Most  purchasers said they also evaluated physicians on quality. 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. 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. 1.) Based on 2003 Medicare claims data, our analysis found outlier generalist  physicians in all 12 metropolitan areas we studied. 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. 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. 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. 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. 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. 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. We agree that any such undertaking  would need to be adequately funded. Several structural features of the Medicare program would appear to pose  challenges to the use of other strategies designed to encourage efficiency. 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.
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.