Changes Needed in Medicare Payments to Physicians Under the End Stage Renal Disease Program

HRD-85-14: Published: Feb 1, 1985. Publicly Released: Feb 1, 1985.

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GAO reviewed a new method of physician reimbursement in the End Stage Renal Disease (ESRD) program, which is administered by the Health Care Financing Administration (HCFA). Since August 1983, ESRD physicians have been reimbursed for outpatient care on the basis of a monthly capitation payment and for inpatient care on a fee-for-service basis. GAO evaluated the HCFA methodology for deriving the monthly capitation payment to determine if it accurately reflected the services provided and evaluated whether physician payments were properly determined.

The HCFA formula for deriving the monthly capitation rate assumed that outpatients receive about 70 percent of the physician services received by inpatients and adjusted the monthly fee accordingly. GAO found that, on the average, outpatients were seen about 25 percent as often as inpatients. Using the GAO percentage in the average monthly payment formula would reduce Medicare-allowed charges for physicians' services by about $11.8 million annually. Furthermore, GAO found that, by using special dialysis procedure codes, ESRD physicians receive higher payments without showing that the services provided are greater than those provided to other hospital inpatients. However, HCFA and Medicare carriers did not define what services should be provided under the special codes. In addition, GAO estimated that annual savings of about $1.3 million could be achieved by reimbursing physicians for hospital dialysis visits on the basis of hospital visit codes rather than special dialysis visit codes. Finally, GAO identified about $721,000 in incorrect payments and another $527,000 in questionable payments covering periods of up to 3 years. Most of the incorrect payments resulted from administrative complexities involved in the collection procedures for hospitalized ESRD patients who receive maintenance dialysis. GAO believes that the use of a capitation payment system, for both inpatients and outpatients, would eliminate some of these administrative problems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Effective August 1, 1986, The Department of Health and Human Services (HHS) modified the monthly capitation payment rate, reducing it by an average of $14. HHS referred to the GAO findings as the reason for acting.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to modify the monthly capitation payment rate taking into consideration GAO survey data on related physician involvement with home and facility patients.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HCFA issued revised instructions for using special dialysis codes, but in effect no significant change was made nor will savings result.

    Recommendation: If the recommendation for a total capitation system is not accepted, the Secretary of Health and Human Services should direct the Administrator, HCFA, to either: (1) eliminate the special dialysis visit procedure codes and pay physicians for the services provided to hospitalized ESRD patients during dialysis on the basis of hospital visit codes; or (2) modify the dialysis visit codes to reflect the nature and scope of physician services provided during dialysis and the amounts other physicians receive for the same or similar services.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: HHS stated that it will initiate demonstration projects to collect the data necessary to implement this recommendation. Earlier plans to conduct such projects were delayed by funding and other problems. GAO believes that it is unlikely that action will be taken.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop and implement a total capitation system to reimburse ESRD physicians for all routine physician services provided to ESRD beneficiaries. Such a system should be based on the current monthly capitation payment rates adjusted for home patient care and the value of routine hospital visits, as discussed in this report.

    Agency Affected: Department of Health and Human Services


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