Medicare
Providing Systematic Feedback to Physicians on their Practice Patterns Is a Promising Step Toward Encouraging Program Efficiency Gao ID: GAO-07-862T May 10, 2007GAO was asked to discuss--based on Medicare: Focus on Physician Practice Patterns Can Lead to Greater Program Efficiency, GAO-07-307 (Apr. 30, 2007)--the importance in Medicare of providing feedback to physicians on how their use of health care resources compares with that of their peers. GAO's report discusses an approach to analyzing physicians' practice patterns in Medicare and ways the Centers for Medicare & Medicaid Services (CMS) could use the results. In a related matter, Medicare's sustainable growth rate system of spending targets used to moderate physician spending growth and annually update physician fees has been problematic, acting as a blunt instrument and lacking in incentives for physicians individually to be attentive to the efficient use of resources in their practices. GAO's statement focuses on (1) the results of its analysis estimating the prevalence of inefficient physicians in Medicare and (2) the potential for CMS to profile physicians in traditional fee-for-service Medicare for efficiency and use the results in ways that are similar to other purchasers' efforts to encourage efficiency.
Having considered efforts of 10 private and public health care purchasers that routinely evaluate physicians for efficiency and other factors, GAO conducted its own analysis of physician practices in Medicare. GAO focused the analysis on generalists--physicians who described their specialty as general practice, internal medicine, or family practice--and selected metropolitan areas that were diverse geographically and in terms of Medicare spending per beneficiary. Although GAO did not include specialists in its analysis, its method does not preclude profiling specialists, as long as enough data are available to make meaningful comparisons across physicians. Based on 2003 Medicare claims data, GAO's analysis found outlier generalist physicians--physicians who treat a disproportionate share of overly expensive patients--in all 12 metropolitan areas studied. Outlier generalists and other generalists saw similar numbers of Medicare patients and their respective patients averaged the same number of office visits. However, after taking health status and location into account, GAO found that Medicare patients who saw an outlier generalist--compared with those who saw other generalists--were more likely to have been hospitalized, more likely to have been hospitalized multiple times, and more likely to have used home health services. By contrast, they were less likely to have been admitted to a skilled nursing facility. GAO concluded that outlier generalists were likely to practice medicine inefficiently. CMS has tools available to evaluate physicians' practices for efficiency, including a comprehensive repository of Medicare claims data to compute reliable efficiency measures and substantial experience adjusting for differences in patients' health status. The agency also has wide experience in conducting educational outreach to physicians with respect to improper billing practices and potential fraud--providing individual physicians, in some cases, comparative information on how the physician varies from other physicians in the same specialty or in other ways. A physician education effort based on efficiency profiling would therefore not be a foreign concept in Medicare. For example, CMS could provide physicians a report that compares their practice's efficiency with that of their peers, enabling physicians to see whether their practice style is outside the norm. As for implementing other strategies to encourage efficiency, such as the use of certain financial incentives, CMS would likely need additional legislative authority. CMS agreed with the need to measure physician resource use in Medicare but raised concerns about the costs involved in reporting the results and was silent on other strategies discussed beyond physician education. GAO concurs that resource use measurement and reporting activities would require adequate funding; however, GAO is concerned that efforts to achieve efficiency that rely solely on physician education without financial or other incentives for physicians to curb inefficiencies will be suboptimal.
