Impact of Resource-Based Practice Expenses on the Medicare Physician Volume

By Maxwell, Stephanie; Zuckerman, Stephen | Health Care Financing Review, Winter 2007 | Go to article overview

Impact of Resource-Based Practice Expenses on the Medicare Physician Volume


Maxwell, Stephanie, Zuckerman, Stephen, Health Care Financing Review


INTRODUCTION

In 1992, Medicare implemented the Medicare physician fee schedule (MPFS) using a resource-based relative value scale (RBRVS), which established physician service payments based on relative costs instead of prevailing charges. The goal of the MPFS was to correct distortions produced by charge-based payments and to encourage medical practice efficiencies (Physician Payment Review Commission, 1989). Under the new system, payments are based on the number of RVUs assigned to each service. Total RVUs reflect three cost components: (1) physician work (or time and effort), (2) practice expenses, and (3) professional liability insurance for a given service. Costs associated with each component are given a weight, or index value, and are adjusted to account for area price differences. The three index values for a service are then summed and multiplied by a standard dollar amount (a conversion factor) to arrive at a payment amount. On average, work represents 52 percent of total physician payments, practice expenses represent 44 percent, and liability insurance represents 4 percent (U.S. General Accounting Office, 2005). Overall, Medicare physician payments totaled over $40 billion in 2003, or almost 17 percent of Medicare spending (Centers for Medicare & Medicaid Services, 2006a). Medicare payments represent roughly 20 percent of revenues to physicians, although the share varies by specialty (Smith et al., 2006).

While resource-based work RVUs were the foundation of the MPFS, practice expense and liability insurance RVUs continued to be based on historical charges until 1999 and 2000, respectively, when resource-based values for these components were phased in (Federal Register, 1998a,b). By 2002, most of the system's relative values were derived from estimates of resources, however the program made substantial refinements to the RBPE values between 2002 and 2004 (Federal Register, 2002; 2003). (1) Like the original

RBRVS created for physician work, the shift to RBPE and liability insurance values was intended to better align payments with resource costs, and was expected to redistribute payments toward evaluative-oriented services.

One aspect of the new practice expense payment system is that CMS substantially increased the number of services for which the practice expense payment is affected by the site of service, and changed the level of the site of service differential for services that already had a differential. In essence, these changes regarding site of service differentials were designed to more accurately compensate physicians when they furnish procedures in their offices versus in other ambulatory settings. For a service with a site of service differential, facility practice expense RVUs are applied when that service is furnished in a setting whose facility costs are reimbursed under other Medicare payment systems (such as hospital outpatient departments or ambulatory surgical centers) (Federal Register, 2002). Non-facility practice expense RVUs (which are higher in value than the facility RVUs) are applied when a service is furnished in a setting where no other Medicare payment system covers the facility-related expenses. By far the most common non-facility setting, in terms of service quantity and Medicare spending, is the physician office. (2) Until 1999, facility practice expense RVUs were calculated simply by applying a 50-percent reduction to a service's non-facility practice expense RVU value (Federal Register, 2002). However, when developing the RBPE RVUs, average practice expenses were estimated in both the facility and non-facility settings, for the services that Medicare determined would have a site of service differential.

Advances in clinical care, anesthesia methods, and medical technologies have allowed many elective procedures that used to be furnished in the hospital inpatient setting to be furnished in ambulatory settings, and it is estimated that at least 60 to 70 percent of all surgeries are done on an ambulatory basis (Owings and Kozak, 1998). …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • A full archive of books and articles related to this one
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Impact of Resource-Based Practice Expenses on the Medicare Physician Volume
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.