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

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

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Michael Zimmerman Team: General Accounting Office: Human Resources Division Phone: (202) 275-6195