[Regional variation in the impact of Medicare physician payment reform : report to Congress]

7 Pages·1992·0.33 MB·English

by  Sullivan, Louis Wade, 1933-

THESECRETARYOFHEALTHANOHUMANSERVICES
WASHINGTON.O.C.20»0I
DEC 1992
TheHonorableDanQuayle
PresidentoftheSenate
Washington,D.C. 20510
DearMr.President:
Iampleasedtoprovidethisreportinresponsetoscctiun4115ofPublicLaw101-508,the
OmnibusBudgetReconciliationActof1990. Itrequiresstudyofregionalvariationsin
impactofMedicarephysicianpaymentreformincluding: (1)factorsthatmayexplain
geographicvariationsinMedicarereasonablechargesthatarenotattributabletovariations
inphysicianpracticecosts(includingthesupplyofphysiciansinanareaandareavariations
inthemixofservicesfurnished);(2)theextenttowhichthegeographicpracticecost
indices(GPCIs)appliedunderthefeescheduleundersection 1848oftheSocialSecurity
Actaccuratelyreflectvariationsinpracticecostsandmalpracticecosts(andalternative
sourcesofinformationuponwhichtobasesuchindices);(3)theimpactofthetransitionto
anational,resource-basedfeescheduleforphysicians'servicesunderMedicareonaccessto
physicians'servicesinareasthatexperienceadisproportionatelylargereductionin
paymentsforphysicians'servicesunderthefeeschedulebyreasonofsuchvariations;and
(4)appropriateadjustmentsormodificationsinthetransitionto,ormannerofdetermining
paymentsundersection1848oftheSocialSecurityAct.tocompensateforsuchvariations
andassureaccesstophysicians'servicesforMedicarebeneficiariesinsuchareas.
1. FactorsThatMayExplainGeographicVariationinMedicareReasonableCharj^es
Areviewoftheresearchliteraturewasconducted,andwesponsoredresearchtohelp
determinethefactorsotherthanphysicianpracticecostdifferencesthatmayexplain
differencesinMedicarereasonablechargesforphysicianservices. Theformalliterature
frompaststudieshasdealtlargelywithphysicianpricingingeneral,ratherthanwith
Medicarereasonablecharges. Resultsofvariousstudiesarcoftencontradictoryaboutthe
influencesotherthanpracticecosts. Thereisfairlywideagreementthatotherimportant
factorsincludedemandfactors,suchasthepopulationcompositionandthecharacterofthe
insurancemarket,andphysiciansupplyfactors,suchastheageandspecialtydistribution
Otherfactorsincludehospitalsupplyfactors,physici.intrainingandpracticecharacteristics
WehaveacontracttoexaminepossiblecausesU\tvariationsmMedicareaveragealk)wcd
charges. However,becausenosuitabledatabaseexists,thestudycannotcoverthe
spectrumofcustomary,prevailingandrea.sonabie(CPR)chargesthatexistedpriorto
physicianpaymentreform. Conceptually,thereh.\^heeiiachangefromaboutone-half
Page•2--The'HonorableDanQuayle
millionpractice-specificfeeschedules,differentiatedgenerallyaccordingtothelocation,
specialtyandhistoricchargesofeachpractice,toasetof232localityfeeschedules. Fee
schedulepaymentsaredifferentiatedbythestatutorilydefinedhistoricpaymentbasisfor
eachlocalitycomparedtothenationalfeescheduleanditsgeographicadjustment
factors,orGPCIs. Hencetheresearcherswillanalyzefactorswhichmayexplain
variationsinaverageMedicareallowedcharges.
2. GPCIAccuracyinExplainingVariationsinPracticeCostsandMalpractice
Costs,andAlternativeDataSourcesforIndices
WehaveacontracttoexaminewhethertheGPCIsappliedundertheMedicarefee
schedule(MFS)accuratelyreflectvariationinpracticecostsandmalpracticecosts. I'lie
shareweightsandsomekeyinputfactorsarebeingvalidatedwithdataasreportedto
theAmericanMedicalAssociation's(AMA)Socio-EconomicMonitoringSystem. Tlio.se
datacomefromapproximately4,000practicingphysicianseachyearandarewidely
regardedasoneofthebestavailablesourcesofinformationaboutphysiciancostsand
incomesinvariousareasandspecialties.
MWFeS,hatvheenAotMeAdtshaaitd,iinnpraerstp:ondingtotheJune5, 1991,ProposedRulesforthe 1992
"Forthemostpart,theAMAsupportsthemethodsbywhichgeographic
adjustmentisaccomplishedthroughthenewfeeschedule. Wecontinuetohe
concerned,however,byHCFA'snearlyexclusiverelianceonproxiesfor
physiciansactualcosts. Werecognizethedifficultyinfindingdatabasesthat
affordenoughgeographicdetail;toaffordprecisioninthemeasurementof
practiceinputprices.OurownanalysisoftheadequacyoftheGPCIsinreflectirn:
actualpracticeinputpricesprovidedfurtherevidencethatgeographicadjustment
ofpaymentamountsisappropriate. Thisanalysisfurtherfoundthatthe
individualGPCIswerecorrelatedwithactualpracticeinputprices(emphasis
added)."
