Medicare Physician Payments:

Fees Could Better Reflect Efficiencies Achieved When Services Are Provided Together

GAO-09-647: Published: Jul 31, 2009. Publicly Released: Aug 31, 2009.

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Medicare's physician fees may not always reflect efficiencies that occur when a physician performs multiple services for the same patient on the same day, and some resources required for these services do not need to be duplicated. In response to a request from Congress, GAO examined (1) the Centers for Medicare & Medicaid Services' (CMS) efforts to set appropriate fees for services furnished together and (2) additional opportunities for CMS to avoid excessive payments when services are furnished together. GAO examined relevant policies, laws, and regulations; interviewed CMS officials and others; and analyzed claims data to identify opportunities for further savings.

CMS has taken steps to ensure that physician fees recognize efficiencies that occur when certain services are commonly furnished together, that is, by the same physician to the same beneficiary on the same day, but has not targeted services with the greatest potential for savings. CMS is reviewing the efforts of a workgroup created by the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) in 2007 to examine potential duplication in resource estimates for services furnished together. However, the RUC workgroup has not focused on services that account for the largest share of Medicare spending. For this and other reasons, its methodology to identify and review services furnished together likely will result in limited savings. The workgroup's process is also resource intensive because it depends on input and consensus from specialty societies. Independent of the RUC, CMS has implemented a multiple procedure payment reduction (MPPR) policy for certain imaging and surgical services when two or more related services are furnished together. Under an MPPR, the full fee is paid for the highest-priced service and a reduced fee is paid for each subsequent service to reflect efficiencies in overlapping portions of the practice expense component--clinical labor, supplies, and equipment. For example, a nurse's time preparing a patient for a medical procedure or technician's time setting up the required equipment is incurred only once. The MPPR produced savings of about $96 million in 2006 for imaging services. However, the scope of the policy is limited because the policy does not apply to nonsurgical and nonimaging services commonly furnished together, nor does it specifically reflect efficiencies occurring in the physician work component--the financial value of a physician's time, skill, and effort. For example, when two services are furnished together, a physician reviews a patient's medical records once, but the time for that activity is generally reflected in fees paid for both services. CMS has additional opportunities to reduce excess physician payments that can occur when services are furnished together and Medicare's fees do not reflect the efficiencies realized. GAO's review found that expanding the MPPR to reflect practice expense efficiencies that occur when nonsurgical, nonimaging services are provided together could reduce payments for these services by an estimated one-half billion dollars annually. GAO's review also indicated that expanding the existing MPPR policy to reflect efficiencies in the physician work component of certain imaging services could reduce these payments by an estimated additional $175 million annually. Under the budget neutrality requirement, by law, savings from reductions in fees are redistributed by increasing fees for all other services. Thus, these potential savings would accrue as savings to Medicare only if Congress exempted them from the budget neutrality requirement, as was done in the Deficit Reduction Act of 2005 for savings from the changes to certain imaging services fees.

Matter for Congressional Consideration

  1. Status: Open

    Comments: Congress has exempted savings from the implementation of multiple procedure payment reductions (MPPR) for certain diagnostic imaging and therapy services from the budget neutrality requirement, as GAO suggested in July 2009. However, as of November 2017, other policies that may result in a reduction in payments for the professional component for imaging services remained subject to budget neutrality; "savings" from these services are redistributed to other services and do not accrue to the Medicare program. The Consolidated Appropriations Act of 2016 revised the payment reduction for the professional component of multiple diagnostic imaging services from 25 percent to 5 percent beginning on January 1, 2017, and exempted the reduced expenditures attributable to this MPPR from the budget neutrality provision. MPPRs or other policies that may result in a reduction to payments for the technical component for diagnostic cardiovascular and ophthalmology services continue to be subject to budget neutrality for 2016. Unless Congress exempts from the budget neutrality requirement savings realized from the implementation of all MPPRs or other policies that reflect efficiencies occurring when services are furnished together, these savings will not accrue to the Medicare program.

    Matter: To ensure that savings are realized from the implementation of an MPPR or other policies that reflect efficiencies occurring when services are furnished together, Congress may wish to consider exempting these savings from budget neutrality.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: CMS has taken several steps to implement MPPRs to capture efficiencies that occur when services are performed by the same physician for the same beneficiary on the same day, as GAO recommended in July 2009. The Patient Protection and Affordable Care Act requires that the Secretary of Health and Human Services identify potentially misvalued codes by examining multiple codes that are frequently billed in conjunction with furnishing a single service. In implementing this provision in 2011, CMS expanded the imaging MPPR to the technical component of additional imaging services (i.e., the portion of the payment that covers the actual performance of the service) and implemented a 25 percent MPPR for the practice expense component for certain therapy services. The Physician Payment Therapy and Relief Act of 2010 subsequently reduced the MPPR for these therapy services from 25 to 20 percent. However, under the American Taxpayer Relief Act of 2012, Congress increased the MPPR for therapy services to 50 percent for services provided on or after April 1, 2013. The Congressional Budget Office has estimated that this MPPR increase will save $1.8 billion over 10 years. Furthermore, in 2012, CMS implemented a 25 percent MPPR for the physician work component of certain imaging services (i.e., the portion of the payment that covers a physician's work). On the basis of its analysis of services that are commonly furnished together, CMS is implementing an MPPR for the technical component for certain diagnostic cardiovascular tests and diagnostic ophthalmology procedures for 2013. In addition, in 2013, CMS is applying the MPPR for imaging services to services furnished in the same session by physicians in the same group practice. As a result of CMS's actions, the Medicare physician fee schedule better reflects efficiencies that occur when certain services are provided together.

    Recommendation: The Acting Administrator of CMS should take further steps to ensure that fees for services paid under Medicare's physician fee schedule reflect efficiencies that occur when services are performed by the same physician to the same beneficiary on the same day. These efforts could include (1) systematically reviewing services commonly furnished together and implementing an MPPR to capture efficiencies in both physician work and practice expenses, where appropriate, for these services; (2) focusing on service pairs that have the most impact on Medicare spending; and (3) monitoring the provision of services affected by any new policies it implements to ensure that physicians do not change their behavior in response to these policies.

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


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