure 2- Average Annual Gross FFS Billings by Section 2015-16 Billing Data
-

Page 4 of 24
 Figure 3 shows that the proportion of physicians who bill $1M or more also varies
significantly within each section. The ratio for all fee-for-service physicians in Alberta is 7%.

80%
Percent of Physicians with Annual Billings Over $1M
by Section
2015-16BiHing Data

60%--

46%

42%

q 32%

30%+

20% --
-

17%
14%
12%

I
10%
10% 18% 7% 7%
I I
11.1 Ii.i..ii;
4 4% 35

1 -
0 I- Q 0 S W -J -J >- 0 I- 5 W 0 0 a. u a.

00 (3 Z ) 0 0 W 0 a.

Figure 3- Percent of Physicians with Annual Billings Over $1M by Section 2015-16 Billing Data

It is important to understand the reasons behind the distribution of gross payments between
sections. Some possible explanations to explore include:
Overhead - high billers may have high overhead costs
Workload - number of days worked, number of hours worked per day
Complexity and intensity of services - although difficult to objectively measure these
differences between sections, one consideration is to better understand the
differences in training or skill acquisition.
After hours - sections with higher proportions of services performed in periods
where supplemental payments occur.
Efficiencies closely related to intrasectional relativity, there could be circumstances

where a fee is appropriately priced for relatively low volumes. Efficiencies due to
economies of scale (and a relatively narrow scope of practice) can significantly affect
differences in gross annual payment between sections.

Page 5of24
 Intrasectional relativity issues fees that are not relative within a section. Physicians

who have a relatively narrow scope of practice gain or lose within the section
depending on the codes they are using, and
Intersectional relativity issues fees that are not relative between sections. This could
-

be due to the allocation process not moving fast enough to keep pace with
technological change. It could also be related to market conditions (price for one
specialist versus another).
It is also important to note that this comparative data does not include all income such as
payments made to physicians from AHS, or billed privately or through WCB.

Workload

There is a positive correlation between the number of days worked and annual payments. In
Figure 4, days worked explained approximately 11% of the overall variance in payments. If
controlled for specialty section, this correlation would be higher.

This correlation appears to break down for high billers (e.g., physicians with claims over
$2M did not appear to work more days than physicians with lower claims).

Annual Billings ($) vs Days Worked

by Physician
$6,000,000

$5,000,000

$4,000,000 .

$3,000,000

$2000000
4 S

$1,000,000 :..

$0
100 150 200 250 300 350
Days Worked
Source 2015/16 Physicians Claims Cile (certain data escludeci)

Figure 4- Annual Bffling $ vs Days Worked 2015-16 Billing Data

Page 6of24
Overhead

There are several challenges associated with overhead, including but not limited to:
There are significant differences in average overhead payments by section, and it is
therefore possible that gross payments provide a skewed view of income earning
differences.
There are significant differences in overhead payments within each section, and it is
difficult to allocate overhead within the schedule towards individuals.
It is important to understand how fixed and variable costs change with different
levels of practice activity.
It is important to measure sections overhead consistently, including consistently
accounting for direct and indirect costs.
Some sections have organized their practices to take on greater overhead costs (e.g.
having enhanced staff and equipment resources to increase throughput), and are
seeking to have these costs recognized in the fee schedule
Other sections may have identified innovative models of care that are not being
implemented due to financial restrictions in the schedule. This leads to the need to
measure appropriateness of overhead expenses across the profession.

Updating the model used to estimate overhead is a priority for the Physician Compensation
Committee (PCC). This includes updating the data in the model (e.g., to reflect current
equipment, lease and capital requirements and costs) as well as improving the models
sophistication (e.g., ability to model fixed and variable costs as practice activity changes).

Table 1 shows overhead by Sectional Allocation Equivalent (SAE the AMAs measure of a
-

full-time equivalent physician), along with percentages of gross output. Please note that
overhead for several of the high overhead sections have recently been reviewed in relation
to the codes that were involved with the Individual Fee Review and will be further
reviewed as part of the model update. For illustration purposes, estimates for these sections
are drawn from the PCC Fee Review. These will need to be updated prior to using them for
purposes such as allocation.

