Physician Compensation

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Physician Influence on Federal Health Spending, 1950s

April 9, 2012 in Books, Licensure, Physician Compensation, Supply of Medical Services | No comments

The 1950s was a time of unprecedented technological advances in the science of medical care.  In 1955, epidemiologists at the University of Michigan developed a polio vaccine.  These advances lead the federal government to increase funding for research.  Between 1955 and 1960, Congress increased the budget of the National Institutes of Health (NIH) from $81 million to $400 million.  Physicians did not support increased funding for all aspects of medical care, particularly those what would increase competition.

“More money for research met no objections from the AMA.  However, the story of aid to medical education was different, and it is worth recalling the contrast.  In 1949 Congress was close to approving a five-year program of grants and scholarships for medical schools to increase the nation’s supply of physicians.  A bill had passed the Senate and was reported out of House committee when it hit a small snag.  Yet it seemed likely to pass the next year.  The House of Delegates of the AMA approved the measure in December 1949.  However, two months later, concerned about setting dangerous precedents, the AMA board reversed its position, and the bill died in Congress.  Despite wide support from other groups, aid to medical education was blocked throughout the 1950s.”

Although physicians did not support more funds for medical education, medical schools grew tremendously during this period.

“The infusion of money into research and training programs created new opportunities in–and for–medical schools.  During the 1940s, the average income of medical schools tripled form $500,000 to $1.5 million a year; by 1958-59 the average schools income was up to $3.7 million and ten year later to $15 million.”  Medical schools became sprawling, complex organizations that now saw their missions as three-fold: research, education, and patient care (usually in that order).”

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The Impacts of Managed Competition in Netherlands

March 26, 2012 in Health Insurance, International Health Care Systems, Physician Compensation | 1 comment

Financial incentives matter.  If one had to give economists (and health economists as well) a slogan, this would be it.

In 2006, the Netherlands instituted a form of managed competition. According to Van Dijk et al (2012) ”Before 2006, inhabitants had either compulsory social (sickness fund, 62%) or voluntarily private (36%) health insurance depending, among others, on income (below a gross annual income of €33 000 people were socially insured).  This combined system of social and private health insurance was replaced by a compulsory single universal basic health insurance covering a legally defined package of basic benefits including GP care. GPs act as gatekeepers for secondary care…”

The implementation of a managed competition system in the Netherlands cause two major changes to the primary care payment system.   First, cost sharing was abolished for privately insured individuals.  Second, whereas previously doctors treating socially-insured patients received a capitation payment and physicians treating  privately-insured beneficiaries received a fee-for-service payments, after 2006 all physicians received a mixed capitation/fee-for-service payment system.

How did these changes affect the number of primary care visits in the Netherlands?  The authors of the study used a sample of GP practices participating in the 2005-2007 Netherlands Information Network of General Practice (LINH) study to conclude the following:

“Abolition of cost sharing led to a higher increase in patient-initiated utilisation for privately insured consumers in persons aged 65 and older. Introduction of fee-for-service for socially insured consumers led to a higher increase in physician-initiated utilisation.”

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Less Money for Preventive Care, More Money for Docs

February 22, 2012 in Medicaid/Medicare, Physician Compensation | No comments

Merrill Goozner reports that paying for the “doc fix” comes at the cost of preventive services.

Friday’s payroll tax cut extension bill included $18 billion to maintain Medicare physician salaries at current levels for the rest of this year. Unlike the payroll tax extension, Congress insisted on paying for the doc-fix with offsetting budget cuts.  They raised nearly a third of the money by cutting $5 billion from prevention programs initiated under the Affordable Care Act. The rest came from reduced payments to hospitals, nursing homes, and clinical labs, and reduced Medicaid payments to Louisiana.

Smoking cessation programs? Cut. Outreach to schools to get kids to eat more fruits and vegetables? Cut. More programs at local YMCAs to prevent diabetes? Cut.“The idea of paying for a ten-month fix in physician payments with a ten-year cut in prevention programs is the ultimate penny-wise, pound-foolish move,” said Richard Hamburg, deputy director of Trust for America’s Health, which lobbies for community prevention programs and more funding for state and local health departments.

