Physicians Who Treated a Disproportionate Share of Overly Expensive Patients Were Found in Each of 12 Areas Studied

In each of the 12 metropolitan areas studied, we found physicians who  treated a disproportionate share of overly expensive patients. 1.) Outlier Physicians Were Present in Every Metropolitan Area

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. The 10 health care purchasers in  our study profiled physicians—that is, compared physicians’ performance  to an efficiency standard to identify those who practiced inefficiently. 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. Most  of the 10 we spoke with 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. Two purchasers used  a population-based model, which aggregated patient claims data to classify  a patient’s health status score for patients in the population to estimate  expected expenditures for the patients a physician treats. Health Care Purchasers Linked Physician Profiling Results to Range of Incentives Encouraging Efficiency

The health care purchasers we examined directly tied the results of their  profiling methods to incentives that encourage physicians to practice  efficiently. We found that the incentives varied widely in  design, application, and severity of consequences—from steering patients  toward the most efficient providers to excluding a physician from the  purchaser’s provider network because of inefficient practice patterns. CMS Has Tools Available to Profile Physicians for Efficiency, but May Need Some Additional Authorities to Use Results in Ways Similar to Other Purchasers

Medicare’s data-rich environment is conducive to conducting profiling  analyses designed to identify physicians whose medical practices are  inefficient compared with their peers. CMS has a comprehensive  repository of Medicare claims data and experience using key  methodological tools. However, CMS may not have legislative authority to  implement some of the incentives used by other health care purchasers to  encourage efficiency. These figures suggest that CMS has enough  clinical and expenditure data to compute reliable efficiency measures for  most physicians billing Medicare. The profiling system should  include 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. CMS also found our focus on the need for risk  adjustment in measuring physician resource use to be particularly helpful. We believe that the optimal profiling  effort would include financial or other incentives to curb individual  physicians’ inefficient practices and would measure the effort’s impact on  Medicare spending.
Why GAO Did This Study

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) directed GAO to study the compensation of physicians in traditional fee-for service (FFS) Medicare. GAO explored linking physician compensation to efficiency--defined as providing and ordering a level of services that is sufficient to meet a patient's health care needs but not excessive, given the patient's health status. In this report, GAO (1) estimates the prevalence in Medicare of physicians who are likely to practice inefficiently, (2) examines physician-focused strategies used by health care purchasers to encourage efficiency, and (3) examines the potential for the Centers for Medicare and Medicaid Services (CMS) to profile physicians for efficiency and use the results. To do this, GAO developed a methodology using 2003 Medicare claims data to compare generalist physicians' Medicare practices with those of their peers in 12 metropolitan areas. GAO also examined 10 health care purchasers that profile physicians for efficiency.

What GAO Found

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. Certain public and private health care purchasers routinely evaluate physicians in their networks using measures of efficiency and other factors. The 10 health care purchasers in our study profiled physicians--that is, compared physicians' performance to an efficiency standard to identify those who practiced inefficiently. 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. Most of the 10 purchasers also evaluated physicians on quality. To encourage efficiency, all 10 purchasers linked their physician evaluation results to a range of incentives--from steering patients toward the most efficient providers to excluding physicians from the purchaser's provider network because of inefficient practice patterns. CMS has tools available to evaluate physicians' practices for efficiency but would likely need additional authorities to use results in ways similar to other purchasers. CMS has a comprehensive repository of Medicare claims data to compute reliable efficiency measures for most physicians serving Medicare patients and has substantial experience using methods that adjust for differences in patients' health status. However, CMS may not currently have the flexibility that other purchasers have to link physician profiling results to a range of incentives encouraging efficiency. Implementation of other strategies to encourage efficiency would likely require legislation. CMS said that our recommendation was timely and that our focus on the need for risk adjustment in measuring physician resource use was particularly helpful. However, CMS only discussed using profiling results for educating physicians. GAO believes that the optimal profiling effort would include financial or other incentives to encourage efficiency and would measure the effort's impact on Medicare. GAO concurs with CMS that this effort would require adequate funding.