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Assessing the implementation of physician-payment reform
W C Hsiao1, D L Dunn, D K Verrilli
1Department of Health Policy and Management, Harvard School of Public Health, Cambridge, MA 02138.
The New England Journal of Medicine
|April 1, 1993
Summary
The Medicare fee schedule underpays medical services due to misallocated practice expenses and an inadequate conversion factor. This physician payment reform may discourage new medical careers and incentivizes lucrative procedures over patient care.
Area of Science:
- Health Economics
- Medical Policy
- Physician Reimbursement
Background:
- Medicare physician payment reform in 1992 introduced a new fee schedule.
- Key controversies involve the conversion factor, work intensity differences, and practice expense allocation.
Purpose of the Study:
- To assess the implementation of physician payment reform using simulation methods.
- To evaluate the impact of the Medicare fee schedule on physician net income across specialties.
Main Methods:
- Developed simulation methods using a standard service from each specialty.
- Calculated potential net income for specialties under various payment scenarios, including the Medicare fee schedule.
Main Results:
- The current Medicare conversion factor results in low income for most specialties.
- Practice expenses are misallocated, over-reimbursing invasive services and under-reimbursing medical services.
- The fee schedule acknowledges work intensity differences between specialties.
Conclusions:
- Misallocated practice expenses lead to underpayment for medical services.
- Physicians may shift towards more lucrative services like diagnostic tests.
- The current conversion factor may deter individuals from pursuing medical careers.