Preventive care programs may improve the quality of life for some individuals, but according to the CBO expanded use of preventive care “leads to higher, not lower, medical spending overall.”  Thus, although cutting preventive care may seem to increase medical costs in the long-run, in practice the deal to cut preventive care services should save enough move to pay for this year’s doc fix.

 

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How much is rent in your area?

February 1, 2012 in Data, Medicare, Physician Compensation | No comments

The Department of Housing and Urban Development (HUD) is responsible for answering just that question.  To determine what level Section 8 vouchers should be set, HUD measures the rents for every county across the nation.  Specifically, they measure the 40th percentile and 50th percentile (i.e., median) rents in each area.  They choose to use the median so that high prices for luxury residences do not skew the measure of rent for a “typical” person in each area.  How does HUD calculate these Fair Market Rents (FMR)?  Today I will explain.

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Medicare reducing reimbursement for low-quality docs

January 16, 2012 in Medicare, P4P, Physician Compensation | 4 comments

In 2015, Medicare will begin implementing a value-based purchasing (VPB) program for physicians.  Initially the program will target only certain physicians and groups of physicians, but by 2017 all physicians is participate in this program.

The VBP program will evaluate physicians along two broad dimensions: quality and cost.  In the final rule:

Section 1848(p) of the Act requires the Secretary to ‘‘establish a payment modifier that provides for differential payment to a physician or a group of physicians’’ under the physician fee schedule ‘‘based upon the quality of care furnished compared to cost *** during a performance period.’’ The provision requires that ‘‘such payment modifier be separate from the geographic adjustment factors’’ established for the physician fee schedule. In addition, section 1848(p)(4)(C) of the Act requires that the value modifier be implemented in a budget-neutral manner.

 

Quality

The current quality measures to be used include:

  1. The measures in the core set of the Physician Quality Reporting System (PQRS);
  2. All measures in the Group Practice Reporting Option (GPRO) of the Physician Quality Reporting System; and
  3. the core measures, alternate core, and 38 additional measures in the Electronic Health Records (EHR) Incentive Program measures.

Cost

The current measures of cost CMS is using are total per capita cost measures and per capita cost measures for beneficiaries with four chronic conditions (COPD; heart failure; coronary artery disease; and diabetes).

By January 2012, however, CMS will choose an episode grouper which can evaluate physicians based on episodes of care. Specifically:

Section 1848(n)(9)(A) of the Act requires us to develop by January 1, 2012, an episode grouper that combines separate, but clinically related items and services into an episode of care for an
individual, as appropriate.

Other Issues

One of the main problems of the physician VBP is attribution of patients to doctors. In managed care organizations, patients are assigned a primary care doctor or gatekeeper who are responsible for the patient’s overall care. In Medicare, the patient can see any willing provider; because the primary care doctor cannot restrict the patient’s choice of care, it is more difficult to hold them responsible for the care. Specifically, Medicare beneficiaries never have to choose a primary care doctor, so identifying the doctor to be ultimately responsible for each patient’s overall care is difficult.

Physicians require additional information to understand why the received the VBP scores they did. For this purpose, CMS will create Physician Feedback Reports, confidential reports providing more detailed information of the underlying factors which produce these scores.

For the VBP modifier in 2015, CMS will use 2013 as the initial performance period 2013. This means that payment adjustments in 2015 will be on care provided 2 years ago. Although evaluating physician performance, allowing for appeals and adjusting payments takes time; two years is a long lead time.

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Will Caesareans Become the Default Delivery Option?