Ourcontractorwillalsoexaminesomepossibledataalternativesforvariouscomponents
oftheGPCIs,inparticularfornon-physicianemployeewagesandforofficerentandtor
malpracticeexpenses. Onealternativefornon-physicianwagesthatwillbeanalyzed :s
theMedicareHospitalWageIndex.Severalrentaldatasourcesarebeingexamineil,iv..:
wehavethusfaragreedwiththePhysicianPaymentReviewCommission'sfindingth.i;
theavailabledataarenotveryrepresentativeatarealevelsandseldomincludesmaii•:
cuarlbcaunlaotironasnyisrauvraalilaarbelaes.forClmeaarnlyy,mtohreeraesriedaesnttihaalnreanntyalprporsopxeyctwievenaolwterunsaetiivne.theWeGl'a<ir!
alsogatheringandanalyzingagreatdealofmorerecentinformationaboutphysician
malpracticepremiums. Wealsohavelaunchedstudieswhichwillexamine 1990Ceir.;.
resultsandothermorerecentdatathatcanformthebasisforthenextgeneralupd.i:;;.•
orrefinementoftheGPCIs. Weanticipatethatwewillbeabletoprcipo.seagener.i'
updatinginthespringof1994forimplementationmcalendar 1995,consistentwith
section4118(c)ofPublicUiw 101-50S.
Page3"The-HonorableDanQuayle
I
3. ImpactonAccessinAreasThatExperienceDisproportionatelyLargeReductions
inPaymentsforPhysicianServices
Wehaveidentifiedthoseareaswhichareestimatedtofacecomparativelythelargestfee
reductionsundertheMedicarefeeschedule. TheestimatescomparewhatMedicare
mighthavepaidafter1992hadtherenotbeenphysicianpaymentreform. Using 1996
asthereferenceperiod,weidentifiedtheMedicarepaymentlocalitiesinwhichaverage
paymentsperservicemaybeatleast 10percentlessundertheMFS,comparedto
averagesundertheoldsystem. Ourcontractorisexaminingthecharacteristicsofthese
localitiesfromseveralperspectives,includingthosefoundtobepossiblysignificantinthe
analysisofvariationsinMedicarereasonablechargesdiscussedearlier.
Byandlarge,theseareasarecharacterizedbyhigherthanaverageMedicarehistoric
paymentlevels. SomeofthelargestreductionsareexpectedinManhattan,
LosAngeles,MiamiandLasVegas. Most,butnotall,ofthehighestimpactareasare
imneduircbaalncoarrelgaivregres.cityWseubwuorubladnaalrseoaspowihnteroeutthtehraetaisctaubaolveto-taavleMraegdeicaavraielapbailyimteynotfsfcir
physicianservicesareexpectedtogrowevenintheseareaswhereaverageMedicare
paymentsperservicemaydeclinethemost. Also,wenotethattheMedicare 10percent
bonuspaymentsforphysicianservicesprovideanextraaccessincentivetocaregiversin
UrbanandRuralHealthPersonnelShortageAreas.
4. AppropriateAdjustmentsorModifications
Wehavenotyetseenanyreasonwhichwouldleadustoconcludethataccessto
physicianservicesduringthetransitionperiodforMedicarephysicianpaymentreform
shoulddiminish,evenintheareasfacingthelargestpaymentreductions. Aswas
describedinourrecentReporttoCongress"MonitoringUtilizationofandAccessto
ServicesforMedicareBeneficiariesunderPhysicianPaymentReform,"weare
extensivelymonitoringforchangesinaccesstophysicianservicesbyMedicare
beneficiaries. Untiltheresearchv/earesponsoringandmyreviewofapproachesfor
simulatingagreatersupplyofprimarycarepractitionersarecompleted,weseeno
justificafionforalteringeitherthestatutorytransitionperiodfortheMedicarephysici.m
feeschedule,orthemannerofdeterminingpaymentsforphysicians'services.
ResearchReportStatusSummary
BySpring1993,weexpecttoreceivefromourcontractortheanalyseswehaveiniii:.;.-.!
yoonureingiaonraelpovrartiaattitohnatintipmhey.sicWiaenlpoaoykmefonnt.v;rierfdortmo.woTrhkiisngincfloorsmelaytiaonndwiclolntbienuporuosvliydra'i::.
CongresstoassurethatMedicarebeneficiariescontinuetohaveaccesstoquality
physicianservices.