Page 7 of 24
Table 1 Overhead Costs*, by Section, 2015-16
-

Section Overhead Per SAE Overhead Ratio

Anaesthesiology $M,352 13.2%
Cardiology $274,908 39.9%
Cardio & Thoracic Surgery $163,405 21.4%
Critical Care Medicine $57,060 10.8%
Dermatology $224,211 24.2%
Emergency Medicine $48,022 12.1%
Endocrinology/Metabolism $157,427 55.9%
Gastroenterology $194,737 29.9%
General Practice $160,527 44.5%
General Surgery $159,882 29.9%
Generalists Mental Health $129,167 28.1%
Infectious Diseases $144,296 56.5%
Internal Medicine $160,278 32.4%
Nephrology $139,187 22.4%
Neurology $146,546 33.9%
Neurosurgery $177,821 36.4%
Obstetrics & Gynaecology $181,915 30.3%
Ophthalmology $516,576 45.4%
Orthopaedic Surgery $160,332 31.1%
Otolaryngology $385,471 54.1%
Paediatrics $178,204 41.6%
Physical Medicine and Rehabilitation $139,850 31.8%
Plastic Surgery $209,2w 41.6%
Psychiatry $128,598 32.6%
Radiology $751,953 55.5%
Respiratory Medicine $166,682 21.4%
Rheumatology $142,011 52.3%
Thoracic Surgery $164,295 34.8%
Urology $169,424 27.8%
Vascular Surgery $157,593 32.1%
All Physicians $180,916 38.5%

*
Based on the Physician Business Cost Model (PBCM), adjusted in some cases by the analysis carried
out by the FCC for the purposes of the Individual Fee Review. The AMA acknowledges that estimates
for Diagnostic ImaginglRadiology are in particular need of updating, due to known issues with the
current PBCM.

Page 8of24
 After adjusting for overhead costs using the above ratios (an approximation of overhead for
each physician), there is still a significant spread between sections, ranging from $800,000 in
Respiratory Medicine to just over $200K for General Practice.

900000
Average Annual Net Income per Physician
by Section
800000
2015-16 Billing Data

700000

600000

500000

400000

li i. I i .1 I .1 1I II I
300000

200000

100000

0
In 0
z w a. J

LU a. U

Figure 5- Average Annual Net FFS Billings by Section 2015-16 Billing Data
-

Page 9 of 24
 After adjusting for the number of days worked, net income per day still varied significantly
between sections. Physicians in the top earning section earned just under $4,000 per day on
average (after overhead) while physicians in lower earning sections earned under $1,000 per
day.

11000
Gross vs Net Mean Daily Payments
10000
2015-16 Billing Data
9000

8000
Gross Mean Daily Payments
Net Mean Daily Payments
7000

6000

5000

4000

3000

ILLL[[
1111111 IiIiIIIIiIh
2000

1000

0
>-x uo
o z

Figure 6- Gross vs Net Mean Daily Billings by Section 2015-16 Billing Data

Page 10 of 24
Intrasectional Relativity

There is also significant variation in average daily billings between physicians in the same
section. Figure 7 compares each physicians average daily billings with the average for their
entire section. As an example on this chart, 424 physicians were at the average for their specialty
(the bar above the 100% mark).

The tail of this histogram is skewed to the right showing the outliers within their own sections.
While it is not explicitly shown on the chart, there were 339 physicians who billed 200 percent
(double) or more of their sections average daily earnings in 2014-15.

Physicians Daily Net Income as Compared to

Their Section Mean
500
450
400
u
C
350
300

Frequency
150
100
50
0
o Lt) C C 1.0 C If) C If) C 1.0 0 1.0 C If) C) Lfl C If) C If) 0 U
- r.j If) N 00 C -1 m D N 0 C cJ m If) 1.0 00 0 r
- ,-l -4 - - ,-4 r4 r.J rJ rJ r. rJ m cY ro m
Percent of Own Sections Mean Daily Billings

Figure 7- Physicians Daily Net Income as Compared to Their Section Mean

Some of this variation is justifiable, as it relates to average hours worked in a day, differences in
after-hours workload and remuneration, as well as the intensity and complexity of services
provided to patients (theyre billing different fees and those fees might be different for good
reason). However, it is also commonly understood that there are problems with intrasectional
relativity and that efforts to improve relativity vary significantly between sections. To address
this problem, the PCC has undertaken a project to have sections develop standardized INRV
values which includes the following:
1. Identification of overhead costs associated with each health service code owned or
jointly owned by the section.
2. Assignment of physician time estimates for each health service code.
3. Classification of intensity and complexity according to a standard scale, and
4. Consistent measurement and treatment of pre- and post-operative care.

