Economies of scope and payment for physician services

Physician payment reform will base payment largely upon physician work. Current reforms assume that services are provided independently, yet physicians may often perform two or more services at one time. There is evidence from other industries that services provided jointly may not require the same total resources as identical services provided independently. This study evaluated whether physician-reported work and time were the same for some common services when provided jointly and when provided separately. Six case vignettes were constructed consisting of two services each. Forty-four general internists rated the total work and time required for each vignette performed as a whole, and for the two services performed separately. Total work was estimated using a magnitude estimation technique similar to that used in developing the resource-based relative value scale. For five of the six vignettes, the work rating for performing the services together was significantly less than the sum of the ratings for the separate services. The work savings associated with providing services together ranged from 4% to 30% of the total work of the separate services. A similar reduction was observed for the estimated time to perform services jointly in four of the six vignettes. In no case was work or time lower when services were provided separately. Physicians report lower work and time for at least some pairs of services, compared with providing the same services separately. Reimbursement mechanisms that fail to account for these reductions may provide incentives to combine or add services.