Sincerely.
Louis V. , la.,.,. M.D.
THESECRETARYOFHEALTHANDHUMANSERVICES
WASHINGTON,O.C.J0701
DEC I I 1992
TheHonorableThomasS.Foley
SpeakeroftheHouseofRepresentatives
Washington,D.C 20515
DearMr.Speaker:
Iampleasedtoprovidethisreportinresponsetosection4115ofPublicLaw101-508,the
OmnibusBudgetReconciliationActof1990. Itrequiresstudyofregionalvariationsin
impactofMedicarephysicianpaymentreformincluding: (1)factorsthatmayexplain
geographicvariationsinMedicarereasonablechargesthatarenotattributabletovariations
inphysicianpracticecosts(includingthesupplyofphysiciansinanareaandareavariations
inthemixofservicesfurnished);(2)theextenttowhichthegeographicpracticecost
indices(GPCIs)appliedunderthefeescheduleundersection 1848oftheSocialSecurity
Actaccuratelyreflectvariationsinpracticecostsandmalpracticecosts(andalternative
sourcesofinformationuponwhichtobasesuchindices);(3)theimpactofthetransitionto
anational,resource-basedfeescheduleforphysicians'servicesunderMedicareonaccessto
physicians'servicesinareasthatexperienceadisproportionatelylargereductionin
paymentsforphysicians'servicesunderthefeeschedulebyreasonofsuchvariations;and
(4)appropriateadjustmentsormodificationsinthetransitionto,ormannerofdetermining
paymentsundersection1848oftheSocialSecurityAct,tocompensateforsuchvariations
andassureaccesstophysicians'servicesforMedicarebeneficiariesinsuchareas.
1. FactorsThatMayExplainGeographicVariationinMedicareReasonableCharges
Areviewoftheresearchliteraturewasconducted,andwesponsoredresearchtohelp
determinethefactorsotherthanphysicianpracticecostdifferencesthatmayexplain
differencesinMedicarereasonablechargesforphysicianservices. Theformalliterature
frompaststudieshasdealtlargelywithphysicianpricingingeneral,ratherthanwith
Medicarereasonablecharges. Resultsofvariousstudiesareoftencontradictoryaboutthe
Influencesotherthanpracticecosts. Thereisfairlywideagreementthatotherimportant
factorsincludedemandfactors,suchasthepopulationcompositionandthecharacterofthe
insurancemarket,andphysiciansupplyfactors,such.istheageandspecialtydistribution.
Otherfactorsincludehospitalsupplyfactors,physiciantrainingandpracticecharacteristics.
Wehaveacontracttoexaminepossiblecausesforv.iri.itionsinMedicareaverageallowed
charges. However,becausenosuitabledatabaseexists,thestudycannotcoverthe
spectrumofcustomary,prevailingandrea.sonable(Cl'l?)ehargesthatexistedpriorto
physicianpaymentreform. Conceptually,thereh.isheen.iehangefromabouti)ne-half
Page2-TheHonorableThomasS.Foley
millionpractice-specificfeeschedules,differentiatedgenerallyaccordingtothelocation,
specialtyandhistoricchargesofeachpractice,toasetof232localityfeeschedules. Fee
schedulepaymentsaredifferentiatedbythestatutorilydefinedhistoricpaymentbasisfor
eachlocalitycomparedtothenationalfeescheduleanditsgeographicadjustment
factors,orGPCIs. Hencetheresearcherswillanalyzefactorswhichmayexplain
variationsinaverageMedicareallowedcharges.
2. GPCIAccuracyinExplainingVariationsinPracticeCostsandMalpracticeCosts,
andAlternativeDataSourcesforIndices
WehaveacontracttoexaminewhethertheGPCIsappliedundertheMedicarefee
schedule(MFS)accuratelyreflectvariationinpracticecostsandmalpracticecosts. The
shareweightsandsomekeyinputfactorsarebeingvalidatedwithdataasreportedto
theAmericanMedicalAssociation's(AMA)Socio-EconomicMonitoringSystem. Those
datacomefromapproximately4,000practicingphysicianseachyearandarewidely
regardedasoneofthebestavailablesourcesofinformationaboutphysiciancostsand
incomesinvariousareasandspecialties.
WMFeS,hatvheenAotMeAdtshaaitd,iinnpraerstp:ondingtotheJune5, 1991,ProposedRulesforthe 1992
"Forthemostpart,theAMAsupportsthemethodsbywhichgeographic
adjustmentisaccomplishedthroughthenewfeeschedule. Wecontinuetobe
concerned,however,byHCFA'snearlyexclusiverelianceonproxiesforphysicians
actualcosts. Werecognizethedifficultyinfindingdatabasesthataffordenough
geographicdetail;toaffordprecisioninthemeasurementofpracticeinputprices.
