HCFA Can Improve Methods for Revising Physician Practice Expense Payments

T-HEHS-98-105: Published: Mar 3, 1998. Publicly Released: Mar 3, 1998.

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William J. Scanlon
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Pursuant to a congressional request, GAO discussed the efforts of the Health Care Financing Administration (HCFA) to revise the practice expense component of Medicare's physician fee schedule.

GAO noted that: (1) HCFA's general approach for collecting information on physicians' practice expenses was reasonable; (2) HCFA convened 15 panels of experts to identify the resources associated with several thousand services and procedures; (3) HCFA made various adjustments to the expert panels' data that were intended to: (a) convert the panels' estimates to a common scale; (b) eliminate expenses reimbursed to hospitals rather than to physicians; (c) reduce potentially excessive estimates; and (d) ensure consistency with aggregate survey data on practice expenses for equipment, supplies, and nonphysician labor; (4) while GAO agrees with the intent of these adjustments, GAO believes that some have methodological weaknesses, and other adjustments and assumptions lack supporting data; (5) HCFA has done little in the way of performing sensitivity analyses that would enable it to determine the impact of the various adjustments, methodologies, and assumptions, either individually or collectively; (6) such sensitivity analyses could help determine whether the effects of the adjustments and assumptions warrant additional, focused data gathering to determine their validity; (7) GAO believes this additional work should not, however, delay phase-in of the fee schedule revisions; (8) since implementation of the physician fee schedule in 1992, Medicare beneficiaries have generally experienced very good access to physician services; (9) the eventual impact of the new practice expense revisions on Medicare payments to physicians is unknown at this time, but they should be considered in the context of other changes in payments to physicians by Medicare and by other payers; (10) recent successes in health care cost control are partially the result of purchasers and health plans aggressively seeking discounts from providers; (11) how Medicare payments to physicians relate to those of other payers will determine whether the changes in Medicare payments to physicians reduce Medicare beneficiaries' access to physician services; and (12) this issue warrants continued monitoring, and possible Medicare fee schedule adjustments, as the revisions are phased in.

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