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Surgery is performed at Toronto Western Hospital.Fred Lum/The Globe and Mail

Sending a signal that will reverberate throughout Ontario's broader public sector, Dalton McGuinty's Liberals have broken with their conciliatory past by forcing a tough new deal onto Ontario's doctors.

Less than two weeks after negotiations with the Ontario Medical Association fell apart, and despite requests by the OMA to call in a conciliator, Health Minister Deb Matthews announced Monday that a package of cuts to doctors' fees will be unilaterally imposed through regulations, retroactive to April 1.

The abrupt manner in which the cuts were unveiled, amid claims by the OMA that Ms. Matthews has misrepresented discussions at the bargaining table, sets an aggressive tone for other negotiations – including with the province's teachers. And it epitomized the shifting focus of a government once known for its big-spending ways.

The 37 fee-schedule changes announced Monday focus heavily (although not exclusively) on a relatively small number of high-paid specialists – mostly radiologists, ophthalmologists and cardiologists – and by the Liberals' estimate will save $338-million in 2012-13 and $440-million in 2013-14. But sources say there are more broad-based cuts to come, to get the rest of the way to a two-year freeze in doctors' total pay envelope.

Still on the table is the elimination of a "retention bonus," which the Liberals had brought in to dissuade doctors from leaving the province. That benefit currently peaks at $5,000 every three years for doctors who have practised at least three decades.

The government also wants to revive so-called clawbacks of doctors' fees once they exceed a level at which their ratio to overhead costs becomes skewed. The clawbacks were eliminated in the past decade because they were considered a disincentive to performing services. The government is mulling ways to reduce its investment in malpractice insurance, likely by increasing deductibles.

Those moves are expected to be followed by more changes to the fee schedule in the years ahead.

To some extent, Ontario may be setting the pace for a nationwide shift to rein in doctors' salaries. "We're watching the developments in Ontario with interest," a spokesperson for the B.C. health ministry said Monday.

But with a $14.8-billion deficit, Ontario is widely acknowledged to face the country's biggest fiscal challenges. Consistently restricting health-spending increases to 2.1 per cent annually is the single biggest part of that equation, since health care is on pace to soon account for more than 50 per cent of all program expenditures.

Having spent heavily when they came to office to address short-term concerns, in this case a shortage of doctors and lengthy waiting times, the Liberals are now trying to scale back those investments to prevent social programs from collapsing under the weight of a structural deficit.

Doctors made for an obvious target, and an easier one than some others on the Liberals' radar. Unlike with other public sector workers, the government is able to impose changes to doctors' pay through regulation rather than legislation. And the OMA, less a union than a professional association, has shown little interest in trying to get its members to take job action. While OMA officials said they're considering their legal options, they are otherwise reduced to a public advocacy campaign arguing that the cuts will lead to reduced service.

On Monday, Ms. Matthews went out of her way to suggest that a relatively few doctors who have seen "windfall profits" because of advances in technology will bear the brunt of the cuts. According to sources, 27 doctors earned more than $2-million in fees last year, up from 20 the previous year.

What remains to be seen is whether the government's recent heavy-handedness, which the OMA complains has squandered eight years of goodwill, will make doctors less co-operative with long-term reforms to their profession aimed at stabilizing costs for the long-haul – including a shift toward "evidence-based medicine" and a greater willingness to share work with other medical professionals.

Seeking to avoid alienating family doctors in particular, the government has been trying to go around the OMA to communicate with them directly. Its success thus far has been mixed at best, with a letter sent out last week from the Health Ministry failing to reach many of the physicians who were supposed to receive it.

Government officials contend that the OMA doesn't speak for all doctors, and that younger ones in particular are more reform-minded. But having been bypassed on Monday, the OMA will now attempt to ensure that all doctors feel they have been snubbed. If successful, those efforts could make it more difficult for Ms. Matthews to follow through on the still-vague "action plan" that is supposed to bring structural changes to the entire health sector.

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