GAO-07-862T, Medicare: Providing Systematic Feedback to Physicians on their Practice Patterns Is a Promising Step Toward Encouraging Program Efficiency
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Testimony:
Before the Subcommittee on Health, Committee on Ways and Means, House
of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:00 a.m. EDT:
Thursday, May 10, 2007:
Medicare:
Providing Systematic Feedback to Physicians on their Practice Patterns
Is a Promising Step Toward Encouraging Program Efficiency:
Statement of A. Bruce Steinwald:
Director, Health Care:
GAO-07-862T:
GAO Highlights:
Highlights of GAO-07-862T, a testimony before the Subcommittee on
Health, Committee on Ways and Means, House of Representatives
Why GAO Did This Study:
GAO was asked to discuss”based on Medicare: Focus on Physician Practice
Patterns Can Lead to Greater Program Efficiency, GAO-07-307 (Apr. 30,
2007)”the importance in Medicare of providing feedback to physicians on
how their use of health care resources compares with that of their
peers. GAO‘s report discusses an approach to analyzing physicians‘
practice patterns in Medicare and ways the Centers for Medicare &
Medicaid Services (CMS) could use the results. In a related matter,
Medicare‘s sustainable growth rate system of spending targets used to
moderate physician spending growth and annually update physician fees
has been problematic, acting as a blunt instrument and lacking in
incentives for physicians individually to be attentive to the efficient
use of resources in their practices. GAO‘s statement focuses on (1) the
results of its analysis estimating the prevalence of inefficient
physicians in Medicare and (2) the potential for CMS to profile
physicians in traditional fee-for-service Medicare for efficiency and
use the results in ways that are similar to other purchasers‘ efforts
to encourage efficiency.
What GAO Found:
Having considered efforts of 10 private and public health care
purchasers that routinely evaluate physicians for efficiency and other
factors, GAO conducted its own analysis of physician practices in
Medicare. GAO focused the analysis on generalists”physicians who
described their specialty as general practice, internal medicine, or
family practice”and selected metropolitan areas that were diverse
geographically and in terms of Medicare spending per beneficiary.
Although GAO did not include specialists in its analysis, its method
does not preclude profiling specialists, as long as enough data are
available to make meaningful comparisons across physicians. Based on
2003 Medicare claims data, GAO‘s analysis found outlier generalist
physicians”physicians who treat a disproportionate share of overly
expensive patients”in all 12 metropolitan areas studied. Outlier
generalists and other generalists saw similar numbers of Medicare
patients and their respective patients averaged the same number of
office visits. However, after taking health status and location into
account, GAO found that Medicare patients who saw an outlier
generalist”compared with those who saw other generalists”were more
likely to have been hospitalized, more likely to have been hospitalized
multiple times, and more likely to have used home health services. By
contrast, they were less likely to have been admitted to a skilled
nursing facility. GAO concluded that outlier generalists were likely to
practice medicine inefficiently.
CMS has tools available to evaluate physicians‘ practices for
efficiency, including a comprehensive repository of Medicare claims
data to compute reliable efficiency measures and substantial experience
adjusting for differences in patients‘ health status. The agency also
has wide experience in conducting educational outreach to physicians
with respect to improper billing practices and potential
fraud”providing individual physicians, in some cases, comparative
information on how the physician varies from other physicians in the
same specialty or in other ways. A physician education effort based on
efficiency profiling would therefore not be a foreign concept in
Medicare. For example, CMS could provide physicians a report that
compares their practice‘s efficiency with that of their peers, enabling
physicians to see whether their practice style is outside the norm. As
for implementing other strategies to encourage efficiency, such as the
use of certain financial incentives, CMS would likely need additional
legislative authority.
CMS agreed with the need to measure physician resource use in Medicare
but raised concerns about the costs involved in reporting the results
and was silent on other strategies discussed beyond physician
education. GAO concurs that resource use measurement and reporting
activities would require adequate funding; however, GAO is concerned
that efforts to achieve efficiency that rely solely on physician
education without financial or other incentives for physicians to curb
inefficiencies will be suboptimal.
What GAO Recommends:
In its report, GAO recommended that CMS develop a system that
identifies individual physicians with inefficient practice patterns
and, seeking legislative authority as necessary, uses the results to
improve program efficiency.
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-862T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact A. Bruce Steinwald at
(202) 512-7101or steinwalda@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today as you discuss the importance of
physician-focused strategies to improve efficiency in Medicare. One
such strategy entails providing feedback to physicians on how their use
of health care resources compares with that of their peers. We recently
issued a report, entitled Medicare: Focus on Physician Practice
Patterns Can Lead to Greater Program Efficiency,[Footnote 1] which
discusses an approach to analyzing physicians' practice patterns in
Medicare and ways the Centers for Medicare & Medicaid Services
(CMS)[Footnote 2] could use the results of such an analysis to modify
inefficient physician behavior. In the report, we used the term
efficiency to mean providing and ordering a level of services that is
sufficient to meet a patient's health care needs but not excessive,
given a patient's health status.
