Physician payment and cost-containment strategies in West Germany: suggestions for Medicare reform

The West German health care system pays ambulatory care physicians on a fee-for-service basis but employs a national relative value scale and regional capitation-based revenue pools to achieve expenditure controls on total physician reimbursement. Physician-controlled organizations manage these pools and conduct utilization reviews on their own members. The capitation rates are determined by negotiations between the physician associations and health insurers. The West German government has been able to exert some influence on the outcome of these negotiations through a quasi-governmental advisory body. Aspects of this structure could be adopted by Medicare in order to determine conversion factors for resource-based relative value scales or to create expenditure control and incentive structures for Medicare-participating physicians.