Medicare:

Focus on Physician Practice Patterns Can Lead to Greater Program Efficiency

GAO-07-307: Published: Apr 30, 2007. Publicly Released: Apr 30, 2007.

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The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed GAO to study the compensation of physicians in traditional fee-for service (FFS) Medicare. GAO explored linking physician compensation to efficiency--defined as providing and ordering a level of services that is sufficient to meet a patient's health care needs but not excessive, given the patient's health status. In this report, GAO (1) estimates the prevalence in Medicare of physicians who are likely to practice inefficiently, (2) examines physician-focused strategies used by health care purchasers to encourage efficiency, and (3) examines the potential for the Centers for Medicare and Medicaid Services (CMS) to profile physicians for efficiency and use the results. To do this, GAO developed a methodology using 2003 Medicare claims data to compare generalist physicians' Medicare practices with those of their peers in 12 metropolitan areas. GAO also examined 10 health care purchasers that profile physicians for efficiency.

Based on 2003 Medicare claims data, GAO's analysis found outlier generalist physicians--physicians who treat a disproportionate share of overly expensive patients--in all 12 metropolitan areas studied. Outlier generalists and other generalists saw similar numbers of Medicare patients and their respective patients averaged the same number of office visits. However, after taking health status and location into account, GAO found that Medicare patients who saw an outlier generalist--compared with those who saw other generalists--were more likely to have been hospitalized, more likely to have been hospitalized multiple times, and more likely to have used home health services. By contrast, they were less likely to have been admitted to a skilled nursing facility. Certain public and private health care purchasers routinely evaluate physicians in their networks using measures of efficiency and other factors. The 10 health care purchasers in our study profiled physicians--that is, compared physicians' performance to an efficiency standard to identify those who practiced inefficiently. To measure efficiency, the purchasers we spoke with generally compared actual spending for physicians' patients to the expected spending for those same patients, given their clinical and demographic characteristics. Most of the 10 purchasers also evaluated physicians on quality. To encourage efficiency, all 10 purchasers linked their physician evaluation results to a range of incentives--from steering patients toward the most efficient providers to excluding physicians from the purchaser's provider network because of inefficient practice patterns. CMS has tools available to evaluate physicians' practices for efficiency but would likely need additional authorities to use results in ways similar to other purchasers. CMS has a comprehensive repository of Medicare claims data to compute reliable efficiency measures for most physicians serving Medicare patients and has substantial experience using methods that adjust for differences in patients' health status. However, CMS may not currently have the flexibility that other purchasers have to link physician profiling results to a range of incentives encouraging efficiency. Implementation of other strategies to encourage efficiency would likely require legislation. CMS said that our recommendation was timely and that our focus on the need for risk adjustment in measuring physician resource use was particularly helpful. However, CMS only discussed using profiling results for educating physicians. GAO believes that the optimal profiling effort would include financial or other incentives to encourage efficiency and would measure the effort's impact on Medicare. GAO concurs with CMS that this effort would require adequate funding.

Status Legend:

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  • 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: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include financial or other incentives for individual physicians to improve the efficiency of the care they provide.

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

    Status: Open

    Comments: On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) of the Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110-275) which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area. CMS leadership has articulated the goal of using financial and other incentives to improve the efficiency of physician care.

    Recommendation: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include a physician education program that explains to physicians how the profiling system works and how their efficiency measures compare with those of their peers.

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

    Status: Open

    Comments: On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) of the Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110-275) which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area.

    Recommendation: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include empirically based standards that set the parameters of efficiency.

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

    Status: Open

    Comments: On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) MIPPA which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area. Specifically, this work begins to address GAO's recommendation to include efficiency standards through the application of cost of care benchmarks to both: (1) specialty and (2) geography.

    Recommendation: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include adjustments for differences in patients' health status.

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

    Status: Closed - Implemented

    Comments: In 2007, GAO recommended that CMS develop a profiling system that identifies individual physicians with inefficient practice patterns and use the results to improve program efficiency. Specifically, GAO recommended that the systeminclude adjustments for differences in health status. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275) mandated the Secretary of Health and Human Services to develop and implement a physician feedback program by January 2009. On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) MIPPA which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area. Specifically, this work addresses GAO's recommendation to adjust for difference in patients' health status by comparing each patient's costs with costs of other patients with similar severity of illness indicators. Costs are adjusted for age, sex, dual Medicare-Medicaid status, ESRD status, illness severity, whether the patient was alive at the end of the calendar year or episode, and socioeconomic characteristics.

    Recommendation: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include total Medicare expenditures as the basis for measuring efficiency.

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

    Status: Closed - Implemented

    Comments: In 2007, GAO recommended that CMS develop a system that identifies individual physicians with inefficient practice patterns and use the results to improve program efficiency. Specifically, GAO recommended that in addition to an episode of care framework, CMS should use total Medicare expenditures to measure efficiency. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA, P.L. 110-275) mandated the Secretary of Health and Human Services to develop and implement a physician feedback program by January 2009. On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) of MIPPA, which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area. Specifically, this work addresses GAO's recommendation to include total Medicare expenditures as a basis for measuring efficiency by using a per capita analysis for measuring cost of care in addition to pursuing an episode of care framework.

    Recommendation: Given the contribution of physicians to Medicare spending in total, the Administrator of CMS should develop a profiling system that identifies individual physicians with inefficient practice patterns and, seeking legislative changes as necessary, use the results to improve the efficiency of care financed by Medicare. The profiling system should include methods for measuring the impact of physician profiling on program spending and physician behavior.

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

    Status: Open

    Comments: On November 19, 2008, CMS published a federal register notice outlining the implementation of the Physician Feedback Program as required under Section 131(c) of the Medicare Improvements for Patients and Providers Act of 2008 (P.L. 110-275) which amends Section 1848(n)(1)(B) of the Social Security Act. CMS has completed Phase 1 of the physician profiling and feedback system. In May 2008, CMS awarded a contract to Mathematica Policy Research (MPR) to develop and disseminate Resource Use Reports (RURs) to physicians in a phased, pilot approach. The RURs focus on risk adjustment, attribution of cost, and benchmarking. CMS identified eight priority conditions and disseminated approximately 310 RURs to physicians in selected specialties who practiced in one of 13 geographic areas. The reports generally included both per capita and per episode resource use measures that were calculated according to five different attribution rules. The reports also contained multiple cost benchmarks relative to physicians in the same specialty and geographic area. Subsequent work is planned to evaluate the impact of physician RURs on Medicare program spending and physician behavior.

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