MedPAC to study if reimbursement overpays on services

The advisory panel should consider appropriateness of care when pursuing the link between payment and utilization, an AMA trustee says.

By David Glendinning — Posted July 11, 2005

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Washington -- The commission that advises Congress on Medicare reimbursement has a theory as to why utilization of physician services is going up so rapidly: The government is paying too much for some of them.

In a report delivered to lawmakers last month, the Medicare Payment Advisory Commission responded to concerns from program officials that spending on physician services went up too steeply -- 15.2% -- last year. Higher numbers of office visits, minor procedures and imaging services accounted for a majority of the increase.

The complex method that the federal government uses to determine how much to pay physicians based on type of service and practice location could be partly to blame for the sharp rise, MedPAC said.

"If mispricing includes Medicare overpaying for services, that mispricing could contribute to overuse of services -- one of the concerns with the spending increase in 2004," the commission said in its report.

MedPAC plans to look at services with the fastest-growing volume to see if they are ones that are relatively well-reimbursed by the program. If the panel finds that physicians are gravitating toward the treatments or procedures that are overvalued by Medicare and away from the undervalued services, it could recommend policy changes to bring payments more into line.

"We've been saying [to Congress] that you need to rethink how you pay for imaging, you need to think about pay-for-performance, you need to think about more sophisticated and targeted volume-control policies," said Mark Miller, executive director of MedPAC. "For our upcoming agenda, we'll be working more aggressively at the guts of the physician payment system because we think there are some incentives in the payment system that are driving the use of these services and the moving of some of these services into the physician's office."

Physicians have questioned the assertion that some of the increases in volume of services are unwarranted and don't lead to better patient care. Instead, the rise is due to a greater focus on preventive services and diagnostic testing that is supported by Medicare officials themselves, they said.

"What we need to look at when it comes to these services are the indications for doing the procedures," said American Medical Association Chair J. James Rohack, MD, a cardiologist in Temple, Texas. If the procedure in question was medically appropriate, investigators cannot make a link between the reimbursement amount and the physician's decision to order the service, he said.

Geography's role

MedPAC said the volume of procedures might be higher in areas of the country that receive higher rates. For instance, magnetic resonance imaging of the spine pays less than $500 in most of Missouri but more than $800 in San Francisco to account for the higher estimated practice expenses there. The commission plans to compare volume of services between such regions to determine whether geographic adjustments should be tweaked to eliminate overpayments and underpayments.

Dr. Rohack said investigators must consider geographic factors beyond payment that could be resulting in higher utilization rates. The use of MRIs might be higher in San Francisco because the population is more active and suffers more injuries, not because of the price difference, he said.

MedPAC also raised the prospect that the Centers for Medicare & Medicaid Services could be overpaying for some services across the board.

The agency reviews and revises the values of individual services every five years with the help of a committee convened by the AMA and medical specialty societies. The panel is currently working on recommendations that, if accepted by CMS, would affect payments starting in 2007. MedPAC plans to review the work of this committee to see if the process is adequately identifying services whose payments need to be scaled back to better match the costs of providing them.

MedPAC does not plan on revisiting its recommendation on next year's physician pay update, Miller said. It has advised Congress to grant doctors a roughly 2.7% boost next year, instead of the expected 4.3% reduction. The panel also has called for the replacement of the current physician pay formula with a system that better matches the costs of providing care.

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External links

Medicare Payment Advisory Commission's "Report to the Congress: Issues in a Modernized Medicare Program," June, in pdf (link)

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