OurownanalysisoftheadequacyoftheGPCIsinreflectingactualpracticeinput
pricesprovidedfurtherevidencethatgeographicadjustmentofpaymentamountsis
appropriate. ThisanalysisfurtherfoundthattheindividualGPCIswerecorrelated
withactualpracticeinputprices(emphasisadded)."
Ourcontractorwillalsoexaminesomepossibledataalternativesforvariouscomponents
oftheGPCIs,inparticularfornon-physicianemployeewagesandforofficerentandtor
malpracticeexpenses. Onealternativefornon-physicianwagesthatwillbeanalyzedis
theMedicareHospitalWageIndex.Severalrentaldatasourcesarebeingexamined,hi;;
wehavethusfaragreedwiththePhysicianPaymentReviewCommission'sfindingth.i:
theavailabledataarenotveryrepresentativeatarealevelsandseldomincludesmall:
cuarlbcaunlaotrionasnyisrauvraalilaarbelaes.forClmeaarnlyy,mtohreeraersiedaesnttihaalnreanntyalprpor.osxpyectwievenaolwterunsaetiivne.theWeGi'.(ire1
alsogatheringandanalyzingagreatdealofmorerecentinformationaboutphysician
malpracticepremiums. Wealsohavelaunchedstudieswhichwillexamine 1990Ceii.r.
resultsandothermorerecentdatathatcanformthebasisforthenextgeneral upd.ir-:
orrefinementoftheGPCIs. Weanticipatethatwcwillbeabletoproposeageiici.il
updatinginthespringof1994forimplementationincalendar 1995,consistentwith
section4118(c)ofPublicLaw 101-508.
i
' Page3--TheHonorableThomasS.Foley
3. ImpactonAccessinAreasThatExperienceDisproportionatelyLargeReductions
inPaymentsforPhysicianServices
Wehaveidentifiedthoseareaswhichareestimatedtofacecomparativelythelargestfee
reductionsundertheMedicarefeeschedule. TheestimatescomparewhatMedicare
mighthavepaidafter1992hadtherenotbeenphysicianpaymentreform. Using 1996
asthereferenceperiod,weidentifiedtheMedicarepaymentlocalitiesinwhichaverage
paymentsperservicemaybeatleast10percentlessundertheMFS,comparedto
averagesundertheoldsystem. Ourcontractorisexaminingthecharacteristicsofthese
localitiesfromseveralperspectives,includingthosefoundtobepossiblysignificantinthe
analysisofvariationsinMedicarereasonablechargesdiscussedearlier.
Byandlarge,theseareasarecharacterizedbyhigherthanaverageMedicarehistoric
paymentlevels. SomeofthelargestreductionsareexpectedinManhattan,
LosAngeles,MiamiandLasVegas. Most,butnotall,ofthehighestimpactareasare
mineduircbaalncoarrelgairvegres.cityWseubwuorubladnaalrseoaspowihnteroeutthtehraetaisctaubaolveto-taavleMreagdeicaavraielapbailyimteynotfsfor
physicianservicesareexpectedtogrowevenintheseareaswhereaverageMedicare
paymentsperservicemaydeclinethemost. Also,wenotethattheMedicare10percent
bonuspaymentsforphysicianservicesprovideanextraaccessincentivetocaregiversin
UrbanandRuralHealthPersonnelShortageAreas.
4. AppropriateAdjustmentsorModifications
Wehavenotyetseenanyreasonwhichwouldleadustoconcludethataccessto
physicianservicesduringthetransitionperiodforMedicarephysicianpaymentreform
shoulddiminish,evenintheareasfacingthelargestpaymentreductions. Aswas
describedinourrecentReporttoCongress"MonitoringUtilizationofandAccessto
ServicesforMedicareBeneficiariesunderPhysicianPaymentReform,"weare
extensivelymonitoringforchangesinaccesstophysicianservicesbyMedicare
beneficiaries. Untiltheresearchwearesponsoringandmyreviewofapproachesfor
stimulatingagreatersupplyofprimarycarepractitionersarecompleted,weseeno
jusfificationforalteringeitherthestatutorytransitionperiodfortheMedicarephysician
feeschedule,orthemannerofdeterminingpaymentsforphysicians'services.
ResearchReportStatusSummary
BySpring1993,weexpecttoreceivefromourcontractortheanalyseswehaveinitiated
onregionalvariationinphysicianpaymentreform. Thisinformationwillbeprovidedto
youinareportatthattime. Welookforwardtoworkingcloselyandcontinuouslywith
CongresstoassurethatMedicarebeneficiariescontinuetohaveaccesstoquality
physicianservices.
Sincerely,
Louis \\ Snl!iv;iri, M.D.
ensLIBRHRy
3 flDTS 0DDLL770 L