The standardized INRV approach is currently being piloted with the Section of Paediatrics.
Page 11 of 24
Appendix A contains some further discussion on intrasectional relativity, including a table
produced by Alberta Health that shows the distribution of payments within each section.

Intersectional Re1atiyjy and SOMB Increases

As was shown in figure 6, there is an approximately 4:1 spread between the net annual earnings
(adjusted for overhead and days worked) of the highest versus lowest earning section.

Macro allocation efforts are sometimes geared to reducing the differences in these numbers, by
providing sections different fee increases depending on their circumstances. It is important to
note that fee increases (i.e., price changes) are only one factor driving changes in average
payments. Technological change, changes in practice, external constraints (e.g., O/R time) and
workload can all impact the quantity of services that a physician provides. Figure 8 shows the
compounded fee increases provided to sections over the nine-year period from 2005 to 2014,
alongside the increase in their average payments (unadjusted for overhead costs).

Average Payment Compared with SOMB Increases

160
2005-06 to 2014-15

SO

Average Payment% Increase

SOMB % Increase

140

*
130

IIiii
120

110

100
NEUR OMIT PED UROL lOIS INMO DIRD cvr EMSP ANES PSYC GP PLAS ORTh GNSG OBGY GAST DERM CARD OTOL

---------__

Figure 8- Average Payment Compared with SOMB Increases 2005-06 to 2014-15

Page 12 of 24
The divide between allocated fee increases and actual expenditures appears to carry on into
2015-16. For each section, Figure 9 compares fee increases with growth in physician
expenditures per physician, as well as the growth in expenditures per day, for 2015-16
compared to the previous fiscal year.

2015-16 Expenditure Growth Relative to Fee Increases

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

-2%
0 I 0 - C - 0 0 I 0 -j > (
cc cc < >- CD cD LJJ M
< -J
.- ,) I- tj Z ow cc a z
cu
3
-Oz w
Source: Annual claims file for 2015-16 relative to 2014-15 claims file

Figure 9-2015-16 Expenditure Growth Relative to Fee Increases

Page 13 of 24
V. Past and current efforts to address relativity and inequity in Alberta

There have been a number of initiatives in Alberta to address relativity. Projects undertaken in
the past 15-20 years included:

Relative Value Guide (RVG) Commission (1998-2000)

The objective was to address longstanding concerns about fairness and equity in the 50MB and
to establish a new Intersectional Relative Value Guide that would serve as a basis for paying
physicians. Several issues hampered the implementation of the RVG:

There was an upfront recognition that no section should receive an overall fee rollback.
Specialties and sub-specialties had differing views on relativity.
A number of methodological difficulties were identified, including significant variation
in the quality of section INRV submissions.
Groups negatively impacted were much more vocal than those who gained from
process.
The project ultimately polarized the profession, and the potential benefits were not seen
as worth the costs/ unrest.
There were a number of benefits that resulted from this project:
Section commitment to INRVs
An up-to-date overhead cost study and the introduction of the model office approach.
The RVG was used for one significant intersectional allocation.

Fee Equity Committee (FEC) (2001)

This Committee was created in response to the failed implementation of the RVG. Its purpose
was to promote fee equity in the SOMB and recommend to sections how to move to
intrasectional equity through allocation. This resulted in a recommendation to promote
intrasectional relative values (INRVs) and a commitment to the model office approach to
measuring overhead.

The AMA Board of Directors created the three-pool allocation method currently in use in
Alberta:
1. Section funding to recognize physician overhead costs.
2. Targeted/priority funding for system improvements. AND
3. Section funding on a fixed amount per physician (originally per FTE, now SAE).

INRV 101 and Section Rewrites (2002-current)

The AMA has provided guidance and financial assistance to sections to establish their
intrasectional relative values. The AMA has also provided assistance to a number of sections
who have rewritten/modernized their schedules, including: orthopaedic surgery (2002); general
surgery (2011); diagnostic imaging ultrasound (2009) and ophthalmology (2014).

Page 14 of 24
Additional priority funding for underfunded sections
AH and AMA board agreed to provide six sections with an additional $5,000 per FTE in
allocations for both 2009 and 2010. These six sections were: general practice; generalists in
mental health; psychiatry; paediatrics; internal medicine; and general surgery.

