3.7. Payment mechanisms

3.7.1. Paying for health services

The actual payment methods, service prices and benefits package are all included and regulated in a single government-approved health service list. The management of this list is the responsibility of the EHIF but the government gives its final approval. All providers are paid the same prices and there is no adjustment for hospital characteristics, such as teaching status. Since 2002, the EHIF’s health service list is approved by the government in order to increase public accountability and to make it less vulnerable to provider influence, as it had been when the Minister of Social Affairs was solely responsible for amendments and updates. The list of services and prices is updated at least once a year. The price list contains more than 2000 different items, including a whole range of different payment methods. Please refer to Table3.8 for an overview of the most commonly used payment methods, which will be further discussed below.

Table3.8

The payment system for family doctors has been redesigned since the early 2000s, to provide them with incentives to take more responsibility for diagnostic services and treatment, to provide continuity of care and to compensate them for the financial risks of caring for older people and working in remote areas. In primary care, family doctors and nurses contracted by the EHIF are paid via a combination of capitation, basic allowances, fee-for-service and a quality bonus system. There are three funds used for fee-for-service. These include the investigation fund (for different laboratory tests), the therapeutic fund (e.g. physiotherapy and speech therapy) and the activity fund (minor surgical procedures) (see Fig3.7). Together, these payments make up the total budget for each practice. Practices receive monthly prepayments for capitation, allowances and fees, which are recalculated four times a year to reflect changes in the patient list (as patients can change family physicians). The average size of the family doctors’ list is about 1600 persons, but the average income of practice varies widely according to the structure of the people on the list and the different allowances the family doctors can apply for. In 2016 the average monthly practice income was about €10 700.

Fig3.7

After the family physician payment reform of 1998, the capitation payment was similar for all people, irrespective of their age. Age-adjustment was introduced after only one year, forming three capitation groups: up to 2 years of age, 2–70 years of age, and older than 70 years. In 2012, five new capitation groups were agreed: patients aged up to 3 years, 3–6 years, 7–49 years, 50–69 years and over 70 years.

Practices also receive a basic monthly allowance to cover costs of the premises and transport for doctors or nurses. Additional and more marginal payments are made to compensate family physicians in remote areas. Furthermore, a family doctor’s income depends not only on practice list size but also on performance, so that any money spent on unnecessary analyses and procedures will reduce payments. In the collective agreement negotiations in 2013, an additional allowance for family doctors employing a second nurse was agreed. The aim of this additional allowance was to support the nurse’s increasing role in monitoring patients with chronic diseases and acute health disorders as well as in counselling and prevention. A family doctor has to fulfil certain criteria to receive this additional remuneration, for example separate visiting hours for the second nurse and room requirements. Starting from 2014, family physicians may also receive an allowance for overtime work, and nurse(s) for appointments outside of working hours (before 8:00 or after 18:00).

From 2016, the EHIF has increased the share of the basic allowance and reduced the share of capitation in the payment scheme. Furthermore, in 2017 a new basic allowance has been introduced for primary health care centres that should motivate individual primary health care providers to form groups and provide a wider scope of services. The primary health care centre basic allowance includes additional funds for management, information technology (IT) developments and more spacious rooms. The primary health care centres are eligible for this allowance when at least three family doctors with at least 4500 individuals on their list work together in one location; they also provide physiotherapy and midwife services (providing home nursing will be compulsory starting from mid-2018) and have extended opening hours (from the compulsory 8 hours to 10 hours per day).

Family physicians can receive separate additional fee-for-service payments up to a maximum of 41% of their total capitation payment if they perform well according to the quality bonus system standards. The maximum fee-for-service payment rate for family physicians who do not attain the quality goals is 39%. These differentiated rates are used to provide incentives for family physicians not only to participate but also to achieve good results and to promote improvements in quality of care.

The new quality bonus system was introduced in 2006. The main purpose of this initiative was to increase the quality and effectiveness of preventive services, as well as to improve monitoring of chronic diseases. The quality bonus system highlights the importance of clinical guidelines and performance monitoring at primary health care level. It is the only quality rewarding system that has ever existed in Estonian health care. The cost of the scheme, about 2% of the primary health care budget, is relatively small and there is ongoing discussion to expand the quality bonus system and make it more attractive. The quality bonus system includes three domains: disease prevention, chronic disease management and additional activities. The quality bonus system is a joint initiative of the EHIF and the Estonian Family Physicians Association. A key factor in implementing the quality bonus system has been the electronic billing data collection system, which enables monitoring of family physicians’ activities without the need for additional data collection. Since its introduction, the number of participating family physicians has risen from 50% in 2006 to 97% in 2014, reflecting its broad acceptance. Despite its small financial contribution, the quality bonus system has strengthened disease management for patients with hypertension or diabetes or after acute myocardial infarction (Fig3.8), and nearly all the indicators of disease management have improved. However, three of the four indicators of prevention have not yet improved (see also 7.4.2 Health service outcomes and quality of care).

Fig3.8

Since 2015 the participation in the quality bonus system has been obligatory for all family doctors and the individual results are publicly reported. In 2015 the World Bank conducted a study on Health Care Integration in Estonia. In response to the results of the study, in 2016 the EHIF made considerable changes to the quality bonus system and raised the payment by 25% (compared to 2015). The focus of the quality bonus system has been shifted from rewarding family doctors for single activities to bundled activities. Indeed, the scheme now rewards coordinating the provision of a full set of recommended services rather than single procedures or services, i.e. administering all necessary vaccinations for children up to 3 years old rather than doing a single vaccination. In addition, indicators for the correct prescription of medication for the chronically ill have been added to the quality bonus system indicators. With the help of e-prescription data, the EHIF can measure whether the family doctor has prescribed the medications in accordance with clinical guidelines, i.e. oral hypoglycemic (metformin) for patients with diabetes. In 2016 a separate payment was introduced in the quality bonus system for accredited providers. The accreditation process is led by the Estonian Family Physicians Association.

