Physician Compensation

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Sigmoidoscopy: The colonoscopy’s cheaper, equally effective predecessor

August 23, 2010 in Physician Compensation, Prevention, Specialists | No comments

Physicians claims that colonoscopies are the gold standard of preventive medicine.  In 2008 the American Cancer Society deemed the colonoscopy as the preferred test and the health reform law (PPACA) will compel insurance companies to cover colonoscopies.  But does the sigmoidoscopy–the colonoscopy’s predecessor–offer less expensive, less invasive, equally effective preventive care?

“[The sigmoidoscopy] looks at only half the colon. In that test, there’s no sedation, no day off from work, no jug of laxatives the night before and maybe no gastroenterologist. Your primary care doctor could probably do the procedure himself…

Colonoscopy is three to four times more expensive than the simpler sigmoidoscopy test. And the risk of complication is seven times higher. Still the idea caught on. And as it did, it transformed the profession of gastroenterology. We went from too many specialists to a national shortage.”

In fact, the inventor of the colonoscopy, Al Neugut, wrote an editorial in the JAMA this summer stating that he regrets inventing the colonoscopy.  On Marketplace, Neugut said “If today, we were where we were in 1988, I would not institute colonoscopy based on the current evidence.”

The gold standard of preventive medicine may only be golden from the point of view of physician salaries.

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A Tale of Two Bounties: Can Physicians Cost Shift from Medicare to Private-Pay Patients

April 20, 2010 in Medicaid/Medicare, Physician Compensation | 1 comment

Do physicians cost shift after Medicare reduces reimbursement rates?  A paper by Rice et al. (1999) examines whether or not this in fact occurred after Medicare reduced payment for surgical procedures in the late 1980s.  To be more specific, “The Omnibus Budget Reconciliation Act of 1989 (OBRA-89) reduced Medicare physician payment rates for thirty-six groups of so-called overvalued procedures, covering 245 individual procedure codes.” The study examines the impact of these changes using data from 1988-1991 covering the frequency of 17 major surgical procedures in 182 hospitals.  The data on privately insured individuals was obtained from the Commission on Professional and Hospital Activities (CPHA) a convenience sample of 3.7% of U.S. hospitals.

To control for omitted variable bias, the authors used a fixed effects specification.  This framework averages the effect of changes in Medicare reimbursement on quantities within each hospital.  Thus, it can control for time-invariant hospitals characteristics, but it cannot control for unobserved hospital characteristics which vary over time.

In the study period, “privately insured patients brought in far more revenue per hysterectomy than did Medicare patients: $1,538 versus $885, a ratio of 1.74…Typically, Medicare paid 60 to 70 percent as much as private insurers before the reductions in Medicare payments.”

Using this data and the empirical framework outlined above, the authors find that Medicare fee reductions increased the volume of privately insured service only in some cases.  “Of the seventeen procedures groups, twelve had the expected negative signs and seven of the twelve were statistically significant at the 5 percent or 10 percent level…”  Additionally, it appears that in some cases, a decrease in Medicare fees increases private-pay services even for procedures unrelated to those that experienced a Medicare fee decrease.  For instance, when Medicare cut cataract reimbursement rates, ophthalmologists supplied more services to private-pay patients, but not necessarily more cataract surgeries.

One drawback of this study is that it is fairly old and takes place before the rise of managed care.  Because managed care organizations can institute utilization restrictions, it is unclear if Medicare price decrease will increase the quantity of services supplied to private-pay patients as much now as they did in the late 1980s.

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Effect of Decreasing Medicare Reimbursement Rates on Cataract Surgeries

April 19, 2010 in Medicaid/Medicare, Physician Compensation | No comments

What if Medicare spends reimburses physicians too generously for a certain service. Will reducing reimbursement for that service decrease utilization and cost?

A study by Mitchell, Hadley and Gaskin (2002) attempts to answer this question by examining the impact of changing Medicare reimbursement for cataract surgeries.  Between 1992 and 1994, Medicare decreased fees paid for cataract extractions by 17.4%.  After the fee decrease, the authors observe the following:

…we found that the Medicare cross-price [elasticity] is significant and negative, implying that a 10% reduction in the fee for a cataract extraction will cause ophthalmologists to supply about 5% more non-cataract services.  Second, the income variable is highly significant, but its impact on the supply of non-cataract services is trivial. This suggests that physicians behave more like profit maximizing firms than target income seekers.

