Medicare inpatient physician charges: an econometric analysis

Area of Science:

• Health Economics
• Public Policy
• Medical Care Research

Background:

• Medicare physician payments are controlled by Volume Performance Standards (VPS) established in 1989.
• The current nationwide risk pool for VPS is considered too large to effectively influence physician behavior.
• A potential modification involves segmenting risk pools for inpatient physician services by hospital medical staff.

Purpose of the Study:

• To explore the determinants of medical staff charges within Medicare admissions.
• To analyze the policy implications of modifying the VPS risk pool structure.
• To investigate factors influencing physician charges in a large Medicare patient sample.

Main Methods:

• Utilized a national random sample of 500,000 Medicare admissions for analysis.
• Employed multivariate analysis to identify key determinants of medical staff charges.
• Examined the relationship between hospital characteristics and physician billing.

Main Results:

• Medical staff charges were found to increase with patient case mix complexity.
• Charges also increased with hospital bed size.
• Surprisingly, charges decreased with higher levels of hospital teaching activity, attributed to resident physician substitution.

Conclusions:

• Modifying VPS by creating hospital-specific risk pools for inpatient physician services could be a viable policy option.
• Hospital characteristics significantly influence physician charges, suggesting targeted interventions may be effective.
• The findings provide insights into physician payment reform and cost control within the Medicare system.