The report fulfilled a 2003 mandate that we examine aspects of
physician compensation in Medicare, pertaining only to physicians
serving beneficiaries in traditional fee-for-service (FFS)
Medicare.[Footnote 3] This topic has been of significant interest to
the Congress, as Medicare's current system of spending targets used to
moderate physician spending growth and annually update physician fees
has been problematic. This spending target system--called the
sustainable growth rate (SGR) system--adjusts Medicare's physician fees
based on the extent to which actual spending aligns with specified
targets. If the growth in the number of services provided per
beneficiary--referred to as volume--and in the average complexity and
costliness of services--referred to as intensity--is high enough,
spending will exceed the SGR target. In recent years, the SGR system
has called for cuts in physician fees to offset volume and intensity
increases that have exceeded spending targets. Although these cuts have
been overridden by legislative or administrative action, a sustained
period of declining fees under the SGR system is projected.
Policymakers are therefore concerned about the appropriateness of the
SGR system for updating physician fees and about physicians' continued
participation in the Medicare program. The problem, in part, is that
the SGR system acts as a blunt instrument in that all physicians are
subject to the consequences of excess spending--namely, downward fee
adjustments--that may stem from the excessive use of resources by only
some physicians. In addition, under the SGR system, individual
physicians have no incentive to be attentive to the efficient use of
resources in their own practices.
Policymakers are also concerned that some of the increase in volume and
intensity that drives spending growth may not be medically necessary.
Experts agree that physicians play a central role in the generation of
health care expenditures in total.[Footnote 4] For example, physicians
refer patients to other physicians; they admit patients to hospitals,
skilled nursing facilities, and hospices; and they order services
delivered by other health care providers, such as imaging studies,
laboratory tests, and home health services. However, some of the
spending for services provided and ordered by physicians may not be
warranted. For example, the wide geographic variation in Medicare
spending per beneficiary--unrelated to beneficiary health status or
outcomes--provides evidence that health needs alone do not determine
spending.[Footnote 5] Medicare physician payment policy does little to
change this situation; payments under the Medicare program are not
designed to foster individual physician responsibility for the most
effective medical practices. In contrast, some public and private
health care purchasers have initiated programs to identify efficient
physicians and encourage patients to obtain care from them.
Against this backdrop, my remarks today will focus on (1) the results
of our analysis estimating the prevalence of inefficient physicians in
Medicare and (2) the potential for CMS to profile physicians in
traditional FFS Medicare for efficiency and use the results in ways
that are similar to other purchasers' efforts to encourage efficiency.
My remarks are based on findings in our report: Medicare: Focus on
Physician Practice Patterns Can Lead to Greater Program
Efficiency.[Footnote 6] Having considered the efforts of 10 private and
public health care purchasers that routinely evaluate physicians for
efficiency and other factors, we conducted our own analysis of
physician practices in Medicare. We focused the analysis on
generalists--physicians who described their specialty as general
practice, internal medicine, or family practice--and selected
metropolitan areas that were diverse geographically and in terms of
Medicare spending per beneficiary. Although we did not include
specialists in the analysis, our method does not preclude profiling
specialists, as long as enough data are available to make meaningful
comparisons across physicians. We based our analysis on 2003 Medicare
claims data. We conducted our work from September 2005 through May 2007
in accordance with generally accepted government auditing standards.
In summary, we found outlier generalist physicians--physicians who
treat a disproportionate share of overly expensive patients--in all 12
metropolitan areas studied. Outlier generalists and other generalists
saw similar numbers of Medicare patients and their respective patients
averaged the same number of office visits. However, after taking health
status and location into account, we found that Medicare patients who
saw an outlier generalist--compared with those who saw other
generalists--were more likely to have been hospitalized, more likely to
have been hospitalized multiple times, and more likely to have used
home health services. By contrast, they were less likely to have been
admitted to a skilled nursing facility. We concluded that outlier
generalists were likely to practice medicine inefficiently.
