The impact of the fee-for-service reimbursement system on the utilisation of health services: Part I. A review of the determinants of doctors' practice patterns

The impact of different methods of reimbursement on the practice patterns of doctors has received little attention in the local literature. This series of three papers attempts to address this gap.Here the international evidence on this issue is reviewed. The 'information gap' between doctors and their patients allows doctors to induce demand for their services. This leads to the potential for doctors to increase the supply of services when they stand to gain financially from doing so, as is the case in the fee-for-service system.There is extensive international evidence, at both national and micro levels, of the link between increased utilisation and the fee-for-service payment system. This is in contrast with the pattern noted in the salary system, used in some health maintenance organisations (HMOs) in the USA, or in the capitation system, used in the British National Health Service.The 'practice setting' in which doctors operate also affects patterns of practice. In the local fee-for-service sector, 'third-party payment' means that both doctors and patients have little awareness of the direct costs of services. In other systems, such as HMOs, there is a strong cost consciousness on the part of practitioners. These differences in practice setting account in part for the different patterns of utilisation in these systems.The fee-for-service system, as it is structured in South Africa, thus leads to extreme inefficiency, and the development of alternatives is becoming an urgent necessity. All systems of reimbursement have certain problems, and some combination may be the best solution