Physician payment reform in the United States

The United States recently adopted an entirely new system of paying physicians for the services they provide to elderly and disabled patients. The new system is based on a fee schedule in which the relative values among different services are derived on the basis of the cost of providing such services. To control expenditure growth, a system of Volume Performance Standards (VPSs) was adopted, which explicitly links physician fee levels to the success the physician community has in controlling the total volume of services provided. This article presents and analyzes the new payment system and examines its applicability to other countries. It concludes that the methodology used to develop the fee schedule may be useful to other countries, particularly if they are unable to reach a consensus on appropriate physician fee levels, but that the VPS system needs to be refined in a number of ways before it can be successfully exported.