Venue: The Fuqua School of Business, Duke University, 1 Towerview Drive, Durham, NC 27708-0120

 

Presentation

Missing Productivity Gains in the Medicare Physician Fee Schedule: Where are They?

Authors: Jerry Cromwell (Research Triangle Institute); Nancy McCall (Research Triangle Institute); Sonja Hoover (Research Triangle Institute); Peter Braun (Private Consultant)

Presenter: Jerry Cromwell (RTI International)

Discussant: Mireille Jacobson (University of California, Irvine)

Session: Work Force Issues

Room: Seminar A

When: Monday 10:30 a.m. - noon

Economist William Baumol once compared physicians' work to playing a Mozart symphony: It was impossible to play the symphony (or see patients) any faster without diminishing the quality of the music (or the quality of health care). Ever since 1992, when the Medicare Fee Schedule (MFS) was implemented, the Congress has tried to rein in the growth in physician expenditures in part by sharing in any productivity gains.

Two levers that could justify slower fee increases include:

  • the global productivity adjustment to the MFS conversion factor; * the mandated 5-year reviews of all Medicare fees to account for productivity gains and other factors over time.

We show a single global productivity adjustment to be a blunt instrument for productivity adjustments. Failure to make procedure-specific productivity adjustments to fees quickly undermines the system's integrity, sending wrong signals to providers and capital investors in new technologies.

In this paper using objective national surveys, Medicare 5% physician claims files, and unpublished government data, we detail the flaws in the current Resource Based Relative Value System (RBRVS) approach in updating Medicare fees. To begin, we document the institutional biases in a review system that rewards specialties for reporting ?more work? (read: lower productivity) to raise their payments. The table below shows how successful they have been in increasing work RVUs by review cycle:

Review Cycle Code Increases Code Decreases 1996 28% 11% 2001 64% 2% 2006 53% 7%

Because well over 90% of provider-driven requests for code changes have been for increases, final fee updates are even more biased against against productivity gains.

Empirical analysis in this paper refutes Baumol's notion that physicians cannot 'practice faster.' Physician reported visit lengths (LOVs) on the 2004 National Ambulatory Medical Care Survey (NAMCS) are found to be 36% shorter for consults and new patient visits compared with outdated 1992 Medicare LOVs. Using operating room (OR) log data, 8 of 17 surgeries had reported skin-to-skin times more than 30 minutes shorter than outdated physician-reported times. Surgeon-reported work effort per operating room hour (WPUT) was found to increase 27% (and a single-artery heart bypass WPUT 85%) in the last 7 years. We also present evidence of the decoupling of the fee schedule across families of codes and specialties by seemingly random changes in reported work effort for 360 codes tying together specialty-specific ratings of work effort.

Besides productivity gains in the operating room, surgeon 'hand-offs' to non-surgeons after surgery adds to the overstatement of surgeons' total work. A comparison of thousands of Medicare claims for 7 surgical groups (e.g., heart/valve, hip) between 1995-2004 showed a 14% increase in follow-up, casemix-adjusted, visits by non-surgeons despite 5-15 visits already incorporated into the surgeon's global fee. The paper concludes by identifying hundreds of millions of dollars in potential savings annually from productivity-justified fee rollbacks in consultations, shorter surgeries, and duplicate payment hand-offs from surgeons.