Several natural experiments have demonstrated that when physician fees are adjusted or the prices of medical and surgical services are controlled, practitioners alter their style of practice or services billed (Hadley, Holahan, and Scanlon 1979; Rice 1983; Barer, Evans, and Labelle 1988; Rice and Labelle 1989; Wedig, Mitchell, and Cromwell 1989). The response by dentists to overt billing constraints has received minimal attention, but the results suggest behavior similar to their medical counterparts (Stamm et al. 1986; Simard, Brodeur, Gingras, et al. 1988; Grytten, Holst, and Grytten 1992).

In Canada, fee-for-service is the predominant payment mechanism for dentists in private practice settings. Most dentists bill according to the suggested fees listed in a schedule published and updated annually by provincial professional associations. Similarly, most third-party payers base reimbursement on the relevant provincial schedule rather than usual, customary, and reasonable (UCR) fee screens favored by U.S. carriers. In 1992, aggregate dental expenditures in Canada amounted to $4.06 billion (Canadian), or 0.66 percent of gross domestic product (GDP) and 6.6 percent of national health expenditures (Health Canada 1996).

Beginning with the 1988 fee schedule, preventive maintenance or recall services,(1) a mainstay of the general dental practice, were bundled in one Canadian province (Ontario). Rather than assessing the fee for each procedure provided at a recall visit (i.e., a la carte billing), bundling applied a single relative value (and fee) to various combinations of preventive maintenance services. As a consequence, the fee for a recall visit decreased by 18-20 percent, depending on the combination of services provided.

This study examines the extent to which dentists may have avoided downward pressure on incomes by altering the mix and volume of services offered at recall visits. Because this is the first investigation in North America to evaluate dentist behavior under constraints similar to those experienced in the medical sector, the results add to our understanding of the impact of economic incentives on practice patterns and thereby inform the policy process regarding provider payment systems.

METHODS

The Fee Guide

The fee for each dental procedure listed in The Ontario Dental Association (ODA) Suggested Fee Guide for General Practitioners is the product of its relative value (RVU) and a dollar conversion factor:

Fee = [RVU.sup.*] Conversion Factor

The conversion factor is adjusted annually to reflect the prevailing economic environment, current methods of practice, and the fees of allied professions. Throughout this article, we have adjusted payments by the annual increase to the conversion factor rather than the consumer price index as the former was a more accurate indicator of changes in dental prices.

The bundling of recall services in 1988 was a dentist-initiated response to plan sponsors’ increasing dissatisfaction with the high rate of growth in dental expenditures exhibited throughout the decade. Four unique bundles of various preventive and diagnostic services were created with considerable implications for fees as shown in Table 1. Radiographs continued to be billed separately. No other services in any of the broad categories of dental care were bundled at that time or subsequently.

In addition to the major change in billing for recall services, the RVUs of composite (tooth-colored) fillings were adjusted upward in 1988 resulting in fee increases of 9-22 percent, depending on tooth type and the number of tooth surfaces involved.

In 1989, one year after bundling was introduced, and in response to complaints from the profession that the fees for bundled adult services were based on time factor estimates that were set too low, the RVUs of these bundles were increased by 5-6.9 percent, depending on the particular configuration of services. These increases were offset by decreases of a similar magnitude in the RVUs associated with primary dentition (children’s) bundles.

Data Sources

Two sources of data were used in this study: Liberty Health (previously Ontario Blue Cross)(2) provided the entire dental claims experience from a [TABULAR DATA FOR TABLE 1 OMITTED] sample of insured plans over the period 1987 through 1990, and the provincial regulatory body of dentists provided information about practitioners.

Selection of the Sample

A sample of plans was drawn from a pool of contracts that met the following conditions:

1. Established prior to 1987 and in effect without interruption until 1991. The period of observation was thus one year prior to fee bundling (1987), one year concurrent with the change (1988), and two years after its introduction (1989-1990).

2. Enrollment of 500 or more employees. Plans of this size were preferred, thus providing a large pool of patients and dentists while also minimizing variation caused by factors outside the scope of the study.

3. Allowable benefit determined according to the current fee schedule. By stipulating plans where reimbursement was based on the current fee schedule, we avoided issues arising from the effects of copayment on utilization, as some contracts base reimbursement on a lapsed fee schedule, in which case the claimant is responsible for the difference between the dentist’s fee and the lagged fee.