Section Allocation Equivalent (2011)

The Section Allocation Equivalent (SAE) measure was developed by the AMA in 2011 to
provide a better measure of full-time equivalent physicians than is currently in use by the
Canadian Institute for Health Information (Cl-h). The AMAs measure utilizes a richer data
source (annual claims file individual records) to account for claims billed per day as well as
days worked per year. It better accounts for part-time workers in a section, as well as section
members who work more than 209 days per year.

Individual Fee Review (2013-present)

The objective of the fee review was to address individual over-valued and under-valued fees.
This would promote relativity and help prevent any future unilateral fee cuts. Any changes
were to be expenditure neutral (i.e., reductions to be matched by increases elsewhere in the
physician services budget). Savings from the first round of the Fee Review (and limited to only
the first round) were ultimately returned to the Physician Services Budget as part of SOMB
savings in the 2016-18 Amending Agreement. The Fee Review was intended to augment and
not replace other relativity initiatives such as allocation, INRVs, and intersectional relative
values. The PCC has temporarily suspended work on the next round of the Fee Review,
pending implementation of initiatives under the 2016-18 Amending Agreement.

Schedule Redevelopment and ISRV (2015-present)

In 2015, the PCC initiated a project to redevelop the Schedule of Medical Benefits to streamline
and modernize payment. This would include restructuring the coding and diagnostic
classification (to match the International Statistical Classification of Diseases and Related Health
Problems, version 10 [lCD-b]), rules redevelopment, as well as establishing new relative

values for the new health service codes. The ultimate goal was to implement a new schedule,
new intersectional relative values, and a new claims system to handle payment. The project is
currently on hold pending implementation of initiatives under the Amending Agreement.

Page 15 of 24
VI. Approaches in other jurisdictions

It is important to note that no province has found the ideal method for addressing
relativity/inequities. The process is difficult circumstances change rapidly and theres often

vary little consensus among physicians on how to measure and how to adequately address
inequities. Ultimately, the solution involves more art than science. To be successful,
physicians and their representative sections must buy in to a process they know is not perfect.
The following outlines approaches currently undertaken in selected jurisdictions.

Ontario
Ontario allocates a substantial portion of funding to sections according to income relativity.
Specifically, sections receive an allocation based on a Comparison of Adjusted Net Daily Income
(CANDI).

The Ontario Medical Association (OMA) measures average gross daytime, weekday FFS
billings per specialty and then adjusts for:

Estimated non-FFS earnings (publically funded)

Overhead costs
Opportunity cost of training
Skill acquisition modifier for additional training, and
Hours of work

Each sections adjusted net daily income is then compared to the overalL average for all
physicians. Sections below the average are targeted to receive additional funding. Sections
above average do not receive any relativity allocation.

Manitoba
Manitobas allocation model is, in some ways, the antithesis of Ontarios. Doctors Manitoba
unapologetically focuses only on market considerations, specifically tying its fees to the
Ontario-Prairie Average (OPA), which is the average of Ontario, Saskatchewan and Alberta
fees. The medical association devotes a great deal of staff activity to gather and measure the
differences in fees between jurisdictions. In recent years, it has discontinued publishing the
annual increases provided to sections under the rationale that fee relativity with other provinces
matters more than intersectional comparisons within Manitoba.

Saskatchewan
In its allocation methodology, the Saskatchewan Medical Association (SMA) tries to balance
income equity with market considerations. As in Alberta, the SMA provides a pool of allocation
funding to recognize increasing section overhead costs. Saskatchewan does not have its own
business cost study, but relies instead on the average of overhead studies undertaken in BC,
Alberta and Ontario. The remainder of funds are distributed according to an intersectional
disparity index. This index has three components:

1. A comparison of net incomes (after overhead) of the 50th to 75th percentile earners in
each specialty, excluding after-hours payments and including WCB.

Page 16 of 24
 2. A comparison of workload between sections (average number of FTEs worked by 50th
to 75th percentile, evaluated against CIHI national benchmarks), and
3. An interprovincial comparison of fees (Ontario to BC) for each section using CIHIs
National Physician Benefit Rates report, supplemented with Doctors Manitoba
estimates.

