Do physician remuneration schemes matter? The case of Canadian family physicians

Although it is well known theoretically that physicians respond to financial incentives, the empirical evidence is quite mixed. Using the 2004 Canadian National Physician Survey, we analyze the number of patient visits per week provided by family physicians in alternative forms of remuneration schemes. Overwhelmingly, fee-for-service (FFS) physicians conduct more patient visits relative to four other types of remuneration schemes examined in this paper. We find that family physicians self-select into different remuneration regimes based on their personal preferences and unobserved characteristics; OLS estimates plus the estimates from an IV GMM procedure are used to tease out the magnitude of the selection and incentive effects. We find a positive selection effect and a large negative incentive effect; the magnitude of the incentive effect increases with the degree of deviation from a FFS scheme. Knowledge of the extent to which remuneration schemes affect physician output is an important consideration for health policy.