January 10, 2012 in Physician Compensation | No comments

This question may not be as far fetched as it seems.  According to a California Maternal Quality Care Collaborative (CMQCC) White Paper:

“Cesarean delivery rates in both California and the United States as a whole rose by 50 percent between 1998 and 2008, climbing from 22 percent to 33 percent of all births in just a decade. This upward trend, which is seen for every type of woman regardless of race/ethnicity, age, weight, or the gestational age of the pregnancy, shows no signs of reversing. The increasing rates are largely the result of two factors: a significant rise in first-birth cesareans done in labor, and a marked decline in vaginal births after a prior cesarean (VBAC).”

As any good economist would say, there are two factors affecting the change in Caesarean rates: demand and supply. On the demand side, women are more comfortable having a Caesarean than ever before. When a woman is pregnant, more of their peers will have had a Caesarean and the are thus their fear of this major surgery may decrease. Further and with the tremendous amount of faith most women place in modern medicine and their physicians specifically, Caesareans may seem like a more ‘advanced’ way to give birth.

On the supply side, there is a simple reason why Caesareans have risen: money. Physicians get paid more when they do Caesareans. Further, a vaginal birth takes a long time and involves a lot of watchful waiting and monitoring. The Caesarean procedure–although much more intensive and generally worse for the women–is much faster. According to the CMQCC report, “Many nurses talked about the timing of cesareans done during labor, citing the competing demands on physicians for clinic appointments and their desire for balance between work and the rest of life”Kaiser Permanente, where physicians are paid a salary and beneficiaries receive all services from KP docs, generally have among the lowest Ceasarean rates in the state of California.

Doctors do not find it profitable to supervise vaginal birth. And to be honest, I don’t blame them. A typical vaginal birth without complications may not require much direct supervision of a physician. Substituting more labor (i.e., time spent with the patient) by using a midwife in place of more capital (i.e., human capital that the physician accumulated) is more likely to produce better birth outcomes for the average women. Physicians could be brought in only for complicated cases which require additional expertise and surgical skills.

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Why Doctors Don’t Like Medicare

January 3, 2012 in Medicare, Physician Compensation | 7 comments

Being a doctor is difficult.  You need to graduate from medical school and learn a ton of difficult scientific concepts.  You need to stay up to date on the latest medical developments.  You need to cater to sick, needy patients (and their family).  Any you need to get paid.

Earning a living is not as simple for doctors as other professions.  Sure doctors make a lot of money.  But knowing how much they get paid for a particular service is complex.

I provide an overview of the physician reimbursement system here.  That overview does not take into account all the payment modifiers in the Medicare’s physician reimbursement system.  Consider the following payment modifiers:

  • For many procedures, Medicare pays providers for the professional and technical component.  The professional component is the physician’s work and expertise; the technical component provides reimbursement for equipment and supplemental staff needed to perform the procedure.  If the procedure is billed globally, then the physician receives both components.  If another entity performed the technical component, then the physician is only paid for the professional component.  For instance, for lab tests, the lab may run the test (technical component) but the physician would be the one interpreting the test (professional component).
  • If you assist in a surgery, you receive 16% of the fee the primary surgeon does.Under some circumstances, the individual skills of two surgeons are required to perform surgery on the same patient during the same operative session.  If you are a co-surgeon (rather than an assistant at surgery), you receive 62.5% of the typical reimbursement for that surgery.
  • If you perform a bilateral surgery–a surgery done on both sides of the body (e.g., right arm and left arm)–then you receive 150% of the payment you would have received from doing a unilateral surgery.
  • When multiple procedures are performed through the same endoscope, payment will be made for the highest valued endoscopy (100% of the allowance) plus the difference between the next highest and the base endoscopy.
  • If you perform multiple surgeries in the same day on the same patient, you do not get paid the same amount as if these were performed on multiple days.  The highest valued procedure is paid 100% of the allowance.  For the second through the fifth highest valued procedures, the physician receives 50% of the typical payment amount.
  • If you are a physician assistant, nurse practitioner, or a registered dietitian or nutritionists; you receive 85% of the payment an MD would receive for performing the same service.
  • If you are a clinical social worker, you receive 75% of the payment an MD would receive for performing the same service.
  • If you are a certified nurse midwife, you receive 85% of the payment an MD would receive for performing the same service.  If you are a midwife, you only receive 65%.
  • Participating providers receive the full Medicare Part B allowed amount as payment in full for services and bill the beneficiary only for any coinsurance or deductible that may apply. Payment for nonparticipating physicians (i.e., those who have not signed a Participating Payment Agreement) is 5 percent below the Medicare Physician Fee Schedule amount, but these physicians are permitted to bill patients up to 15 percent in excess of the fee schedule amount.