What this means is that when Medicare decreases one specific fee, physicians will substitute other services in its place.   In this case, ophthalmologists replace cataract surgeries with non-cataract services. The authors do not estimate the total effect on prices, but if non-cataract services are less expensive than cataract surgeries, than this almost certainly decreases Medicare expenditures.

The generalizability of this finding, however, is unknown. A cataract surgery is fairly elective meaning that it can be easily postponed temporarily or indefinitely. When necessary, postponing a cataract surgery will not affect patient health, but will influence their quality of life through worse vision.  Thus, ophthalmologists can easily substitute non-cataract services for cataract services with little effect on patient health.  In cases where the fee-reduction does not have such a clear substitute for services, it is unclear how physicians will respond.

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Match Day

March 18, 2010 in Physician Compensation, Supply of Medical Services | No comments

Today is “Match Day.”  The Match Day proceedings will determine not only where graduating students will work after medical school, but also what kind of doctors they will become.  What will work life be like for these students?

If they were to enter a residency 20 years ago, they may have worked 120 hours per week.  Now, however, the Accreditation Council for Graduate Medical Education has placed residents on a strict 80 hour work week.  In fact, the Council is even considering dropping the limit to 60 hours per week.

The Washington Post reports that although most residents appreciated the reduced work hours, physicians fear that resident training may suffer.  “John W. Larsen, 67, GWU’s OB-GYN department chairman, said he worries that reduced hours have diminished new doctors’ training. Residents who stay with one patient from their arrival at the hospital all the way through to delivery have the advantage of detecting and recalling tiny but important clues that might not be written down when a case is handed to the doctor on the next shift.”

Although most residents prefer shorter work hours, in some cases they would actually like to work more.  One first year resident said that “…she usually works 70 to 75 hours a week but sometimes stays beyond her shift to take part in procedures involving fetal abnormalities.”

In the entire article, however, there is no mention of what is best for patients.  Having residents work 120 hours per week instead of 80 hours may (or may not) improve physician training.  However, would you like to be treated by a doctor in the 39th hour of a forty hour shift?  I thought not.   Dr. Larsen also worries that handoffs between one resident and another may not be smooth and shorter hours will increase the number of these transitions.  Why then shouldn’t practicing physician also work longer hours to improve patient care?  Experienced doctors may also want residents to work long hours for another reason: they’re cheap labor.

In the debate between the number of hours residents should work, policymakers should focus on what is in the best interest of the patient rather than subjecting residents to what is, in essence, an elaborate hazing ritual.

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“The country’s dismal rates of vaginal birth after Caesarean”

March 9, 2010 in Nonphysician Clinicians, Physician Compensation | No comments

From the N.Y. Times:

The national Caesarean rate, 31.8 percent, has been rising steadily for the last 11 years and is fed by repeat patients. Critics say that doctors are performing too many Caesareans, needlessly exposing women and infants to surgical risks and running up several billion dollars a year in excess bills, precisely the kind of overuse that a health care overhaul is supposed to address.

In fact, the rate of vaginal birth after Caesarean (VBAC) is now below 10%.  Some doctors claim that VBACs risk tearing the mother’s scar tissue on her uterus, but others–including the profiled women on a Navajo reservation–successfully undergo multiple VBACs.  Why are the rates VBAC rates so low?

  • Fears of malpractice
  • Physicians make more money Caesarean rather than a vaginal birth
  • Caesarean’s use fewer physician hours than vaginal births
  • Fewer expected number of pregnancies
  • Patient demand

Why are Caesarean rates so much lower on the Navajo reservation?  On the reservation, physicians are federally insured against malpractice, are paid a salary, and the use of midwives is much more common.  Additionally, Navajo “couples often want more than two children, but repeated Caesareans increase the risk of each pregnancy, so doctors and patients are motivated to avoid the surgery.”

To see further evidence of how different physician compensation methods can alter surgery rates, see my own study in Health Economics.

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What are Accountable Care Organizations?

January 26, 2010 in Medicaid/Medicare, Physician Compensation, Supply of Medical Services | 3 comments

Accountable Care Organizations (ACOs) are the latest rage in the health policy world.  The question is, what are ACOs.  The Urban Institute’s Kelly Devers and Robert Berenson try to answer the following question: “Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries?”

