Physician Compensation

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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 recieve 85% of the payment an MD would receive for performing the same service.  If you are a midwife, you only receive 65%.

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 | 1 comment

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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Physicians: Coming to a Home Near You

November 18, 2011 in Home Health, Medicaid/Medicare, Medicare, Nonphysician Clinicians, Physician Compensation | No comments

In the 18th and early 19th centuries, physician home visits in the U.S. were very common.  In fact, the home was the primary place where medicine was practiced.  Because physician wages at this time were comparable to those of the average laborer, a market which forced physicians to internalize the time and transportation costs to visit physicians made sense.

As physician wages have grown over time, however, the home visit has made less economic sense.  Consider the table below.  Primary care physician median wages are five times as high as the typical earners wages.  If it takes 30 minutes for the physician to drive and set up his equipment for a home visit, the incremental cost for the typical physician visit would be about $40 compared to only a time cost of about $8 if the patient visited the doctor. Having physician assistants or nurses make a home visit would be relatively more economical, but still is not economically efficient given the current labor market.

Nevertheless, home visits may be making a comeback.

A number of physicians in Great Britain’s National Health Service already make home visits. Further, Health Reform (specifically Section 3024 of the Affordable Care Act) mandated the creation of the Independence at Home (IAH) Demonstration. The IAH demonstration will begin in January 2012. Do home visits make economic sense?

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Revisions to the Sixth Update of the Geographic Practice Cost Index

November 11, 2011 in Medicaid/Medicare, Medicare, My Papers, Physician Compensation | No comments

How does Medicare adjust payments to physician practices to account for regional differences in input costs such as employee wages, office rent, malpractice insurance and other expenses?  I recently co-authored a report in support of the CMS final rule which explains how CMS will make these adjustments for 2012.  Among the key revisions are an expansion of the number of occupations included in the employee wage index and the creation of a purchased services index which takes into account regional variation in the price of services that physicians frequently contract (e.g., accounting and legal services).

You can read the full report here.

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Do doctors tailor the care they provide based on the patient’s health plan?

October 12, 2011 in Physician Compensation | 1 comment

Many studies (including my own) have shown that physicians paid via capitation  perform fewer services than those paid via fee-for-service (FFS).  In the current health care world, however, most physicians treat patients from a variety of different insurance systems (notable exceptions are doctors working at Kaiser and the VA).

Two important research questions come to mind:

  • Do doctors tailor the care they provide to individual patients based on their insurance or is care provided based on the overall mix of a physician’s panel?
  • Are these same effects observed for physicians who own their own practice compared to those who are employees?

According to a paper by Landon et al. (2011), “ Physicians in highly capitated practices had the lowest total costs and intensity of care, suggesting that these physicians develop an overall approach to care that also applies to their FFS patients.”  The authors used data from the Community Tracking Study Physician Survey to reach this conclusion.

This result, however, was only shown to hold for primary care physicians.  The reimbursement differences for each individual patient may be smaller than the physician’s time (and psychic) cost to determine each patient’s payor and alter their recommended treatment regimen accordingly.  Thus, this conclusion makes sense for PCPs.

For specialists, however, this conclusion may or may not hold.  Particularly, for specialists who generally provide expensive procedures, altering care recommendations for individual patients based on their insurance coverage could have a very significant effect on the practice’s bottom line.

Thus, although I think this is an interesting study, it would also be interesting to see how the results were similar or different in the case of specialist compensation.

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