Physician Compensation

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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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The President’s Proposal to “Live Within Our Means”

September 29, 2011 in CHIP, Home Health, Medicaid, Medicaid/Medicare, Medicare, Medicare Part D, Part B, Physician Compensation, Public Policy | 3 comments

President Obama released a proposal last week to jump start the economy and reduce the deficit.  The proposal includes many cuts to Medicare and increased cost sharing.  Senators Coburn and Lieberman are supporting these cuts.

Increased cost sharing is a common theme in Medicare, Medicaid, but also for other programs as well.  For instance, the proposal includes increases to TRICARE pharmacy benefit co-payments to be fall more in line with the most popular Federal employee health plan

The proposal, however, also has some interesting provisions.  For instance, it would require providers to secure prior authorization to perform advanced imaging.  This is one of the first moves away from the fee-for-service free-for-all towards managed care (read: rationing).

A pro-competition rule would prohibit ‘pay-for-delay’ where brand drug companies pay off other drug makers to delay their introduction of a generic into the market.  The FTC is charged with enforcing this requirement. The proposal also would reduce the exclusive period of generic biologics.  Weakening patent protection, for this authors perspective, is likely a good idea.

Specific changes under consideration which are related to medicare are highlighted below (with potential savings per year in parentheses):

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Does Physician income increase from treating more complex patients?

July 18, 2011 in International Health Care Systems, Physician Compensation, Supply of Medical Services | 2 comments

In Denmark at least, the answer is no.

“From the theoretical model we find that higher levels of patient complexity lead GPs [General Practitioners] to choose a lower list size, whereas the effect on income is ambiguous. The effect on total utility (income and leisure) is, however, shown to be negative. Using empirical datafrom 1039 solo practices we find that patient complexity reduces both list size and income and conclude that amixed per capita and fee for service remuneration system does not fully compensate practices with more complexpatients. Differentiated per capita payment may represent a means of ensuring fair and equal income of GPs.”

Differentiated per capita payments may provide a fairer mechanism for compensating physicians for treating more complex patients. This type of reform, however, would also incentivize providers to upcode patient diagnoses in order to increase their per capita payments. Thus, this paper may provide the optimal solution in the case where providers are honest, but this same solution may not be optimal in the case where physicians are potentially dishonest.

The remainder of this post reviews how the authors arrived at the conclusions discussed below.

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MRIs, Back Surgery and Primary Care

June 30, 2011 in Physician Compensation, Specialists, Supply of Medical Services | No comments

Do MRIs increase the liklihood a patient receives back surgery?

“Orthopedists and primary care physicians who begin billing for the performance of MRI procedures, rather than referring patients outside of their practice for MRI, appear to change their practice patterns such that they use more MRI for their patients with low back pain. These increases in MRI use appear to lead to increases in low back surgery receipt and health care spending among patients of orthopedic surgeons, but not of primary care physicians.”

What is it about patients who see primary care physicians that makes them less likely to get back surgery. I can think of a number of reasons:

  • Financial Incentives: Primary care physicians would not be the ones performing the surgery and thus have no financial incentive to favor surgery over rehabiliation.  Orthopedists who self-refer the surgery stand to gain thousands of dollars from this decision.
  • Provider Selection. Doctors who decide to become primary care physicians may favor less invasive treatment.
  • Patient Selection. Patients who visit primary care physicians may favor less invasive treatment. Or, patients who visit primary care physicians may be more likely to have lower income and less generous insurance coverage, and thus may be more likely not to opt for the back surgery.

Source

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Negotiating Power

June 14, 2011 in Health Insurance, Hospitals, Physician Compensation, Supply of Medical Services | No comments

On Monday I attended a talk at AcademyHealth on the impact of market consolidation on the cost of health care.  Particularly interesting was Robert (Bob) Berenson’s analysis of the effect of provider consolidation on negotiating power and health care prices.  Particularly, provider have been gaining market power of late, according to recent CTS site visits.  There are three main reasons for this:

  1. A failure of employers to agree to “narrow networks” of providers and thus be able to drive down prices
  2. The end of the oversupply of hospital beds
  3. Provider clout due to name recognition (only for the “have” hospitals, not the have nots.

Further industry consolidation has taken three main forms over the last few years:

  1. Multi-hospital chains are buying more hospitals,
  2. Hospitals are employing more physicians directly, and
  3. Physicians are consolidating into groups.

Physician consolidation is particularly interesting.  Physicians consolidate not only to gain negotiating leverage, but a larger practice allows for physicians to start performing ancillary services such as labs and imaging.

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OB-GYN vs. cosmetic-gyn

May 16, 2011 in Physician Compensation, Supply of Medical Services | No comments

Why don’t more doctors choose primary care?  Here’s why doctors are choosing to specialize in vaginal cosmetic procedures rather than more general OB-GYN:

…it was clear that patients aren’t the only—or necessarily the primary—driving force behind the cosmetic-gyn boom. Many of the conference’s OB-GYNs groused that even after they’ve amassed hundreds of thousands of dollars in medical-training debt, their insurance reimbursements are lousy. One doctor said he receives just $1,700 in fees for prenatal care and delivery, and a mere $800 for a hysterectomy. By contrast, a labiaplasty can be done in just a few hours, in-office, for a fee upwards of $5,000 and no “income socialism” to spread the proceeds among hospitals, insurers, and group-practice partners.