The goal of ACOs is to pay providers in a way that encourages them to work together, to pay providers in a way that does not encourage supplier induced demand, and to create an organization that is rewarded for providing high quality care.  What kind of organizations are currently poised to evolve into ACOs. This chart evaluates the prospects.

One question is why doesn’t Medicare just use their current Medicare Advantage program to accomplish these goals.  In the Medicare  Advantage program, Medicare pays a lump sum to private insurers and holds them accountable for all the medical care the beneficiary needs.  However, there are three main differences between ACOs and HMOs.

  1. The “accountability” rests with the providers.  Providers or provider groups, rather than insurance companies, are evaluated on the quality and efficiency of care.
  2. Direct contracting with provider organizations without the reliance on a health plan intermediary.
  3. The ACOs allow for flexibility in the type of organization.  Some regions may prefer independent practice associations (IPAs) while others  may prefer a physician-hospital organization (PHO).

The physician-centered organization makes much sense to many policymakers because “the resources that flow from the decisions physicians make with patients account for a major portion of overall health care costs, regardless of where the care actually takes place.”

Medicare could pay ACOs with a “gainsharing” mechanism.  In the gainsharing framework, the fee-for-service payment structure remains, but a portion of patient cost savings gets passed through to the physician. On the other hand, Medicare could institute a partial capitation scheme.  This would be similar to Medicare Part D, where the prescription drug plans get a flat rate per person, but they also receive are involved in risk corridors, which “limit a prescription drug plan’s potential losses should the plan happen to experience much higher utilization and costs than expected.”

One problem with this framework is that physicians are good at treating patients, not at risk management.  Thus, many physicians may get stuck with high-risk patients and some ACOs may become insolvent unless there are adequate Medicare risk adjustment payments.

Secondly, patients may see ACOs as HMOs in disguise.  ”[I]f beneficiaries believe that ACOs are essentially tightly managed ‘HMOs in drag’ that are going to restrict their choices, undermine the doctor-patient relationship, and result in cheaper but lower-quality care, the concept will be met with skepticism, if not overt opposition.”

Other obstacles to ACOs include possible FTC and DOJ desires to quash ACOs on anti-trust grounds.  Further, state governments may need to change laws related to insurance regulation as well as organizational and professional liability.

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To Curb Repeat Hospital Stays, Pay Doctors

December 2, 2009 in Hospitals, Medicaid/Medicare, Physician Compensation | No comments

Much of my own research has focused on how physician financial incentives affect the quantity and quality of medical care. It should come as no surprise that I found a recent New York Times article on the topic stimulating.  Dr. Sandjeep Jauhar examines how hospital and physician financial incentives affect the length of a patient’s hospital stay.  An excerpt is below.

My hospital, like all acute-care facilities, receives a set payment per admission based on the patient’s diagnosis. So the longer a patient stays in the hospital, the more money the hospital stands to lose. Of course, the longer a patient stays, the greater the likelihood of hospital-acquired infections or harm from tests and procedures, which means timely discharge in most cases is good for hospitals and patients alike.

But doctors, paid separately by Medicare, have little motivation to discharge patients quickly. As long as their patients are in the hospital, they can bill and be paid for each visit they make.

I discussed this issue with an internist in private practice, who requested anonymity because of the sensitive nature of the subject. His patients, it seemed to me, were often staying longer in my hospital than necessary. “I understand why hospitals want to cut down length-of-stay,” he told me matter-of-factly. “But if I discharge a patient early, I don’t get paid. It’s O.K. if you have enough patients in the hospital, but if you don’t, you sometimes have to drag out the stay. I don’t like to do it, but sometimes you have to.”

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Medicare Doc Paycut Reversed

November 30, 2009 in Current Events, Medicaid/Medicare, Physician Compensation | No comments

In 1998, Medicare enacted the sustainable growth rate (SGR) which would slowly bring down Medicare physician compensation.  However, each year, it gets reversed by Congress. Now, instead of a gradual decline, the implementation of SGR would  result in a 21.2% pay cut for Medicare docs.

Before the Thanksgiving holiday, however, Congress once again reversed the SGR.  Megan McArdle gives some solid reasons of why the reform of the SGR should be included in any health reform bill.