CMS has tools available to evaluate physicians' practices for
efficiency, including a comprehensive repository of Medicare claims
data to compute reliable efficiency measures and substantial experience
adjusting for differences in patients' health status. The agency also
has wide experience in conducting educational outreach to physicians
with respect to improper billing practices and potential fraud--
providing individual physicians, in some cases, comparative information
on how the physician varies from other physicians in the same specialty
or in other ways. A physician education effort based on efficiency
profiling results would therefore not be a foreign concept in Medicare.
For example, CMS could provide physicians a report that compares their
practice's efficiency with that of their peers, enabling physicians to
see whether their practice style is outside the norm. As for
implementing other strategies to encourage efficiency, such as the use
of certain financial incentives, CMS would likely need additional
legislative authority.
In our April 2007 report, we recommended that CMS develop a system that
identifies individual physicians with inefficient practice patterns
and, seeking legislative changes as necessary, uses the results to
improve program efficiency. CMS agreed with the need to measure
physician resource use in Medicare but raised concerns about the costs
involved in reporting the results and was silent on other strategies
discussed beyond physician education. We concur that resource use
measurement and reporting activities would require adequate funding;
however, we are concerned that efforts to achieve efficiency that rely
solely on physician education without financial or other incentives for
physicians to curb inefficiencies will be suboptimal.
Background:
Linking efficiency to physician payment policy has been a subject of
interest among policymakers and health policy analysts. For example,
the Institute of Medicine has recently recommended that Medicare
payment policies should be reformed to include a system for paying
health care providers differentially based on how well they meet
performance standards for quality or efficiency or both.[Footnote 7] In
April 2005, CMS initiated a demonstration mandated by the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) to test this approach.[Footnote 8] Under the Physician Group
Practice demonstration, 10 large physician group practices, each
comprising at least 200 physicians, are eligible for bonus payments if
they meet quality targets and succeed in keeping the total expenditures
of their Medicare population below annual targets.[Footnote 9]
Several studies have found that Medicare and other purchasers could
realize substantial savings if a portion of patients switched from less
efficient to more efficient physicians. The estimates vary according to
assumptions about the proportion of beneficiaries changing
physicians.[Footnote 10] In 2003, the Consumer-Purchaser Disclosure
Project, a partnership of consumer, labor, and purchaser organizations,
asked actuaries and health researchers to estimate the potential
savings to Medicare if a small proportion of beneficiaries started
using more efficient physicians. The Project reported that Medicare
could save between 2 and 4 percent of total costs if 1 out of 10
beneficiaries moved to more efficient physicians. This conclusion is
based on information received from one actuarial firm and two academic
researchers. One researcher concluded, based on his simulations, that
if 5 to 10 percent of Medicare enrollees switched to the most efficient
physicians, savings would be 1 to 3 percent of program costs--which
would amount to about $5 billion to $14 billion in 2007.
The Congress has also recently expressed interest in approaches to
constrain the growth of physician spending. The Deficit Reduction Act
of 2005 required the Medicare Payment Advisory Commission (MedPAC) to
study options for controlling the volume of physicians' services under
Medicare.[Footnote 11] One approach for applying volume controls that
the Congress directed MedPAC to consider is a payment system that takes
into account physician outliers.
In our report on which this statement is based, we sought information
about other purchasers' profiling efforts designed to encourage
physicians to practice efficiently. We selected 10 health care
purchasers that profiled physicians in their networks--that is,
compared physicians' performance to an efficiency standard to identify
those who practiced inefficiently.[Footnote 12] To measure efficiency,
the purchasers we spoke with generally compared actual spending for
physicians' patients to the expected spending for those same patients,
given their clinical and demographic characteristics.[Footnote 13] Most
purchasers said they also evaluated physicians on quality. The
purchasers linked their efficiency profiling results and other measures
to a range of physician-focused strategies to encourage the efficient
provision of care. Some of the purchasers said their profiling efforts
produced savings.