If you don’t think Medicare is bureaucratic, just take a look at those rules.

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Doc Fix Fixed…for Two Months

January 2, 2012 in Medicare, Physician Compensation | No comments

Kaiser Health News reports:
The House GOP leadership’s agreement to a Senate proposal averts a 27 percent paycut to doctors scheduled to take effect in January. The deal delays the cut until March 1, and lawmakers hope to hammer out an agreement on a longer-term fix to the payment formula before then.

As I previously noted, this delaying the cut to physician payment is not a long term fix. Either Medicare should remove the sustainable growth rate (SGR) provision and acknowledge the fiscal impact of paying doctors more or they should impose the SGR or (more likely) a modified SGR.

The current two month delay makes it seem as if Congress will cut Medicare payments to physicians by 27 percent on March 1, 2012, even though this will of course not happen.

With respect to the ‘doc fix’ issue, more transparency is needed.

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Will the Doc Fix happen this year?

December 26, 2011 in Medicare, Physician Compensation | 2 comments

The Healthcare Economist is going on vacation for the next week.

In the meantime, I pose to you, my reader, a bet.  Do you think the ‘doc fix’ gets passed?  Before you read on, make your predictions in the comments section below.

Healthcare Economist’s Prediction

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Medicare Physician Payment Adjustments

November 21, 2011 in Healthcare IT, Medicare, P4P, Physician Compensation, Quality | No comments

The Medicare billing system is complex.  There an alphabet soup of acronyms, (e.g., RVUs, CPT, HCPCS, GPCI) and each of these affects payments in different ways.  In addition to the standard payment terms, Medicare is also creating additional payment incentives.  These payment incentives fall into three broad categories:

  • Quality reporting
  • e-Prescribing (eRx)
  • Electronic Health Records (EHR)

CMS’s Physician Quality Reporting System (PQRS) allows physicians to report the quality of care their patients receive. Physicians can report PQRS measures through claims, registries, or EHR systems.  To incentivize physician participation in the PQRS, CMS has adopted incentive payments.  In 2012-2014, Physicians who meet the PQRS participation requirements will receive a 0.5 percent payment bonus.  In 2015 through 2017, however, who do not submit a sufficient number of PQRS measures actually will receive a payment reduction.

In addition to the PQRS incentive, beginning 2012, Medicare eligible professionals who are not successful electronic prescribers under the eRx Incentive Program to a payment adjustment. This payment adjustment applies to all of the eligible professional’s Part B-covered professional services under the Medicare Physician Fee Schedule (MPFS). From 2012 through 2014, the payment adjustment will increase with each new reporting period. Accordingly, for 2012, eligible professionals receiving a payment adjustment will be paid 1.0% less than the Medicare Physician Fee Schedule (MPFS) amount for that service. In 2013 and 2014, the payment adjustment increases to 1.5% and 2.0% respectively.

A table summarizing these incentive payments is below.

Year PQRS eRx
Incentive Payment MOC Incentive Sucessful
2011 1.0% 0.5% 1% N/A
2012 0.5% 0.5% 1% -1%
2013 0.5% 0.5% 0.5% -0.5%
2014 0.5% 0.5% N/A -2%
2015 -1.5% N/A N/A N/A
2016 -2.0% N/A N/A N/A
2017 -2.0% N/A N/A N/A

CMS also offers physicians incentive payments to adopt EHR.  Incentive payments can be as high as $18,000 per year or $44,000 over a five year period.

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