Do market fees differ from relative value scale fees? Examining surgeon payments in New Zealand

Health funders face the challenge of determining the appropriate level of surgeon fees in fee-for-service schemes.  A resource-based relative value scale (RBRVS) attempts to identify the fees that would exist in a competitive market.  Private insurance providers in New Zealand do not use a RBRVS but rather rely on a market.  We explore the extent to which private surgeon fees in New Zealand are consistent with fees that would be generated by a RBRVS.

Data on 155,290 surgical procedures from 2004-06 were provided by New Zealand's largest private health insurer.  314 procedure codes were matched to the Australian Ministry of Health and Ageing's RBRVS. A random effects model determined predicted surgeon reimbursements based on the RBRVS, the location and the year. Procedure volume and specialty were explored as potential sources of deviations.

The RBRVS, location and year explain 79% of the variation in surgeon fees. After accounting for the RBRVS, location and year, no statistical differences were found between five out of the seven specialties, but higher volume procedures were associated with lower fees. There was some evidence that the model explained less variation in lower volume procedures.

Surgical fees were generally consistent with those predicted by the RBRVS. However, the fees for high volume procedures were relatively lower than predicted while the fees for low volume procedures appeared more variable. The findings are consistent with the hypothesis that market forces lowered prices for procedures with higher volumes. This has implications for how health funders might determine private surgical fees, especially in mixed public-private systems.