DO PHYSICIAN-PAYMENT MECHANISMS AFFECT HOSPITAL UTILIZATION - A STUDYOF HEALTH-SERVICE ORGANIZATIONS IN ONTARIO

Objectives: To determine whether payment of primary care physicians ba sed on capitation, with an additional incentive payment for low hospit al-utilization rates, resulted in lower hospital-utilization rates amo ng patients of these physicians than among patients of physicians stil l paid on a fee-for-service basis. Design: Retrospective cohort study. Setting: Capitation-based and fee-for-service primary care practices in Ontario. Subjects: Thirty-nine physicians whose method of payment w as converted from fee-for-service to capitation during the period from lune 1985 to January 1989 and 77 physicians who remained in fee-for-s ervice practice, two of whom were matched with one physician in capita tion-based practice on the basis of practice location, type of practic e (academic v. community), hours of practice (part-time v. full-time), years since graduation, physician group size, practice size (number o f patients), type of group (primary care v. multispecialty), sex, cert ification in family medicine, country of graduation (Canada v. other) and age. One physician in capitation-based practice was matched with o nly one physician in fee-for-service practice. Outcome measures: Annua l hospital-utilization rates (hospital separations or hospital days pe r 1000 patients in each practice) for the physicians paid on a capitat ion basis 3 years before, 1 year before and 3 years after they convert ed from fee-for-service payment and al corresponding periods for the m atched physicians still paid on a fee-for-service basis. Results: The mean annual rate of hospital days used, adjusted for the age and sex o f patients as well as for their social-program-recipient status, fell from 1085 per 1000 patients (3 years before the conversion date) to 10 30 (1 year before conversion) and to 954 (3 years after conversion) in capitation-based practices. For the matched physicians in fee-for-ser vice practice, the rates during the corresponding periods were 1085, 1 035 and 956 hospital days per 1000 patients. The pattern was similar f or rates of hospital separations, adjusted for patients' age, sex and social-program-recipient status. There were no statistically significa nt differences between the rates of hospital utilization among patient s of physicians in capitation-based practices and the rates among thos e of physicians in fee-for-service practices during each of the three periods, nor were there significant differences in the changes in rate s. Conclusion: Capitation payment, with an additional incentive paymen t to encourage low hospital utilization rates, did not reduce hospital use. Factors other than the method of physician payment appear to be responsible for the variations in hospital utilization among practices .