Not only does primary care pay less, it does not require as many hours or dealing with the complications from delivery.  Which one would you choose?

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“Do Medicare patients have longer waits to see doctors than those with commercial insurance?”

May 5, 2011 in Medicare, Physician Compensation, Supply of Medical Services, Wait Times | 1 comment

…and three other questions about physician care.

Do Medicare patients have shorter waiting times than those with commercial insurance?

  • In the 2010 survey, among those seeking an appointment, most beneficiaries (75 percent) and most privately insured individuals (72 percent) reported “never” having to wait longer than they wanted for an appointment for routine care.
  • Another 17 percent of Medicare beneficiaries and 21 percent of privately insured individuals reported that they “sometimes” had to wait longer than they wanted for a routine appointment.Finding a primary care physician was more difficult for privately insured individuals than for Medicare beneficiaries.  Seventy nine percent of Medicare beneficiaries reported that they had no problem finding a PCP compared to 69 percent of privately insured individuals.

Is Medicare the new Medicaid?

The answer is not yet; providers are still accepting Medicare patients at high rates, but the trend is towards fewer PCPs accepting Medicare.

  • “For 2008, among physicians with at least 10 percent of their practice revenue coming from Medicare, 90 percent accepted new Medicare patients. By specialty, 83 percent of primary care physicians and about 95 percent of physicians in all other specialties accepted new Medicare patients. The rate of primary care physicians accepting new Medicare patients fell from 88 percent in 2007.”
  • Medicare’s payment for physician fee-schedule services in 2009 averaged 80 percent of commercial rates for preferred provider organizations (PPOs)

Is concierge medicine the wave of the future?

Not yet.  In the fall of 2009, researchers found that there were 750 retainer-based or “concierge” physicians.  Thus number represents less than 1 percent of the total number of physicians practicing in the United States.  However, there is a trend towards more concierge medicine.  There was a 50% annual increase in the number of retainer-based practices from 2005 to 2009.

Where types of physician care is growing the fastest (and slowest)?

  • Volume per beneficiary grew 3.3 percent in 2009.
  • However, there was a decrease in 2009 of coronary artery bypass grafts (CABG), cardiovascular stress tests, colonoscopy, standard chest imaging, hip fracture repair, brain MRIs, and coronary angioplasty.
  • Increases in service volume per beneficiary were found in advanced, non-standard computed tomography (CT) scans, outpatient rehabiliation, and spine surgery.

What recent legislation will affect the provision of physician services in the coming years?

  • Since 1991, physicians and other health professionals who practice in designated health professional shortage areas (HPSAs) automatically receive a 10 percent bonus (relative to the fee schedule amount) on all Medicare services they provide.
  • Starting in 2010, CMS no longer recognizes the billing codes for consultation services
  • Starting in 2010, CMS started a four-year transition to practice expense relative values that incorporate data from the Physician Practice Information Survey.
  • Starting in 2011 and ending in 2016, primary care practitioners will receive a 10 percent increase in payments for selected Medicare services, as will general surgeons practicing in HPSAs
  • Under the Physician Quality Reporting System (PQRS), physicians and other health professionals may qualify for a 1 percent bonus on all Medicare services they provide in 2011 and a 0.5 percent bonus in 2012 through 2014.
  • Starting in 2015, those who do not satisfactorily report PQRS measures will be subject to a financial penalty starting at 1.5 percent of their Medicare services.
  • EHR incentive programs provides physicians with incentive payments for meaningful use of electronic health records (EHR).
  • Starting in 2015, eligible physicians who do not satisfy the EHR criteria will be subject to a financial penalty starting at 1 percent of their Medicare services.
  • Reimbursement changes from Health Reform (PPACA) can be found here.

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Upcoding

April 19, 2011 in Medicare, Physician Compensation, Public Policy | 1 comment

Would Congressman Ryan’s proposal solve this problem?

Medicare Part B pays outpatient physicians according to the billed Current Procedural Terminology (CPT) codes, which differ in procedure and intensity….Using nationally representative data from the 2001 to 2003 Medicare Current Beneficiary Survey, this paper…finds strong evidence that these fee differentials influence physician’s coding choice for billing purposes across a variety of specialties. For general office visits, Medicare outlays attributable to upcoding may sum to as much as 15% of total expenditures for such visits.

Likely no. For physicians paid by private insurers, they would still have an incentive to upcode. It is possible that private insurers may be better at policing upcoding, but their extra vigilience may also cause physicians to hesitate from providing necessary services since they fear they’ll be targeted for upcoding. On the other hand, for integrated managed care organizations like Kaiser Permanente, they have the opposite incentive. These providers are rewarded for reducing cost and thus insurers may claim to have providers services they did not in fact perform.

Although privatizing Medicare and/or Medicaid could solve some problems, upcoding is not likely to be one of them.

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