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The Role Of Payment Systems In Influencing Oral Health Care Provision

One may foolishly undermine the role of payment systems in influencing oral health care provision. See how payment systems drive changes in dental services and impact overall wellness.

Author:Suleman Shah
Reviewer:Han Ju
Dec 22, 2023
What could be the role of payment systems in influencing oral health care provision?
The unique characteristics of dental disease should result in greater cost control and an expectation of a better operation of the market mechanism than in general healthcare.
Such characteristics include:
  • its predictability
  • non-communicability
  • ease of diagnosis
  • its extensive prevention possibilities
These differentiating features, however, also increase the likelihood that services are over-consumed and/or over-provided.
The most influential feature determining efficient resource use in health care provision is the type of payment system.
A per capita system serves as a link between the dentist’s future income and service provision, and provides equity in termsof coverage and access.
The result is that patients may benefit from fewer unnecessary treatments, and encounter more preventive activities.
The system is limited by the potential for under-treatment and problems with patient selection.
With fixed salary, the dentist's income is independent of service provision, with incentives for low production, which leads to high costs per patient.
Salaried dentists generally provide more prevention services, and allow the targeting of services to priority or ‘special needs’ groups.
The patient benefits from the greater equity of a service and the location of services can be determined by community needs.
Fee-per-item is the most common payment system in dental service provision for adults, where the dentist is rewarded according to the amount of work undertaken.
Fee-per-item removes the incentive for supervised neglect or to cherry pick patients.
It also solves the problems of patient selection and under-treatment, associated with capitation financing.
Fee-per-item can encourage the use of services by patients on the advice of the dentist with the result that costs can be inflated with little impact on oral health itself.
In the absence of a system of probity, dentists can manipulate demand and set fees, and provided moral hazard can occur in the form of supplier inducement.
This review discusses the role of payment systems in influencing oral health care provision.

Preliminary Discussion

Dental care has unique features that distinguish it from health care in general.
Diseases are relatively few and tend to be more predictable.
Dental care is rarely in response to a life-threatening occurrence and untreated disease rarely has dramatic consequences on an individual’s health.
Dental diseases are relatively easy to diagnose giving the patient more time to plan and take treatment decisions.
Disease is non-communicable and there is much greater scope for prevention.
As a result of these distinctive features, one would expect market mechanisms to perform better in dental care than in other health services as dental disease across individual can be treated as independent.
A feature of market economies is that, in the presence of externalities such as communicable disease, markets fail to allocate goods and services efficiently.
These factors make it possible to control costs and for a more efficient market mechanism:
  • non-emergency nature of most dental care
  • ease of access to relevant information for treatment decisions via X-rays
  • different treatment alternatives with varying costs
However, the distinguishing characteristics of dental care also increase the likelihood that services are over-consumed and/or over-provided.
Among the leading strategies to reform health care is the development and implementation of new payment models.
The goal is to change the way physicians, dentists, hospitals, and other care providers are paid in order to emphasize higher quality at lower costs - in other words, to improve value.

Payment Systems

When evaluating payment models, the framework used was how well the various payment systems support the attributes of value-driven health system, where health is maximized and care is:
  • patient-centered
  • efficient
  • safe and effective
  • timely and assessable
  • accountable
  • innovative
  • coordinated across providers and facilities
The choice of payment system is the key issue for efficient resource use in health care provision.
The term “payment system” denotes the body of price regulation existing in the market for dental services.
The incentives of a dentist or physician depend on the combination of:
  • payment basis;
  • payment schedule; and, to lesser degree,
  • payment procedure.
A “payment basis” is defined as the level of the payment in a certain period of time, which is remuneration for costs incurred.
This is influenced by:
  • the hours worked by the dentist
  • use of equipment
  • prescription drugs
  • rent
  • heating
  • electricity used in the practice
The “payment basis” also includes the number and types of service provisions and the number of:
  • treatment episodes
  • treated patients
  • potential patients
The “payment schedule” is a function that connects revenue with the components making up the payment basis.
The “payment procedure” is generally referred to as the institutional mechanism of reimbursement.
Different types of payment systems can be used as a means of influencing both consumer and dentist behavior.
Consumer incentives derive from the interaction of individual preferences.
Constraints limiting their preferences, such as income and prices, are also influenced by the health status of the individual, as poor health can lead to a loss of income.
Consumer incentives are revealed in terms of the exertion of preventive effort, the decision to initiate an episode of care, and the selection of providers.
Dentists are generally remunerated in three different methods:
  • per capita
  • fee-per-item
  • fixed salary
These can be used as a means of influencing dentists’ behavior to provide higher quality at lower costs.