British Columbia
British Columbias allocation methodology is a somewhat ad hoc version of Ontarios. For
allocation increases of less than 0.5%, the British Columbia Medical Association (BCMA) uses
the Modified Adjusted Net Daily Income (MANDI) model. As in Ontario, the basis is average
gross daily income by specialty. Adjustments are then applied for:

Overhead costs
Non FFS payments (e.g., sessional payments)
Education
Intensity/stress, and
Private income (this component differs from Ontario and is estimated based on
voluntary onsite audits of office overhead as part of their overhead studies)

Allocations over 0.5 percent involve sections coming together to arrive at consensus on how
funds should be distributed. If consensus is not reached, a mediator/arbitrator is assigned. In
the most recent allocation arbitration decision, the BCMAs arbitrator received a variety of
submissions/recommendations from sections and ultimately selected MANDI as the most
appropriate allocation method.

US Medicare
US Medicare is an example of a system where resource allocation is based almost entirely on an
intersectional relative value schedule which was developed by the American Medical
Association. The schedule contains nearly 8,000 procedure codes which are maintained and
updated regularly (at significant expense) by the Relativity Update Committee of the American
Medical Association. US Medicare defines some regional differences in payment to account for
cost variation between geographical areas. In recent years, payments have been supplemented
with pay-for-performance incentives.

How Alberta Compares

Interjurisdictional comparisons can be difficult, as each province structures its services
differently. Alberta also has a lower proportion of physicians on ARP and blended methods of
payment than other provinces. Interprovincial CIHI data therefore provides only a rough
approximation of how our efforts compare to other provinces.

The charts below (Figure 10) compare specialist billings with a reference group (GPs). Over the
seven-year period from 2006 to 2013 (the latest year available), the ratios of both medical
specialist-to-GP and surgical specialist-to-GP payments increased in Canada. Albertas ratio of
medical specialist-to-GP payments increased slightly over the period. Albertas ratio of surgical
specialist-to-GP payments started higher than the rest of Canada but remained roughly constant
over the period.
Page 17 of 24
 Specialist Income as a Percent of GP Income, Canada
250%

230% --Surgical

Medical
210%
GP

190%

170%

150%

130% ______________________.-

110% --- --

90%

70%

50%
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Source: Cliii NatonaI Physician Database, Physicians earning more than $60,000

Specialist Income as a Percent of GP Income, Alberta

250%

Surgical Medical
230%

210%

190% -

170%

150%

130%

110% .--. ...-----------.---.-

90%

70%

50%
2005/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Source: Cliii National Physician Database, Physicians earning more than $60,000

Figure 10- Specialist Income as a percent of GP Income, Canada versus Specialist Income as a Percent
of GP Income, Alberta

Page 18 of 24
Appendix A Intrasectional Relativity

As demonstrated on the Alberta Health table below, there is a significant spread of payments
within sections. Some of these are dramatic, with physicians earning far more than the average
for their section. Its important to understand the reasons behind these payment distributions.
Some potential explanations include:

The number of days a physician works in a year

The average hours a physician works in a day
The pace that a physician works
After-hours workload and remuneration
Intensity and complexity of services provided to patients
Fees that are out of relativity with other fees in the section (i.e. too highly paid)
A narrow scope of practice
Efficiencies
Community versus hospital-based practices (allowing physicians to organize themselves
and their staff most efficiently)
Creative billing practices such as code stacking (e,g, billing for individual
components of a service when a composite fee exists and would be more appropriately
billed)

The press and public tend to focus on absolute numbers (e.g.; the 400+ physicians who billed
more than $1M per year). This can give the impression that high/outlier amounts reflect the
earnings of all members in a section, when the reality may be something different. It also
ignores the substantial overhead costs incurred by most sections.

Several solutions are either planned or underway to address intrasectional relativity include:

1. The Physician Compensation Committees (PCCs) Standardized Intrasectional Relative

Value project (SINRV), to encourage sections to review individual fees from the
perspective of time, intensity, complexity and overhead costs
2. The Peer Review Process under development, as outlined in the Amending Agreement
to identify and address aberrant billing practices
3. Reform of the Schedule of Medical Benefits, such as individual section rewrites, as well
as the recent SOMB rules initiative under the Amending Agreement.
4. Fee initiatives being considered by the Section of General Practice, such as linking health
service codes and payment rates to patient attachment
5. The PCCs Individual Fee Review which identified and reduced fee codes that led to
high billing practices within a section.

