While the great majority of physicians provided care that is not excessive, the Government Accountability Office (GAO) found physicians in every part of the country that provided more services than were required, according to a GAO study that was described by Bruce A Steinwald, Director of Health Care to the Subcommittee on Health of the House of Representative's Committee on Energy and Commerce at a hearing on March 6, 2007.
This study was conducted in an effort to examine aspects of physician compensation in Medicare do identify improvements that can be made to the physician payment system. GAO examined the use of physician profiling practices used by other health care purchasers and recommended its use by CMS to identify individual physicians that are providing excessive care in an attempt to find an alternative the sustainable growth rate mechanism to control spending on physician services. Although savings from this determination alone would not be enough to correct Medicare's long-term fiscal imbalance, GAO believes it could be an important part of a package of reforms aimed at future program stability.
Purchaser programs
In this study, the GAO examined 10 health care purchasers to determine if profiling systems used by these purchasers that assessed physician performance against an efficiency standard could identify individual physicians that were providing care in excess of a norm. Three of the 10 purchasers examined reported that the profiling programs produced savings and provided estimates of savings attributable to their physician-focused efforts.
The health care purchasers then tied the outcome of their profiling results to incentives that were designed to encourage physicians to practice efficiently. Although the incentives varied widely in design and application, they included: educating physicians to encourage more efficient care, designating in their physician directories those physicians who met efficiency and quality standards, dividing physicians into tiers based on efficiency and giving enrollees financial incentives to see physicians in their particular tiers, providing bonuses or imposing penalties based on efficiency and quality standards, and excluding inefficient physicians from the network.
A primary virtue of profiling, GAO stated, is that coupled with incentives to encourage efficiency, it can create a system that operates at the individual physician level. GAO believes this has the potential to address a principal criticism of the sustainable growth rate system, which only operates at the aggregate physician level.
Program application
In its study, GAO found that Medicare's data-rich environment is conducive to identifying physicians who are likely to practice medicine inefficiently. GAO created its own profiling analysis of physician practices in the Medicare program. GAO used the term efficiency to mean providing and ordering a level of services that is sufficient to meet patients' health care needs, but not excessive, given a patient's health status. The GAO determined that by identifying patients whose total expenditures far exceeded those of other patients in their same health status grouping, then linking them with the physicians who treated them, GAO was able to determine which physicians treated a disproportionate share of these patients.
While the great majority of physicians were not providing excessive care, GAO's investigation using physician profiling found outlier generalist physicians in each area studied. In only two of the areas, physicians providing services in excess of normal accounted for more than 10 percent of the generalist physician population. In the remaining areas, the proportions ranged from 2 to 6 percent.
CMS has the tools to identify physicians who are practicing inefficiently, such as comprehensive medical claims information, sufficient numbers of physicians in most areas to construct adequate sample sizes and methods to adjust for differences in beneficiary health status. CMS could make methodological decisions similar to those made by other health care purchasers, GAO believes. Although efforts to improve efficiency would not, GAO says, be sufficient to correct Medicare's long term fiscal imbalance, these efforts should be an integral party of any reform package aimed at future program sustainability.
Source: GAO Testimony, GAO-07-567T, March 6, 2007.
A report prepared for the Medicare Payment Advisory Commission (MedPAC) revealed that the new relative value units used to calculate practice expense payments, announced by CMS in June 2006, will eventually increase payments for evaluation and management (E & M) while decreasing them for imaging and major procedures. The study, presented at a March 8 MedPAC meeting in Washington, D.C., found payments rising seven percent for E & M while falling nine percent for imaging and eight percent for major procedures when fully implemented in 2010.
MedPAC chose not to make any recommendations on the new methodology, choosing to wait for more data on its implementation.
Practice expense payments account for almost half of the $54 billion paid to physicians in 2004, according to the report. They cover the expense of operating a medical practice. Direct practice expenses include nonphysician clinical labor, medical equipment, and medical supplies. Indirect practice expenses are administrative labor, office and all other expenses.
Source: CCH Washington Bureau, March 8, 2007.
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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