Per Capita Remuneration

A per capita payment system is mainly used in primary care.
It is suitable in terms of exchequer financing because the price and quantity are agreed at the commencement of contract.
The system maximizes efficiency with the incentive to drive down costs; thus, maximizing profits.
At contract renewal, the government agency can negotiate down the price on foot of these reduced costs.
In a per capita system:
  • fewer dentists are required
  • education and training costs are reduced
Thus, reducing public expenditure.
Patient access and coverage should be more equitable.
Society should benefit from a greater mix of patients being seen and the dentist may have more time to interact with patients and to devise dental plans to suit their needs.
A per capita system separates the link between these two:
  • amount of service provided
  • financial reward
Relative to fee-for-service, capitation may encourage more preventive activities as the dentist’s future income is not dependent on service provision.
The main drawback of per capita remuneration involves the possibility for patient selection and under-treatment.
Clearly, the dentist should not have a role in patient selection.
To avoid patient selection problems, a well-defined and balanced patient population should be allocated randomly to the dental practice.
However, with per capita systems patients are generally allocated geographically.
This method of patient allocation may induce bias, as a patient pool with a concentration of rural patients may have more dental disease as rural dwellers generally have less exposure to fluoridated water supplies.
Problems of patient selection and under-treatment can be limited by risk adjustment of the per capita fee.
If patient groups with high-levels of treatment needs can be identified, then these characteristics can be used in order to differentiate the per capita fee.
The differentiation must not be based on characteristics that the dentist can manipulate.
With a fixed pool of patients for an agreed remuneration dentists have an incentive to under-treat to save costs.
A per capita system can lead to what is termed supervised neglect.
However, the evidence per capita system for the treatment of children in the General Dental Service in Britain found no evidence of systematic neglect among those treated, but they had:
  • fewer fillings
  • more untreated diseased teeth
  • similar disease levels to their counterparts treated under fee-for-service
Administration costs in a per capita system are often high and where the population is scattered widely, the population base may be too small to ensure that dentists receive a sufficient per capita income.
A weakness of a per capita scheme identified in different studies is that the quality of the treatment provided can be reduced.
Since dentists get a fixed fee per patient under supervision, their financial rewards are positively correlated with the number of patients.
The economic incentive is to minimize the time spent per patient in order to maximize the panel of patients.
That may result in untreated dental disease.
A further weakness is that the dentists have less time:
  • for prevention
  • for giving advice
  • for carrying out preventive procedures (e.g., fissure sealing)
The most recent evaluation of a per capita payment scheme was undertaken in Norway in 2012.
The authors found that a per capita scheme did not result in a fall in the quality of dental care. However, the number of observations in this study was small and the project was publicly financed.