Through Profiling, We Found That Physicians Likely to Practice
Inefficiently in Medicare Were Present in All Areas Selected for Study:
Having considered the efforts of other health care purchasers in
profiling physicians for efficiency, we conducted our own profiling
analysis of physician practices in Medicare and found individual
physicians who were likely to practice medicine inefficiently in each
of 12 metropolitan areas studied. We selected areas that were diverse
geographically and in terms of Medicare spending per
beneficiary.[Footnote 14] We focused our analysis on generalists--
physicians who described their specialty as general practice, internal
medicine, or family practice. Although we did not include specialists
in our analysis, our method does not preclude profiling specialists, as
long as enough data are available to make meaningful comparisons across
physicians.
Under our methodology, we computed the percentage of overly expensive
patients in each physician's Medicare practice. To identify overly
expensive patients, we grouped the Medicare beneficiaries in the 12
areas according to their health status, using diagnostic and
demographic information. We classified beneficiaries as overly
expensive if their total Medicare expenditures--for services provided
by all health providers, not just physicians--ranked in the top fifth
of their health status cohort for 2003 claims.[Footnote 15]
Within each health status cohort, we observed large differences in
total Medicare spending across beneficiaries. For example, in one
cohort of beneficiaries whose health status was about average, overly
expensive beneficiaries--the top fifth ranked by expenditures--had
average total expenditures of $24,574, as compared with the cohort's
bottom fifth, averaging $1,155.[Footnote 16] (See fig. 1.)
Figure 1: Average Medicare Expenditures, by Quintile, for Beneficiaries
of Nearly Average Health Status:
[See PDF for image]
Source: GAO analysis of 2003 Medicare claims and enrollment data.
Note: Beneficiaries who died during 2003 are excluded.
[End of figure]
This variation may reflect differences in the number and type of
services provided and ordered by these patients' physicians as well as
factors not under the physicians' direct control, such as a patient's
response to and compliance with treatment protocols. Holding health
status constant, overly expensive beneficiaries accounted for nearly
one-half of total Medicare expenditures even though they represented
only 20 percent of beneficiaries in our sample.
Once these patients were identified and linked to the physicians who
treated them, we were able to determine which physicians treated a
disproportionate share of these patients compared with their generalist
peers in the same location. We classified these physicians as outliers-
-that is, physicians whose proportions of overly expensive patients
would occur by chance less than 1 time in 100. Notably, all physicians
had some overly expensive patients in their Medicare practice, but
outlier physicians had a much higher percentage of such patients. We
concluded that these outlier physicians were likely to be practicing
medicine inefficiently.[Footnote 17]
Based on 2003 Medicare claims data, our analysis found outlier
generalist physicians in all 12 metropolitan areas we studied. The
Miami area had the highest percentage--almost 21 percent--of outlier
generalists, followed by the Baton Rouge area at about 11 percent. (See
table 1.) Across the other areas, the percentage of outliers ranged
from 2 percent to about 6 percent.
Table 1: Percentage of Outlier Physicians in 12 Metropolitan Areas,
2003:
Metropolitan area: Miami, Fla;
Percentage of outlier physicians: 20.9.
Metropolitan area: Baton Rouge, La;
Percentage of outlier physicians: 11.2.
Metropolitan area: Cape Coral, Fla;
Percentage of outlier physicians: 6.3.
Metropolitan area: Portland, Maine;
Percentage of outlier physicians: 5.8.
Metropolitan area: Riverside, Calif;
Percentage of outlier physicians: 5.8.
Metropolitan area: Phoenix, Ariz;
Percentage of outlier physicians: 5.2.
Metropolitan area: Sacramento, Calif;
Percentage of outlier physicians: 5.2.
Metropolitan area: Des Moines, Iowa;
Percentage of outlier physicians: 4.8.
Metropolitan area: Columbus, Ohio;
Percentage of outlier physicians: 4.6.
Metropolitan area: Pittsburgh, Pa;
Percentage of outlier physicians: 3.8.
Metropolitan area: Springfield, Mass;
Percentage of outlier physicians: 2.9.
Metropolitan area: Albuquerque, N. Mex;
Percentage of outlier physicians: 2.0.
Source: GAO analysis of 2003 CMS claims and enrollment data.