Page 19 of 24
 **
Tables on the following five pages were taken directly from the AHCIP Statistical Supplement

Table 2.13
Distribution of Gross Payments by Payment Range and Specialty
for the Service Year Apr11 1, 2015 to March 31, 2016

Afl Pliysidans
I ASpedales

(. Pathoo) I (excePt GeneralIF&nily

Cardiovascular and
Theracic Surgery
j Phns and Patholo)
Number c
Payme,gs Payments
Physkns
Less than $10,000 $1,277,133 446 $1,258,559 437 $607,034 275 $9,054
10,000- 19,999 2,493,715 168 2,457,058 166 1,142,507 76 16887] 12
20,000 - 39,999 8,223S8 282 8.323,988 282 3,301,840 112 202,562
40,000- 59,999 11,851,9Th 241 11,851,975 241 4,435,817 90 268,274 5
50,000 - 79,999 i5,184,285 218 15,184,285 218 6.270,975 90 553.579 8 72,694 1
80,000- 99,999 23,580,176 262 23,580,176 262 7,2S4,218W 81 1,002,481 11 I.
100,000- 119,t9 25,634,720 232 25,517,706 231 S,503,321 78 420,986 4 100,261 1
120,000- 139,999 28,664A36 220 28,664,436 220 7,028,891 54 640,233 5
140.000 - 159.999 40,529,591 271 40.529,592 271 11,511,800 77 1.033,504 7
160,000- 179,999
180,000- 199,999
44,049,584l
48,389,265
260
255
44Q49,584
48,206,241
260
254
13,577,4.86
13.764,704
80
72
3.054.053
2 .120 .063
18
11
I
20000-299,999 338,095,520 1,355 338,095,520 1,355 106,071,961 423 T 63 286867:J 1
300.000 - 399.999 443,740,119 1.274 443,740,119 1.274 151,284,441 433 25,000.599 72 1,062,442 3
400,000- 499,999 428,418,856 961 427,969,596 960 189,774,645 424 34,255,376 77 446,597 1
500,000 - 599,999 378,255,359 691 378,255,359 691 208,808,984 380 41,921,330 77
60000- 698,999 276,127,646 427 276,127,646 427 169,954,899 263 14,190,254 22 1,935,893 3
700.000 - 799.999 215,592,779 290 215,592,779 290 129,852,287 175 9,641.062 13 3,043,803 4
801000 -899,999 164,377,744 194 164,377,744 194 112,278,350 132 5,036,912 6 2,507,474 3
900.000-999,999 118,503,187 125 118,503.187 125 89,062,538 94 990,603 1 3,748,604 4
1,000,000-1,999,999 399,253j0831 301 399,253,083 301 347,245,272 ., - 2 7,204,722 6 2,633,622 2
2,000,000 & Over 323,666,095 112 314,587,222 110 306,721,907 107
Tatd 53,3*,a(,2S6 8,585 53,326,125,865 8,569 51,888,453,878 3,774 j 5163,685,587 427 $15,838,257 23
iote: This table reflects fee-for-service data only. Con tinud...
(1 A tifn* ce.Q represents a zero wolue.
(21 These statistics carusor be used as an accurate measure of a physicians income, because they do not Thdude other sources of income. The figures quoted are payrrientsfrom
which physicians pay business expenses, such as office and staff expenses.
 Table 2.13
Distribution of Gross Payments by Payment Range and SpecaIty
for the Service Year April 1, 2015 to March 31, 2016

Dermatology II Emergency Medicine

All General/Family
ans I All Genera Surgery Aft Internal Medicine
Dollar Range
Number o 1
I iri
Number o I Number of