Fee-Per-Item Remuneration

Fee-per-item financing rewards the dentist according to the amount of work undertaken.
Dentists are paid a “piece-rate” for each individual treatment carried out, with specified fees unbundled for each type of treatment, for example:
  • fillings
  • extractions
  • crowns
  • bridges
  • dentures
With fee-per-item, the emphasis is on productivity, and it encourages the delivery of care and maximizing patient visits.
As a payment mechanism, it supports accountability.
In addition, it is relatively flexible in that it can be used regardless of the size or organizational structure of a dentist’s practice or the geographical location of care.
With fee-per-item financing, it is easier to ensure quality.
It also solves the problems of patient selection and under-treatment, which are associated with per capita financing.
If dentists are remunerated fee-per-item of service, they no longer have an incentive to avoid patients who have high levels of treatment need.
With fee-per-item services, equipment and premises are provided and maintained by the dental practitioner; thus, minimizing capital input and investment by the state.
This provides a clear incentive for the dentist to keep costs down so as to maximize profit which effectively minimizes inflationary pressures on the service.
With fee-per-item, the patient benefits from increased competition between practices in terms of the maintenance of quality standards, particularly in areas of high dentist-to-population ratios.
There is no incentive for supervised neglect.
There is also a financial incentive to carry out treatment earlier; thus, resulting in:
  • smaller restorations
  • earlier orthodontic interventions
  • fewer root canal therapies
There is generally a greater allegiance to patients with a financial incentive:
  • to follow-up non-attenders
  • to institute an efficient recall system
Fee-per-item is criticized for giving a potential incentive to “over-treatment” or “supplier induced demand.” Therefore:
  • encouraging dentists to err on the side of “drilling and filling”
  • going against trends in clinical best practice
  • leading to an emphasis on the speed of treatment rather than quality
  • failing to encourage a preventive approach (since dentists were not paid to spend time with patients explaining how they could maintain their dental health)
Fee-per-item encourages the use of services by patients on the advice of the dentist and thus inflating dental care costs with little impact on oral health itself.
The role of regulation in determining fees is influential in determining costs.
Regulated fees are generally negotiated between national dental associations and the health authorities.
Costs can only occur when treatment is provided. So, lack of uptake or non-attendance brings the overall cost down.
There is no incentive for the funding agency to encourage the use of the services as more use means more associated costs to the state.
Fee-per-item financing should be governed by an efficient system of probity that would detect and deter dentists from providing services other than those that are based on need.

Fixed Pay/Fixed Salary

In many European countries, dental services are provided by salaried health board dentists to those under the age of 16.
Health authorities generally employ the dentist and control the cost, nature, and extent of the service by determining the terms of reference of employment.
The health authority:
  • owns the premises and equipment
  • has direct control over standards
The advantages of a salaried system are that health care planning is more informed, as dentists’ salaries are known in advance and that promotion could be performance related.
The dentist’s income is independent of production. They maximize their utility subject to an income-leisure trade-off.
Since income is independent of the number of patients, there are no incentives for dentists to work harder.
This results in low production, which leads to high costs per patient.
Salaried dentists generally provide more prevention services, giving a marginal private benefit from the effectiveness of fissure sealants and fluoride applications and greater recall to monitor preventive programs in place.
Producer moral hazard is counteracted as either over-treatment or over-prescribing is not financially rewarded.
Advanced innovative treatments can be undertaken with financial loss.
The patient benefits from the greater equity of a service for all on the basis of the need.
With a fixed salary, there are no financial incentives to refer difficult cases for secondary care; thus, avoiding issues such as over referral, causing increased waiting lists and more unmet need
Fixed salary remuneration allows the targeting of dental services to priority or “special needs” groups.
There is more clinical time for each patient, and this is particularly suited to the “special needs patient” and the “dental phobic,” who can be given the time necessary for proper orientation and multiple appointments can be given if required.
With fixed salary remuneration, the location of services can be determined by community needs and not on the individualistic need of a dentist acting in self-interest.