Note: Outlier percentages greater than 1 percent indicate that an area
has an excessive number of outlier physicians.
[End of table]
In 2003, outlier generalists' Medicare practices were similar to those
of other generalists, but the beneficiaries they treated tended to
experience higher utilization of certain services. Outlier generalists
and other generalists saw similar average numbers of Medicare patients
(219 compared with 235) and their patients averaged the same number of
office visits (3.7 compared with 3.5). However, after taking into
account beneficiary health status and geographic location, we found
that beneficiaries who saw an outlier generalist, compared with those
who saw other generalists, were 15 percent more likely to have been
hospitalized, 57 percent more likely to have been hospitalized multiple
times, and 51 percent more likely to have used home health services. By
contrast, they were 10 percent less likely to have been admitted to a
skilled nursing facility.[Footnote 18]
CMS Has Tools Available to Profile Physicians for Efficiency:
Medicare's data-rich environment is conducive to identifying physicians
who are likely to practice medicine inefficiently. Fundamental to this
effort is the ability to make statistical comparisons that enable
health care purchasers to identify physicians practicing outside of
established standards. CMS has the tools to make statistically valid
comparisons, including comprehensive medical claims information,
sufficient numbers of physicians in most areas to construct adequate
sample sizes, and methods to adjust for differences in patient health
status.
Among the resources available to CMS are the following:
* Comprehensive source of medical claims information. CMS maintains a
centralized repository, or database, of all Medicare claims that
provides a comprehensive source of information on patients' Medicare-
covered medical encounters. Using claims from the central database,
each of which includes the beneficiary's unique identification number,
CMS can identify and link patients to the various types of services
they received and to the physicians who treated them.
* Data samples large enough to ensure meaningful comparisons across
physicians. The feasibility of using efficiency measures to compare
physicians' performance depends, in part, on two factors: the
availability of enough data on each physician to compute an efficiency
measure and numbers of physicians large enough to provide meaningful
comparisons. In 2005, Medicare's 33.6 million FFS enrollees were served
by about 618,800 physicians. These figures suggest that CMS has enough
clinical and expenditure data to compute efficiency measures for most
physicians billing Medicare.
* Methods to account for differences in patient health status. Because
sicker patients are expected to use more health care resources than
healthier patients, the health status of patients must be taken into
account to make meaningful comparisons among physicians. Medicare has
significant experience with risk adjustment, a methodological tool that
assigns individuals a health status score based on their diagnoses and
demographic characteristics. For example, CMS has used increasingly
sophisticated risk adjustment methodologies over the past decade to set
payment rates for beneficiaries enrolled in managed care plans. On the
related topic of measuring resource use, CMS noted in comments on a
draft of our report that emerging "episode grouper" technology was a
promising approach to measuring resource use associated with a given
episode of care. We agree, but we also consider our measurement of
resource use on a per capita basis, capturing total health care
expenditures for a given period of time, equally promising.
To conduct profiling analyses, CMS would likely make methodological
decisions similar to those made by the health care purchasers we
interviewed. For example, the health care purchasers we spoke with made
choices about whether to profile individual physicians or group
practices; which risk adjustment tool was best suited for a purchaser's
physician and enrollee population; whether to measure costs associated
with episodes of care or the costs, within a specific time period,
associated with the patients in a physician's practice; and what
criteria to use to define inefficient practice patterns.
As for ways CMS could use profiling results, actions taken by other
health care purchasers we interviewed may be instructive in suggesting
future directions for Medicare. For example, all purchasers in our
study used physician education as part of their strategy to change
behavior. Educational outreach to physicians has been a long-standing
and widespread activity in Medicare as a means to change physician
behavior based on profiling efforts to identify improper billing
practices and potential fraud. Outreach includes letters sent to
physicians alerting them to billing practices that are
inappropriate.[Footnote 19] In some cases, physicians are given
comparative information on how the physician varies from other
physicians in the same specialty or locality with respect to use of a
certain service.
