Design of a privileging program for diagnostic imaging: costs and implications for a large insurer in Massachusetts.

PURPOSE: To evaluate the results of a privileging program aimed to ensure that health care providers and facilities adhere to standards of care. MATERIALS AND METHODS: Technical and professional privileging applications were mailed to more than 1,800 diagnostic imaging facilities and more than 6,000 professional providers of services to members of a health care plan. Site inspections were used to determine whether facilities met standards of care. Specialty providers were assigned a range of current procedural terminology codes for which they had privileges to bill the payer. RESULTS: Of 1,004 imaging sites inspected, 197 (20%) failed with the ability to remedy the violation, 106 (10%) failed with fundamental and serious deficiencies, and 701 (70%) passed. Site inspection pass rates varied substantially by specialty. Chiropractors and podiatrists were more likely to fail than medical and surgical specialists. A strong correlation was found between refusal to participate in the inspection and failure rate. Results suggest that reduction of the number of professional claims billed led to a 2% decline in total imaging expenditures, or a more than 10:1 return on the cost of implementing technical and professional privileging programs. CONCLUSION: Health care plans can positively influence costs and quality by developing, monitoring, and enforcing their own quality standards for diagnostic imaging.

A comparison of cardiovascular procedure use between the United States and Canada.

OBJECTIVE: To compare the relative volume and intensity of all types of cardiovascular procedures, noninvasive tests, and diagnostic imaging for all elderly individuals between the United States and the three largest Canadian provinces (Ontario, Quebec, and British Columbia) by patient age. DATA SOURCES: Service volume data for the United States for a one percent random sample of claims obtained from Medicare's National Claims History System. Data for Canada were obtained from the Ministries of Health in the three provinces representing 100 percent of the claims received by each Ministry. STUDY DESIGN: Design is a cross-sectional analysis of 1992 claims data. DATA EXTRACTION METHODS: The volume of cardiovascular services was measured in terms of the relative value units (RVUs) used in the Medicare fee schedule to calculate payments. Services were disaggregated into nine clinical categories, and comparisons were made by type of cardiovascular service and patient age. RESULTS: Overall, cardiovascular procedure RVUs per elderly beneficiary are 53 percent greater in the United States than in Canada. Differences are largest for surgical procedures such as carotid thromboendarterectomy and revascularization procedures and smallest for diagnostic imaging and noninvasive tests. The differences between the countries in the use of cardiovascular procedures increase markedly with age. For example, the United States-to-Canada ratio for PTCA use is 1.87 for persons age 65 to 69, but 7.68 for persons age 80 and older. For CABG, the ratios are 1.36 and 7.16, respectively. CONCLUSIONS: Our findings suggest that global budgets in Canada result in lower levels of cardiovascular service use among the elderly, particularly among the very aged elderly. Patient age appears to play a much more important role in determining the recipients of cardiovascular procedures in Canada than in the United States. Whether these higher rates of procedure use among the very elderly in the United States compared to Canada reflect profligate service use or contribute to improved outcomes is uncertain.

The resurgence of selective contracting restrictions.

As managed care has spread, so has legislation to force plans to contract with any willing provider (AWP) and give patients freedom of choice (FOC). Managed care organizations' selective networks and provider integration reduce patient access to providers, along with provider access to paying patients, so many providers have lobbied for AWP-FOC laws. In opposition are managed care organizations (MCOs), which want full freedom to contract selectively to control prices and utilization. This article comprehensively describes laws in all fifty-one jurisdictions, classifies their relative strength, and assesses the implications of the laws. Most are relatively weak forms and all are limited in application by ERISA and the federal HMO Act. The article also uses an associative multivariate analysis to relate the selective contracting environments to HMO penetration rates, rural population, physician density, and other variables. States with weak laws also have higher HMO penetration and higher physician density, but smaller rural populations. We conclude that the strongest laws overly restrict the management of care, to the likely detriment of cost control. But where market power is rapidly concentrating, not restricting selective contracting could diminish long-term competition and patient access to care. In the face of uncertainty about the impact of these laws, an intermediate approach may be better than all or nothing. States should consider mandating that plans offer point-of-service options, for a separate premium. This option expands patient choice of plans at the time of enrollment and of providers at the time of care, yet maintains plans' ability to control core providers.

