Medicare Payment for Hospital-Based Physician Services

Gao ID: T-HRD-87-13 May 13, 1987

GAO discussed its responses to a series of questions about the hospital-based physician specialities of radiology, anesthesiology and pathology (RAP). These questions dealt with: (1) contractual arrangements between hospitals and physicians; (2) the level of RAP physicians' incomes and the rate of their financial return on medical training; (3) Medicare's controls on the volume of these physicians' services; and (4) geographic variations in payment rates for their services. GAO found that: (1) both written and verbal arrangements appeared to grant these physicians exclusive practice rights; (2) hospitals' staffing arrangements for these physicians were officially open, but in practice, only the physicians with contracts provided services; (3) hospitals had little incentive to bargain with hospital-based physicians to restrain their charges to Medicare beneficiaries; and (4) these physicians earned higher incomes than most other physicians and had the highest financial return on their training. GAO also found that: (1) the Health Care Financing Administration (HCFA) had no special requirements for prepayment review of RAP claims beyond those normal for all physician services; (2) three of the carriers serving the four geographic areas surveyed developed their own prepayment screens for RAP services; and (3) there was considerable variation in Medicare payments for RAP services across the geographic areas surveyed, which raised concerns over equity and reasonableness of program payments.

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