A physician education effort based on efficiency profiling would
therefore not be a foreign concept in Medicare. For example, CMS could
provide physicians a report that compares their practice's efficiency
with that of their peers. This would enable physicians to see whether
their practice style is outside the norm. In its March 2005 report to
the Congress,[Footnote 20] MedPAC recommended that CMS measure resource
use by physicians and share the results with them on a confidential
basis. MedPAC suggested that such an approach would enable CMS to gain
experience in examining resource use measures and identifying ways to
refine them while affording physicians the opportunity to change
inefficient practices.[Footnote 21] In commenting on a draft of our
report, CMS noted that the agency would incur significant recurring
costs in developing reports on physician resource use and disseminating
them nationwide. We agree that any such undertaking would need to be
adequately funded.
Another application of profiling results used by the purchasers we
spoke with entailed sharing comparative information with enrollees. CMS
has considerable experience comparing certain providers on quality
measures and posting the results to a Web site. Currently, Medicare Web
sites with comparative information exist for hospitals, nursing homes,
home health care agencies, dialysis facilities, and managed care plans.
In its March 2005 report to the Congress, MedPAC noted that CMS could
share results of physician performance measurement with beneficiaries
once the agency gained sufficient experience with its physician
measurement tools.
Several structural features of the Medicare program would appear to
pose challenges to the use of other strategies designed to encourage
efficiency. These features include a beneficiary's freedom to choose
any licensed physician permitted to be paid by Medicare; the lack of
authority to exclude physicians from participating in Medicare unless
they engage in unlawful, abusive, or unprofessional practices; and a
physician payment system that does not take into account the efficiency
of the care provided. Under these provisions, CMS would not likely be
able--in the absence of additional legislative authority--to assign
physicians to tiers associated with varying beneficiary copayments, tie
fee updates of individual physicians to meeting performance standards,
or exclude physicians who do not meet practice efficiency and quality
criteria. In commenting on our draft report, CMS was silent with regard
to the need for legislative authority. The agency noted that it is
studying and implementing initiatives that link assessment of physician
performance to financial and other incentives, such as public
reporting.
Regardless of the use made of physician profiling results, the
involvement of, and acceptance by, the physician community and other
stakeholders of any actions taken is critical. Several purchasers
described how they had worked to get physician buy-in. They explained
their methods to physicians and shared data with them to increase
physicians' familiarity with and confidence in the purchasers'
profiling. CMS has several avenues for obtaining the input of the
physician community. Among them is the federal rule-making process,
which generally provides a comment period for all parties affected by
prospective policy changes. In addition, CMS forms federal advisory
committees--including ones composed of physicians and other health care
practitioners--that regularly provide it with advice and
recommendations concerning regulatory and other policy decisions.
Having considered the tools CMS has available and the structural
challenges the agency would likely face in seeking to implement certain
incentives used by other purchasers, we recommended in our April 2007
report that the Administrator of CMS develop a profiling system--
seeking legislative authority, as necessary--that includes the
following elements:
* total Medicare expenditures as the basis for measuring efficiency,
* adjustments for differences in patients' health status,
* empirically based standards that set the parameters of efficiency,
* a physician education program that explains to physicians how the
profiling system works and how their efficiency measures compare with
those of their peers,
* financial or other incentives for individual physicians to improve
the efficiency of the care they provide, and:
* methods for measuring the impact of physician profiling on program
spending and physician behavior.
Concluding Observations:
Policymakers have expressed interest in linking physician performance
to Medicare payment so that incentives under FFS for physicians to
practice inefficiently can be reversed. In our view, Medicare should
adopt an approach that relies not only on physician education but also
financial or other incentives--such as discouraging patients from
obtaining care from physicians who are determined to be inefficient. A
primary virtue of profiling is that, coupled with incentives to
encourage efficiency, it can create a system that operates at the
individual physician level. In this way, profiling can address a
principal criticism of the SGR system, which only operates at the
aggregate physician level. Although any savings from physician
profiling alone would clearly not be sufficient to correct Medicare's
long-term fiscal imbalance, it could be an important part of a package
of reforms aimed at future program sustainability.
Mr. Chairman, this concludes my prepared remarks. I will be pleased to
answer any questions you or the Subcommittee Members may have.
