Complex gears symbolizing healthcare systems, some misaligned.

Is Your Healthcare Paying Off? Unpacking How Specialist Compensation Impacts Quality

Samir D’Costa in Health & Wellness November 2025 • 4 min read.

"A groundbreaking study reveals how mixed compensation models for specialists may inadvertently affect patient outcomes in Quebec, Canada."

In an era where healthcare costs are constantly rising, it's natural to wonder if we're truly getting the best value for our money. Governments and health organizations are increasingly focused on how to allocate healthcare resources effectively, particularly when it comes to compensating physicians.

The way doctors are paid can significantly influence both the quantity and quality of the services they provide. In countries like Canada, where the public sector foots the bill for most medical care, physician spending accounts for a substantial portion of overall healthcare expenditures. This makes it crucial to design payment systems that encourage doctors to deliver high-quality care efficiently.

To address this issue, a number of different payment models have emerged such as, fee-for-service, capitation, and salary. Mixed compensation systems, which combine elements of multiple models, are also gaining traction. However, there's ongoing debate about which approach leads to the best outcomes for patients. A recent study in Quebec, Canada, sheds new light on this important question, revealing how a mixed compensation system for specialists impacted the quality of care they delivered.

The Quebec Experiment: Balancing Act or a Step Backwards?

Complex gears symbolizing healthcare systems, some misaligned.

In 1999, the Quebec government introduced a significant change to how specialists were compensated, moving towards a mixed compensation (MC) model that combined fee-for-service (FFS) with a salary component. Before this reform, the vast majority of specialists in Quebec were paid through a traditional FFS system. Under the MC system, specialists receive a set wage (per diem) for their time spent working in a hospital, in addition to a reduced fee for each clinical service they provide.

The goal of this reform was to address some of the perceived shortcomings of the FFS model, such as incentivizing doctors to prioritize quantity over quality and potentially leading to unnecessary services. By introducing a salary component, the government hoped to encourage specialists to focus on providing the best possible care for their patients, rather than simply maximizing their income.

Per Diem Structure: Specialists are paid for blocks of time (e.g., 3.5 hours) spent working in a hospital, regardless of the number of patients they see or procedures they perform.
Reduced Fees: The fees paid for individual clinical services are reduced compared to the standard FFS rates.
Optional Adoption: The MC system is not mandatory; instead, departments within hospitals must vote to adopt it unanimously. This means that some specialists continue to be paid through the traditional FFS system, even within the same institution.

While the Quebec reform aimed to improve healthcare quality, a recent empirical analysis suggests that it may have inadvertently led to some negative consequences. The study, which examined a large patient/physician panel dataset, found that the MC system was associated with a reduction in the quality of specialist services, as measured by the risk of re-hospitalization and mortality after discharge. These findings raise important questions about the complexities of healthcare compensation and the need to carefully consider the potential unintended consequences of payment reforms.

Navigating the Future of Healthcare Compensation

The Quebec experiment offers a valuable case study for policymakers and healthcare administrators seeking to design effective compensation models. While mixed compensation systems hold promise for addressing some of the shortcomings of traditional fee-for-service models, it's crucial to carefully consider the potential unintended consequences on healthcare quality. Further research is needed to identify the optimal balance between salary and fee components, as well as to explore other factors that may influence physician behavior and patient outcomes.

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Everything You Need To Know

What is a mixed compensation model in healthcare, and why are governments exploring it?

A mixed compensation (MC) model combines elements of multiple payment structures, like fee-for-service (FFS) and salary. Governments are exploring it because they aim to balance the incentives for healthcare providers, addressing potential issues with pure FFS systems that might prioritize quantity over quality. The goal is to encourage efficient and high-quality patient care while managing healthcare expenditures effectively. A purely salary based model can reduce the incentive to see more patients or perform needed services. Finding the right mix is the subject of current research.

How did the 1999 Quebec healthcare reform change specialist compensation, and what were its goals?

In 1999, the Quebec government shifted specialist compensation from a predominantly fee-for-service (FFS) model to a mixed compensation (MC) system. This MC model combined a per diem salary component for time spent in hospitals with reduced fees for clinical services. The primary goal was to mitigate the potential downsides of the FFS system, such as incentivizing unnecessary services, and to encourage specialists to focus on delivering high-quality care rather than solely maximizing income. This reform intended to balance quantity and quality of provided services, yet empirical studies revealed unintended consequences.

What are the key components of the mixed compensation system implemented in Quebec for specialists?

The mixed compensation (MC) system in Quebec comprises three key components. First, specialists receive payment for blocks of time spent working in a hospital through a "per diem structure", irrespective of the number of patients they see. Second, the fees paid for individual clinical services are reduced compared to standard fee-for-service (FFS) rates. Third, the adoption of the MC system is optional; departments within hospitals must unanimously vote to adopt it, allowing some specialists to remain on the traditional FFS system even within the same institution. This optional adoption creates a natural experiment and opportunities for comparative study.

According to the study, what were the unintended consequences of Quebec's mixed compensation model on the quality of specialist care?

The empirical analysis of Quebec's mixed compensation (MC) model revealed some unintended negative consequences on the quality of specialist care. The study found that the MC system was associated with a reduction in the quality of services, as measured by an increase in the risk of re-hospitalization and mortality after patient discharge. This suggests that while the reform aimed to improve care quality, it may have inadvertently created disincentives or other factors that negatively impacted patient outcomes. Further study is needed to understand the specific causes and mitigations.

What broader implications does the 'Quebec experiment' have for healthcare compensation models and future research?

The 'Quebec experiment' serves as a valuable case study for policymakers and healthcare administrators seeking to design effective compensation models. It highlights the complexities of healthcare compensation and the potential for unintended consequences when implementing payment reforms. While mixed compensation (MC) systems offer promise for addressing shortcomings in traditional fee-for-service (FFS) models, the Quebec study underscores the need to carefully consider the balance between salary and fee components. Further research should focus on identifying the optimal mix of payment methods and exploring other factors, such as physician behavior and patient characteristics, that may influence healthcare quality and patient outcomes. This includes studies on the impact of optional adoption on behavior between those choosing FFS and MC within the same institution.