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Risk Adjustment Tools for Measuring Physician Quality

November 12, 2009 in Information, Physician Compensation, Quality | No comments

A paper by Thomas, Grazier, and Ward (2004) analyzes a variety of risk adjustment software products. Using these six risk adjustment products to calculate physician efficiency scores, they found “moderate to high levels of agreement were observed among the six risk-adjusted measures of practice efficiency.” However:

“And even though our analyses suggest that 50 percent to 60 percent of adult PCPs identified by their system as being high outliers are likely to be identified by other profiling systems as well, the client has no way to know which of the identified outliers are the ones that multiple systems would agree on. Thus the profiling client must deal with practice efficiency rankings knowing that, in all likelihood, 40 percent to 50 percent of PCPs identified as high outliers are actually not among the least efficient 10 percent of primary care physicians.”

The authors also compare two quality score metrics. The first is the ratio of the physician’s observed cost with the expected cost based on the physician’s patient’s risk scores. The O/E score is equal to:

  • (O/E)k=yk/Yk

Above, yk is physician k’s observed score and Yk is their estimated score. The authors believe, however that the O/E score is not ideal. It is biased against providers who have a small sample size of patients. Thus, physician’s with smaller patient panels in the data set are more likely to be considered outliers. On the other hand, the authors advocate using a standardized cost difference (SCD). The SCD is calculated as follows:

  • SCDk=(yk-Yk)/[σ/(Nk)1/2]

The SCD measure explicitly takes into account the physician’s sample size. A large sample size will move the SCD more towards the difference in observed and expected costs; a small sample size will move the SCD score closer to the mean of 0.

Below is a list of the six risk adjustment tools used in the paper:

  • Adjusted Clinical Groups from Johns Hopkins University. Adjusted clinical groups cluster health plan members having similar comorbidities into groups that have similar resource requirements and clinical characteristics. The ACG Case-Mix System then uses a branching algorithm to place each patient into one of 82 discrete, mutually exclusive categories based on the mix of clinical groups experienced during the time period under study.
  • Burden of Illness Score from MEDecision, Inc. This system is based on MEDecision’s Practice Review System (PRS), which partitions care into episodes of illness and assigns services, severity levels, and medications to these episodes. The BOI Score is a linear-scaled measure that indicates relative health care cost risks associated with the particular mix of episodes experienced by a patient during a defined time period.
  • Clinical Complexity Index from Solucient, Inc. The CCI methodology considers age, severity, comorbidity, hospital admissions, and categories of diagnoses (acute, chronic, mental health, and pregnancy) to assign patients into mutually exclusive CCI risk categories. Although the system provides for 1,418 different categories, 95 percent of patients fall into just 45 of these.
  • Diagnostic Cost Groups from DxCG, Inc. The DCGsystem includes a whole family of multiple linear regression models.
  • Episode Risk Groups from Symmetry Health Systems,Inc. Like BOI Score, ERGs are episode-based. The episodes underlying ERGs are created using Symmetry’s Episode Treatment Groups (ETGt) methodology, a basic illness classification system that uses a series of clinical and statistical algorithms to combine related services into more than 600 mutually exclusive and exhaustive categories. For a given patient, episodes experienced during a time period are mapped into 119 Episode Risk Groups, and then a risk score is determined based on age, gender, and mix of ERGs. For our analyses, we used the ERG retrospective risk score.
  • General Diagnostic Groups from Allegiance LLC. General Diagnostic Groups were developed using the Agency for Health Care Policy and Research’s Clinical Classification Software (CCS). CCS aggregates individual ICD-9-CM codes identified on health care claims into 260 broad diagnosis categories for statistical analysis and reporting. The GDG system then lumps together CCS categories considered to be clinically similar and to have similar associated per-patient charges into 57 diagnostic categories. These 57 diagnostic categories are used as dummy variables in a multiple regression model for predicting health care costs.

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Physician Organization and Quality of Care

July 15, 2009 in Physician Compensation, Supply of Medical Services | 1 comment

Previous studies have found that paitents of staff/group model HMOs consistently report lower quality of care than patients of Network HMOs.  The finding of Rodriguez et al. (2009) contradicts these assumptions.  They find the following:

  • Physicians belonging to integrated medical groups had better performance on the communication and care coordination measures.
  • Physicians belonging to medical groups with greater numbers of PCPs had better performance on all measures. Larger practices may benefit from economies of scales and more investment in electronic patient records.
  • Productivity incentives do not improve care.  Patients of physicians with strong incentives to see more patients per day may be more likely to experience longer office wait times compared with patients of physicians that do not have these incentives.

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