In 2013, the EHIF started remunerating new innovative e-consultations, in which family physicians consult with specialists through the health information system without sending the patient to the specialist care provider. The e-consultation should support family doctors in assuming more responsibility for patient care and should improve cooperation with specialists. Moreover, this is expected to lower the demand for specialist care, shorten the care episode and provide relief for long waiting times for some specialties. The e-consultation has to follow a standardized format (by specialty), which should better enable specialists to give adequate advice. During 2016, 603 family doctors had 5597 e-consultations with seven different HNDP hospitals (EHIF, 2017). This still accounts for only a very small share of total ambulatory specialist care visits.

Specialist care is mainly remunerated through fee-for-service payments, per diems and diagnosis-related group (DRG)-based payment methods. The main method in outpatient care (laboratory tests, radiology, etc.) is fee-for-service payment, whereas for day surgery and inpatient care, a mix of fee-for-service, per diems and DRG-related payment methods is used. Day surgery and inpatient fee-for-service payment involves also per diem-based units. The per diem should cover the costs of basic examination, diagnosis and treatment planning, nursing, meals, simple medical procedures, laboratory tests and pharmaceuticals.

The EHIF implemented a DRG-based payment system for inpatient services in 2004. The DRG system was mainly seen as a tool to increase efficiency. Another motivation for introducing DRGs was that the old fee-for-service and per diem payment systems had led to volume inflation. In 2001, the EHIF began work on adapting the Nordic DRG system (NordDRG) by identifying areas of variation in activity between Estonian and Scandinavian hospitals, calculating prices for reimbursement in Estonia and providing hospitals with feedback on their activity by NordDRG group. The large amount of detailed diagnostic data available to the EHIF through the invoicing system facilitated this process. By 2003, all primary classifications were implemented, and from 2004 the NordDRG system became operational. The NordDRG system is used in combination with other payment methods already in place, so the price of a case will be calculated based on the price list and NordDRGs and reimbursed proportionally. To minimize any financial risk, the proportion of DRG payment for each case was gradually raised from 10% in 2004 to 70% in 2009 (EHIF, 2009). All inpatient care cases, as well as outpatient care cases involving surgical procedures, fall under DRGs. However, some types of care, such as psychiatric, rehabilitation and follow-up care, are not reimbursed through DRGs. There are also some exemptions according to the principal diagnosis (e.g. chemotherapy), services provided (e.g. organ transplantations) and referred cases. In addition, cases that are too low or high in cost are reimbursed through fee-for-service.

In principle, health service prices should cover all costs related to providing services except those related to research and teaching activities, which are funded separately. All prices approved are maximum prices, and providers and the EHIF can agree on lower prices in the contracts. Revision of service prices and payment methods can be initiated by provider or specialist associations or by the EHIF (see also section 3.3.1 Coverage).

From July 2003, capital costs have been included in the prices paid to providers by the EHIF in order to ensure geographical consistency and fairness in infrastructure development. The mark-up has been calculated according to providers’ optimal capacity per bed (based on an optimal number of square metres per bed). Capital cost funds are now allocated on the basis of activity, and there is no clear link to capital investment needs. However, some of the health care providers receive ERDF infrastructure investments, which may increase disparities among the different providers (see also section 3.6.2 External sources of funds).

3.7.2. Paying health care personnel

During the Soviet era, health care professionals were, similar to civil servants, working as salaried employees in health facilities owned by the state or municipalities. Salary levels were determined centrally. Since the early 1990s, new health care legislation allowed individual providers to work according to private law for the first time and gave institutional providers more autonomy under a different legal status. Although many institutions are still controlled by the state or municipalities, the level of salaries is now established through individual negotiations between employers and employees, taking into account the collective agreements between associations.

Health care professionals’ salaries are determined by the minimum amount of cases contracted with a provider by the EHIF. On average, salaries account for approximately 60% of total hospital costs. All health care professionals and providers now hold individual contracts with hospitals or health centres, although these are sometimes based on general salary agreements for specific groups. The Estonian Medical Association and the Estonian Nurses Union negotiate the levels of minimum hourly wage/salary for their respective professions with the Estonian Hospital Association. The Ministry of Social Affairs and the EHIF are also involved in these negotiations. In 2012 negotiations got stuck and resulted in a 25-day strike of health care workers. The wage negotiations for the 2015–2016 period were particularly lengthy and difficult and resulted in pay rises above the average wage growth in the country. The wage negotiations have put great pressure on the EHIF budget and necessitated difficult trade-offs between higher prices and service volume cuts. After difficult negotiations for more than 6 months between representative bodies of health professionals and medical associations, and unions a collective agreement was finally reached in April 2017, which will last until April 2019.

The minimum hourly wages for doctors, nurses and other health care professionals increased up to €11.35, €6.85 and €4.20 respectively by 2018. This translates into a biannual increase of minimum wages by 13.5% for doctors, 24.5% for nurses and 27.3% for other health professionals. The 2017–2018 negotiation process stands out because of its length and scope, applying a broader health system focus instead of merely aiming at wages and working conditions. Health professionals pressured the government to find a solution securing the long-term sustainability of health insurance financing (see section 6.1 Analysis of recent reforms).

Although health care providers are private entities, the NIHD monitors their financial status and overall salary levels through statistics and annual salary surveys (Table3.9).

Table3.9