Main Discussion

The incentive-structure in systems of remuneration influences the behavior of both patient and provider.
Consumer incentives are negligible in health care because of asymmetric information as the physician’s informational advantage can be used to influence the preferences of the individual.
However, a significant influence on consumer incentives results from eligibility for public or private insurance.
When an individual becomes eligible for dental services under an insurance plan, they may alter their behavior (moral hazard) and seek more dental care than they would have if they were not insured.
Consumer moral hazard arises because insurance eligibility reduces the cost of treatment to zero at the point of consumption, and this makes:
  • poor oral health less desirable
  • prevention less vigorously pursued
This also:
  • increases the likelihood of poor oral health
  • increases the probability of requiring dental services
The zero cost at the point of consumption as a result of insurance encourages a higher rate of utilization than would otherwise be efficient. This creates a gap between:
  • the costs of what is provided; and
  • the value or willingness to pay for it.
The over-consumption of services results in a welfare loss to society as a whole.
Consumer moral hazard can be counteracted by a co-payment system, whereby the patient pays some fraction of the dental fee.
This provides a financial incentive to prevent oral disease and reduce consumption of dental services.
Dentists’ behavior can be influenced by these three things:
  • type of graduate education
  • organization of dental services at the clinical level
  • accountability with the system of delivery (probity)


The optimal dental contract may be a “blended” payment system, whereby dentists receive a:
  • proportion of their income through capitation
  • proportion from fee-per-item
  • proportion from fixed salary or allowances
The per capita element would ensure more equity in access to dental services for the whole population and encourage prevention.
The proportion from fee-per-item would maximize productivity and patient visits.
The proportion from fixed salary or allowances should be performance related to financial incentive associated with achieving defined and measurable goals related to care processes.
This may encourage dentists to form group practices.
A “blended” payment system with an adjustable incentive formula, negotiated between the dental association and the agency providing remuneration, will act to counteract any variation in either:
  • pattern of treatment need;
  • or geographical variations.
The fee-per-item element could have the highest weighting where the population of high-risk to caries patients was the greatest.
The per capita element could have the highest weighting in areas with the highest dentist to population ratios, and thus reduce the likelihood of supplier inducement.
The blend of incentives can be adjusted periodically based on the requirements of policy makers.
Indeed, the role of payment systems in influencing oral health care provision must be emphasized.
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Suleman Shah

Suleman Shah

Suleman Shah is a researcher and freelance writer. As a researcher, he has worked with MNS University of Agriculture, Multan (Pakistan) and Texas A & M University (USA). He regularly writes science articles and blogs for science news website and open access publishers OA Publishing London and Scientific Times. He loves to keep himself updated on scientific developments and convert these developments into everyday language to update the readers about the developments in the scientific era. His primary research focus is Plant sciences, and he contributed to this field by publishing his research in scientific journals and presenting his work at many Conferences. Shah graduated from the University of Agriculture Faisalabad (Pakistan) and started his professional carrier with Jaffer Agro Services and later with the Agriculture Department of the Government of Pakistan. His research interest compelled and attracted him to proceed with his carrier in Plant sciences research. So, he started his Ph.D. in Soil Science at MNS University of Agriculture Multan (Pakistan). Later, he started working as a visiting scholar with Texas A&M University (USA). Shah’s experience with big Open Excess publishers like Springers, Frontiers, MDPI, etc., testified to his belief in Open Access as a barrier-removing mechanism between researchers and the readers of their research. Shah believes that Open Access is revolutionizing the publication process and benefitting research in all fields.
Han Ju

Han Ju

Hello! I'm Han Ju, the heart behind World Wide Journals. My life is a unique tapestry woven from the threads of news, spirituality, and science, enriched by melodies from my guitar. Raised amidst tales of the ancient and the arcane, I developed a keen eye for the stories that truly matter. Through my work, I seek to bridge the seen with the unseen, marrying the rigor of science with the depth of spirituality. Each article at World Wide Journals is a piece of this ongoing quest, blending analysis with personal reflection. Whether exploring quantum frontiers or strumming chords under the stars, my aim is to inspire and provoke thought, inviting you into a world where every discovery is a note in the grand symphony of existence. Welcome aboard this journey of insight and exploration, where curiosity leads and music guides.
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