Medicare Physician Fee Schedule:

CMS Needs a Plan for Updating Practice Expense Component

GAO-05-60: Published: Dec 13, 2004. Publicly Released: Dec 13, 2004.

Additional Materials:

Contact:

Kathleen M. King
(202) 512-8942
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Medicare's payments for the costs physicians incur in operating their practices are based on two sets of estimates: total practice expenses and resource estimates for individual services. Total practice expense estimates were derived from American Medical Association (AMA) physician surveys, which the Centers for Medicare & Medicaid Services (CMS) refines with supplemental data submitted by medical specialty societies. Resource estimates for individual services were developed by expert panels and refined by CMS with recommendations from another expert panel. In response to a mandate in the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000, GAO evaluated CMS's processes for updating total practice expense and resource estimates and whether CMS will have the data necessary to update the fee schedule at least every 5 years as mandated by law.

CMS reviews supplemental data from medical specialties on total practice expenses to determine whether it should use the data, but aspects of CMS's review may result in its not utilizing the best data. CMS's review is necessary because it helps protect against perceived or actual bias in the estimates. Risk of bias exists because only specialties that believe their Medicare fees are too low are likely to submit supplemental data, and the data are not audited. CMS, however, may still use certain data submissions that are not representative of physician practices within a specialty. CMS also may reject some data that are more representative of a specialty's total practice expenses than the data currently used for that specialty. In addition, CMS reviewed a 2002 data submission for accuracy, which is an important additional check, yet when the data did not meet the accuracy test, CMS did not reject the data. CMS has not stated whether it will review the accuracy of all supplemental data submissions. Stakeholders such as specialty societies and AMA said the expert panel improved resource estimates for individual services because of the rigor of its evaluation process. CMS and specialty societies generally accepted the panel's estimates because the panel represented a broad range of specialties and its collaborative evaluation process became increasingly systematic. CMS implemented almost all of the panel's estimates but appropriately changed some estimates that conflicted with Medicare coverage rules and changed others to make them consistent across services. In modifying other estimates, however, CMS did not always rely on adequate data or explain its rationale. Certain physician groups told GAO that this had diminished their confidence in the process for updating Medicare's fees, and physicians' confidence in the process is important to ensure their continued participation in Medicare. CMS does not have a plan for developing and using appropriate data for the mandated review of the fee schedule. CMS reported that it is in the process of obtaining a contract to collect practice expense data from the major physician and nonphysician specialties but did not provide specifics. A plan for the data collection is important for several reasons. Data sources that had been used no longer exist or are insufficient. The AMA physician survey that provided total practice expense data was last conducted in 1999 and was modified in 2000 such that it no longer collected the necessary data. Data submitted voluntarily by specialties to update these estimates are not an appropriate substitute for a systematic data collection effort. In addition, the expert panel that reviewed resource estimates for individual services completed its work in its final meeting in March 2004. CMS indicated that an ongoing AMA committee would continue to develop estimates for new and revised services. While CMS officials told GAO they believe CMS can complete the review of the fee schedule as required by 2007, without a specific plan CMS cannot ensure that it will be able to collect the data and update the fee schedule in a timely manner.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve and update the physician fee schedule, the CMS Administrator should consistently assess the accuracy of all supplemental data submissions on total practice expenses, modify the assessment of representativeness such that the data submitted by specialties better reflect the variation in practice expenses within a specialty, and adjust the precision requirement so that supplemental data submissions that would improve the information currently used to set fees are accepted.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: Consistent with our recommendation, CMS has modified its review process to accept supplemental data submissions that improve the accuracy of CY 2007 fees. Specifically, CMS has now accepted data from 10 additional specialties, and has consistently assessed the accuracy of all these submissions by comparing them with other available benchmark data. CMS has modified its assessment of representativeness to examine variation in practice expenses within a specialty based on practice size, geography or other characteristics for all 10 submissions. CMS has also adjusted the precision criterion resulting in acceptance of two supplemental data submissions that would otherwise have been rejected because they did not meet the precision criterion. CMS accepted these data because they were an improvement on the data currently used to set fees.

    Recommendation: To improve and update the physician fee schedule, the CMS Administrator should base any revisions to the resource estimates for individual services on sufficient data analysis and a documented and transparent rationale.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Not Implemented

    Comments: We cannot determine whether CMS has consistently based any revisions to the resource estimates for individual services on sufficient data analysis and a documented and transparent rationale.

    Recommendation: To improve and update the physician fee schedule, the CMS Administrator should develop and implement a plan to update the fee schedule in a timely manner with representative data on total practice expenses and the resources for individual services so that the fees appropriately reflect changes in medical services and the costs of their delivery.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: Consistent with our recommendation, CMS has formulated a plan to update practice expense estimates. Specifically, to refine total practice expense estimates, CMS plans to use a new AMA-sponsored multi-specialty survey in which over 40 physician and nonphysician specialties have agreed to participate. CMS supports the survey, has offered comments on its design, and plans to consider such data as soon as it becomes available?most likely for the CY 2009 fee schedule. Furthermore, the PEAC has now been replaced by the Practice Expense Review Committee (PERC) which acts to assist in updating resource estimates for individual services. The refinement to the original panel estimates has now been completed, and, according to CMS, the refined estimates more accurately capture the relative direct costs of providing services. As a result, CMS has modified its overall methodology such that greater reliance is now placed on these individual service resource estimates, instead of data from the AMA surveys. This change is expected to lead to greater stability and accuracy in the practice expense portion of fees. Thus, although the new AMA-sponsored multi-specialty survey will not be available before CY 2009, its effect on updates to practice expense estimates is less critical under CMS's modified methodology. GAO therefore concludes that CMS has developed a plan that will enable the agency to conduct the on-going 5-year reviews required by law.

    Aug 22, 2014

    Aug 13, 2014

    Aug 11, 2014

    Jul 30, 2014

    Jul 29, 2014

    Jul 23, 2014

    Jul 16, 2014

    Jul 15, 2014

    Looking for more? Browse all our products here