Income Equity Initiative Update

April 7, 2021

Dear Colleagues,

In July 2019, the AMA Board tasked the AMA Overhead Working Group with developing a revised physician overhead cost model. The group worked closely with a panel of physicians (composed of representatives that were appointed by each economic section), as well as the AMA Compensation Committee (AMACC) to develop additional overhead policy, define model components, and identify model costs.

We are excited to share the results of our work with you. We have developed a short video overview to introduce our model and approach:

View the video: https://youtu.be/njLBH_7xoHw

Next steps

No overhead model is ever truly complete, and we are continuing to develop the approach to aggregating model practice costs. The next steps are:

• Physicians are encouraged to review the report and frequently asked questions on the AMA internal website (login required).
• Questions can be submitted to overhead@albertadoctors.org.
• We are continuing to develop how model practice costs are aggregated in the model.
• If an economic section believes the estimate presented for their model practice is more than 15% over or under typical costs of that practice -and- the model practice represents at least 15% of the section, then they are invited to file a dispute with AMACC before May 11, 2021. The section is expected to provide supporting evidence and analysis to AMACC. At this time, the dispute process only applies to the model practice costs and not the aggregation approach. The aggregation approach will be subject to the dispute process once developed.

Background

Overhead represents a major component of physician compensation and the AMA plans to use the results of this study to inform work in several areas including advocacy (e.g., fee-for-service, alternative relationship plans, and Alberta Health Services compensation negotiations; context around any public disclosure of physician payments information) and schedule of medical benefits management activities such as allocation, income equity, and fee relativity.

The model practice concept is based on decades of previous overhead work in Alberta with the most notable being the 2010 Physician Business Cost Model. It is important to remember that model costs are not intended to represent any individual practitioner, but rather represent the average for a section, or subset of a section.

The model focuses on overhead required to support publicly insured clinical services paid through the Physician Services Budget (PSB). Two payment models are used in the PSB: fee-for-service and ARP payment. We chose to focus on the PSB as this is the expenditure amount of primary interest in negotiations and allocation. It is important to note that physicians working in AHS facilities and are paid via AHS salaried or contractual arrangements, including laboratory physicians and oncologists, still incur overhead. Professional fees contained in Layer 1 are a good indicator of overhead expenses for these physicians (unless contracts specify an amount to offset these expenses).

We extend our deepest gratitude to all who have contributed to this work. Your time and valuable insights are responsible for the success of the project.

Dr. Rick Johnston Chair, Overhead Working Group

Dr. Steve Chambers Co-Chair, AMACC

Dr. Jeff Way Co-Chair, AMACC