Contract design for primary care physicians: physician location and practice behaviour in small communities

Most western countries employ a combination of fee-for-service, fixed salary and per capita subsidies to finance the services of general practitioners. Based on Norwegian data, the authors demonstrate that these financial schemes have been used in different types of municipalities. The authors argue that the fee-for-service and per capita components should be allowed to vary between primary physicians and municipalities: (a) If the patient population per primary physician is low and patient supply is unstable, the per capita subsidy or work-free income should be differentiated to ensure recruitment of physicians. (b) Physicians in municipalities with low physician coverage should be allotted a low basic grant, whilst per capita subsidy and fee-for-service payments should be used to stimulate service production. The opposite situation exists where there is a potential of supplier inducement due to high physician coverage. (c) The responsibility for designing contracts should be assigned to local rather than national authorities. These suggestions go against important elements in the reform of primary physician services in Norway.