Lessthan$10,000
Payments

$6,816 5
Payments

515,980
Pt ciarn
2
I Payments

$651,535
I Phk
162
Payments

519.889 3
Payments

5191,820 124
10,000- 19,999 10,471 1 1,314.550] 90 92,022 5 299,726 21
20,000- 39,999 146,964 5 5,022,148 170 77,665 3 9S3,111 33
40,000- 59,999 103,002 2 7,416,158)N 151 284,968 6 1,298,836 27
60,000- 79,9991 147,765 2 140,5171 2 8,913,310 128 671,475 10 1,671,055 24
80,000- 99,999 90,144 1 174,910 2 16,325,958 181 8O,090 1 1,719,567 19
100.000- 119,999 555,877 5 17,014,386 153 542,699 5 1,849,145 17
120,000- 139,999 369,177 3 26760211 2 21,635,546 166 389,445 3 1,694,840 13
140,000- 159,999 142,799 1 590,271 4 29,017,791 194 873,113 6 2,279,848 15
160,000- 179,999 327,441 2 30,472,098 180 830,817 5 3,589,505 21
180,000- 199,999 761.058 4 34,441,536 182 577,580 3 2,110,818 11
200,000- 299,999 482,800 2 9,130,381 36 232,023,559 932 3,952,705] 16 13,972,573 56
300.000- 399,999 372,634 1 14,888,241 42 292,455,677 841 4,531,963 13 21345,078 61
400,000 499,999 1,780,741 4 13,054,676 30 238,194,951] 536 13,497,911) 30 36,642,633 82
500,000- 599,999 1,696,290 3 3,854,205 7 169,446,375 311 20,872,112 38 33,291,933 60
600,000- 699,999 1,876,558 3 639,227 1 106,172,747 164 17,463,211] 27 29,242,704 45
700,000- 799,999 2,948,323 4 1,524,770 2 85,740,492 115 12,671,469 17 33,564,544 45
800,000- 899,999 3,467,286 4 52,099,3941 62 7,625,974 9 29,794,293 35
900,000- 999,999 3,842,435 4 29,440,649 31 1,839,236 2 27,438,612 29
1,000,000-1,999,999 15,681,936 12 52.007,8111 43 6,050,794 5 90,194,632 68
I
2,000,000 & Over 6,788,829 3 7,865,315 3 2,112,317 1 18,582,309 7
Total 539,797,533 54 546,082,591 147 4
V
9
i,
67
ii
5
g
7
, $95,057,455 208 $351,757,581 813

Note: This table reflects fee-for-service data only. Continued.

(1) A blank cell represents a zero volue

(2) These stotistf cs cannot be used as an accurate measure of a physicians income, because they do not include other sources of income. The figures quoted are payments from
which physicians pay business expenses, such as office and staff expenses.

Page 21 of 24
 _______

Table 2.13
Distribution of Gross Payments by Payment Range and Specialty
for the Sensice Year April 1, 2015 to March 31, 2016

Dollar Range
Neurology

Payments
Neurosurgery
I Obstetrics-Gynaecology Ophthalmology

Payments
Orthopaedic Surgery
II,.
Payments
.

Lessttian $10,000 $17,881 9 528.577 13 52, 936 510,404 2 $16,897 4J

10,000- 19,999 47,682
-

3 19,512] 1 33,468 12,871 1 55,695 4

20.000 - 39,999 123,850 4 61,677 2 152,445 53,007 2 252,639 S
40,000- 59,999 88,171J 2 101,726 2 230,077 200,077 4 99,588J 2
60,000- 79,999 64,551 1 137,032 2 423,494 145,723 2 263,371 4
80,- 99,999 187,415 2 687,378 88,656 1 373.475 4
100,000- 119,999 211,903 2 122,389 1 340,627 847,164 a
120,900-139,999
140,000- 159,999
An 392,920
462,760
a 386,863
605,620
3
4
a-
160,000- 179,999 178,656 522,996 F 334,753 2
180,000- 199,999 375,703 1.83,849 775,730 4 366,918 2
260600-299999 2,038,275 204,774 5,430,158 763,445j 3 2,696,247 11
,Aa..
300,000- 399,999 2,569,093 11,975,879 3,616,971 10 6,117,204 17
400,000- 499,999 3,142,912 10,449,983 4,034,867 9., 11,005,860 24!
500,0CC- 599,999 3,354,660 18,864,217 4,409,141 8 16,986,054 31
600,900-689,999 4,399,914 9,619,595 3,850,008 6 17,386,733 27
700,060- 799.999 1,454,173 7,333,990 5,847,359 8 6,767,860 9
800,900-899,999 1,689,027 10,163,466 8,590,186 10 8,534,378 10
900,000- 999,999 1,893,017 8,578,104 5.720.484 6 3,790,373 4
1,000,000-1,999,999 21,324,974 42,046,685 30 5,354,784 5
2,000,000 & Over I 6,673,174 62,106,170 21 2,427,206 1
TaM 521,836,885
I 5665,686 n4, $113,847,190 222 5142,271,782 127 584,669,682
Note This table reflects feefcr-serwce ama only Continued...
(I) A blank cell represents a zero value
(2J These statistics cannot & used as an accurate measure of a physicians income, because they do not include other sources of income. The figures quoted are pcrymentsfrarn
which physicians pay business expenses, such as office and staff exerses.
 _______________

Table 2.13
Distribution of Gross Payments by Payment Range and Specialty
for the Service Year April 1, 2015 to March 31, 2016