GAO Contacts and Acknowledgments:
For future contacts regarding this testimony, please contact A. Bruce
Steinwald at (202) 512-7101 or at steinwalda@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this statement. Other individuals who made
key contributions include Phyllis Thorburn, Assistant Director; Todd
Anderson; Hannah Fein; Richard Lipinski; and Eric Wedum.
FOOTNOTES
[1] GAO-07-307 (Washington, D.C.: Apr. 30, 2007).
[2] CMS is the agency that administers Medicare.
[3] See Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA), Pub. L. No. 108-173, § 953, 117 Stat. 2066, 2428.
[4] GAO, Comptroller General's Forum on Health Care: Unsustainable
Trends Necessitate Comprehensive and Fundamental Reforms to Control
Spending and Improve Value, GAO-04-793SP (Washington D.C.: May 1,
2004); Laura A. Dummit, Medicare Physician Payments and Spending,
National Health Policy Forum, Issue Brief Number 815 (Washington D.C.:
Oct. 9, 2006).
[5] Elliot S. Fisher, et al., "The Implications of Regional Variations
in Medicare Spending. Part 1: The Content, Quality, and Accessibility
of Care," Annals of Internal Medicine, vol. 138, no. 4 (2003): 273-287.
[6] GAO-07-307.
[7] Institute of Medicine, Rewarding Provider Performance: Aligning
Incentives in Medicare (Pathways to Quality Health Care Series) -
Summary (Washington, D.C.: 2007).
[8] Pub. L. No. 106-554, app. F, § 412(a), 114 Stat. 2763, 2763A-509-
515.
[9] We are currently conducting a study of the demonstration, as
required by BIPA (Pub. L. No. 106-554, app. F, § 412(b), 114 Stat.
2763, 2763A-515).
[10] See Consumer-Purchaser Disclosure Project, More Efficient
Physicians: A Path to Significant Savings in Health Care (Washington,
D.C.: July 2003).
[11] MedPAC is an independent federal body established by the Balanced
Budget Act of 1997 to advise the Congress on payment, access, and
quality issues affecting the Medicare program.
[12] In our report we used the term purchaser to mean health plans as
well as agencies that manage care purchased from health plans; one of
the entities we interviewed is a provider network that contracts with
several insurance companies to provide care to their enrollees.
[13] Generally, estimates of an individual's expected spending are
based on factors such as patient diagnoses and demographic traits.
[14] The 12 metropolitan areas were Albuquerque, N.M; Baton Rouge, La;
Des Moines, Iowa; Phoenix, Ariz; Miami, Fla; Springfield, Mass; Cape
Coral, Fla; Riverside, Calif; Pittsburgh, Pa; Columbus, Ohio;
Sacramento, Calif; and Portland, Maine.
[15] Expenditures identified were for services from inpatient hospital,
outpatient, skilled nursing facility, physician, hospice, durable
medical equipment, and home health providers.
[16] See GAO-07-307, appendix I, for a depiction of beneficiary
expenditures at the 20th, 50th, and 80th percentile for each health
status cohort.
[17] Our approach to estimating outlier physicians was conservative in
that it captured only the most extreme practice patterns; therefore,
our analysis does not mean that all nonoutlier physicians were
practicing efficiently.
[18] These findings were derived from logistic regressions in which
health status, geographic area, and beneficiary contact with an outlier
generalist were the explanatory variables used to predict whether a
beneficiary was hospitalized, used home health services, or was
admitted to a skilled nursing facility.
[19] Other forms of physician education include face-to-face meetings,
telephone conferences, seminars, and workshops.
[20] MedPAC, Report to the Congress: Medicare Payment Policy
(Washington, D.C.: March 2005).
[21] In several testimonies before the Congress in the last half of
2005, CMS officials said that they were taking steps to implement this
recommendation. See Value-Based Purchasing for Physicians Under
Medicare: Hearing Before the House Subcommittee on Health, Committee on
Ways and Means, 109th Cong. (2005) (statement of Mark B. McClellan, MD,
Ph.D., Administrator of CMS).
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