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Effects of lower surgical fees on the use of physician services under Medicare
1Department of Medicine, University of Pennsylvania, Philadelphia.
Background And Objective:
The changes in physician fees that will occur under the resource-based Medicare Fee Schedule (MFS) are similar to those that took place under the Omnibus Budget Reconciliation Act of 1987 (OBRA 87), when Medicare fees for selected "overpriced" procedures and diagnostic tests were reduced. To gain insight regarding the changes in utilization that may occur under the MFS, this study examines the effects of the OBRA 87 fee reductions on the use of physician services by Medicare patients.
Data And Methods:
The five specialties that were most affected by the OBRA 87 fee reductions were studied: ophthalmology, thoracic surgery, urology, orthopedic surgery, and gastroenterology. Medicare physician claims files for 1987 and 1989 were used to obtain data on utilization and fees. Multivariate regression analysis was used to assess the effect of changes in fees on changes in utilization.
Results:
The best estimate of the effect of the OBRA 87 fee reductions on overall physician-services utilization, obtained by pooling the five study specialties, was that every 1% decrease in fees led to a 0.09% decrease in the volume and complexity of services (95% confidence interval, 0.49% decrease to 0.31% increase). This result was not sensitive to minor changes in the covariates included in the regression model.
Conclusion:
To calculate payment levels during the transition to the MFS, the Health Care Financing Administration assumed that physicians whose Medicare revenue declines under the MFS will increase service volume and complexity enough to make up one half of the lost revenue. The findings of this study suggest that the Health Care Financing Administration's assumption was, at best, extreme.
Insights
Physician fee reductions under Medicare
Area of Science:
- Health Economics
- Physician Payment Reform
- Medicare Utilization
Background:
- Medicare Fee Schedule (MFS) changes mirror Omnibus Budget Reconciliation Act of 1987 (OBRA 87) fee reductions.
- OBRA 87 reduced Medicare fees for "overpriced" procedures and diagnostic tests.
Purpose of the Study:
- To analyze the impact of OBRA 87 fee reductions on Medicare physician service utilization.
- To forecast potential utilization changes under the new MFS.
Main Methods:
- Studied five specialties most affected by OBRA 87 fee reductions.
- Analyzed Medicare physician claims data from 1987 and 1989.
- Employed multivariate regression to assess fee impact on utilization.
Main Results:
- A 1% decrease in physician fees correlated with a 0.09% reduction in service volume and complexity.
- This finding remained consistent across pooled specialties and regression model variations.
Conclusions:
- The Health Care Financing Administration's assumption of revenue offset through increased volume is questioned.
- Study findings suggest the assumption of physicians fully recouping lost revenue is extreme.
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