Otolaryngology Paediatrics Pathology

i
Physical Medicine and
Rehabilitation i Surgery
Dollar Range I
Less than $10,000
Payments

$1,042
Number of 1
Physicians
3
Payments

$164,045
Payments

$18,563
t1 Payments

$3,783
Payments

$15,971
10 000 19 999 17 375 1 139 301 -
- -
36657
20,000- 39,999 29,307 1 384,430 83,998 3
40,000- 59,999 730,924 l99.2S6] 4 44,350 1
- ,4
50,000- 79,999 63,132 1 630,495 151,016 2 79,934 1
80,000- 99,999 98,615 1 731,578 190,537 2 88,326 - 1
100,000- 119,999 977,573 211,177 2
120,000- 139,999 138,240 1 523,047
140,000- 159,999 1,787,473 117,013 1 154,047 1
160,000- 179,999 163,458 1 856,510 - 342,592 2 -

180,000- 199,999 184,475 1 967,808 183,024 1 182,474 1 188,788 1

200,000- 299,999 1,582,778 6 16,046,781 - 1,683,631 7 1,800,0721
300.000 - 399,999 1,026,319 3 15,291,355 2,44S,41D 7 2125776 6
400,000- 499,999 1,741,686 4 12,586732] 449,260 1 1,753,411 4 4,087,623 - 9
500,000- 599,999 3.866,863 7 12,112,045 4,366,648 8 6,072,369 11
600,000- 699,999 9,185,338 14 8,370,180 1,317,285 2 9,094,369 14
700,000- 799,999 4,468,321 6 8,019,960 1,491.164 2 3,592,822 5

1800,000 - 899,999 4,145,061 5 3,358,591 896,422] 1 - -

900,000- 999,999 6,632,944 7 958,779 1,954.826 2 1,905,290 2

- 1,999,999 10,308,425 8 6,665,601 1,097,880 1 2,521,785 2
2,000,000 & Over 9,078,873 - -

Total $43,654,380 70 $91,303,207 $9,883,391 - $18,444,560 49 $31,701,473 65

Note: This table reflects fee-for-service aara only. Conpnued. -
(1) A blank cell represents a zero value
(2) These statistics cannot be used as an accurate measure of a physicians income, because they do nor include other sources of income. The figures quoted ore payments from
which physicians pay business expenses, such as office and staff expenses

Page 23 of 24
 Table 2.13
Distribution of Gross Payments by Payment Range and Spec alty
for the Service Year April 1,2015 to March 31, 2016

MI Psychiatry Radklogy

Number of
Payments
Physicians
Less titan S10,000 S29,642 $72,297 23
10,0(X)- 19,999 12728 8 117,681 8
20,000- 39,999 428,859 15 321,326 10
4()0(X) 381,607) B 362,262 7 1
60,000- 79.993 554,651 S 435,508 6 54983

100,000- 119,999
99,999 L311029
1775,015
) 15
16
430,015
447,100
5
4 113.404 2
120,000- 139,999 1,589,949 12 392,554 3 244,023 2
240.000 - 159.999 2.687,348 18 895.018 6
160,000- 179,999 2,714,240 16 662,764 4
180,000- 199,999 4,033,686 21 935.753 c
200,000- 299,999 23,139,890 93 5,364,445 21 1,525,074 6
300.000 - 399,999 30,944,673 90 6,927,824 20 1,039,979 3
400,000- 499,999 30,179497 67 8,373,031 19 2,741,407 6
500.000 - 599.999 26,316,691 48 5.901,579 11 4,922,846 9
600000-698,999 21,168,843 33 ::4997,53;s 23 5,217,254 8
700.000- 799.999 11,964,656 16 12,607,754 17 2,910,257 4
800,000-899,999 6,720 786] B 16,362,909 19 3,384,588 4
900,000- 933$99 2,782,135 3 12,275,235 13 4,811,961 S
1.000,000- 1,999,999 5133.963] 4 125,262,335 89 5.763.134j 5
2,000,000 & Over 2.533.981 I 203.451,644 69 2.045.278 I
Tot $176,516,670 506 $416,496,470 382 534,826,889 56
Note: This robe flecrs fee-for-service do?o on?y.
(1) A bfanA ce represents aero vohie.
(2) These smtisOcs cannot be used as on accurate measure of a physicians income, because they do not include other
sources of income. The figures puoted are payments from which physicians pay business expenses, such as office and
staff expenses.

Page 24 of 24