The measurement of physician work and alternative uses of the resource based relative value scale.

On January 1, 1992, the Medicare program implemented a new payment system for physician services based on the Resource Based Relative Value Scale (RBRVS). The RBRVS has been widely accepted as a rational and systematic approach to measuring the resource costs associated with physician services. In addition to deriving physician payment rates, the RBRVS provides a useful metric that allows the measurement and comparison of provider utilization rates and productivity across physicians performing a varied mix of services. In this study we describe the measurement of physician work, discuss alternative ways in which work values can be used to monitor physician service utilization (e.g., profiling physician practice patterns), measure physician productivity, and determine physician compensation.

Preferred provider organizations and physician fees.

Preferred provider organizations (PPOs) represent a form of managed care in which providers agree to accept discounted fees in exchange for the expectation that their patient volume will increase or at least be maintained. Managed care plans that rely on discounted fee-for-service (FFS) payments have increased from about 10 plans in 1981 to over 700 plans in 1994. In this study, we document levels of discounts achieved by two large national insurers and discuss how the size of the discount varies by type of service and how the discounted rates relate to Medicare fees. Our results show that, despite achieving large discounts (approximately 10 20 percent) relative to their indemnity plans, the two nationwide PPOs studied here pay at rates substantially above Medicare levels.

Assessing the implementation of physician-payment reform.

BACKGROUND: The Medicare program fundamentally changed its system of payment for physicians' services in 1992. Controversy over the new Medicare fee schedule has focused on three issues: the adequacy of the conversion factor used to translate resource-based relative-value units into fees; the ability of the new payment system to capture differences in work between surgeons and physicians in other specialties; and the allocation of practice expenses across services. METHODS: Using a standard service in each specialty, we developed simulation methods to assess the implementation of physician-payment reform. With these methods we calculated the potential net income for each specialty, as generated by different payment scenarios, including the Medicare fee schedule. RESULTS: We found that Medicare's current monetary-conversion factor yields an unreasonably low level of income for most specialties. Furthermore, the Medicare fee schedule misallocates practice expenses; invasive services are reimbursed for more than actual expenses, and medical services are reimbursed for less. Thus, physicians continue to be paid more generously for invasive services. Finally, the Medicare fee schedule does recognize the wide differences in the intensity of work performed by physicians in various specialties. CONCLUSIONS: The misallocation of practice expenses in the Medicare fee schedule results in serious underpayment for medical services. We think it likely that physicians compensate by performing more lucrative services, such as diagnostic tests. Even if legislation is passed to deal with the misallocation of expenses, the current conversion factor still produces unreasonably low levels of payment overall, which could dissuade those considering a career in medicine from entering the field. Finally, the simulation method we developed can be used as a tool for fee negotiations.

The Resource-Based Relative Value Scale. Methods, results, and impacts for ophthalmology.

In January 1992, the Health Care Financing Administration implemented sweeping legislation that reformed the way Medicare pays for physicians' services. The cornerstone of the reform consists of a new fee schedule based on the Resource-Based Relative Value Scale. This article summarizes the methods and data used to derive the scale for ophthalmology. The results and impacts of the new Medicare payment rates for ophthalmology are also assessed. Using our methods and assumptions, ophthalmologists stand to lose 16% of their Medicare revenues under a fully implemented relative value-based fee schedule. Overall, the fees for performing evaluation and management services will increase, while those for most surgical procedures and diagnostic tests will decrease. Physicians' practice decisions and medical students' specialty choices could be affected. Ophthalmologists who perform work-intensive surgical procedures and spend the majority of their time in the operating room will continue to earn much higher incomes than those who do not.

An overview of the development and refinement of the Resource-Based Relative Value Scale. The foundation for reform of U.S. physician payment.

Responding to distortions in payment rates between services, policymakers in the United States have sought a systematic and rational foundation for determining physician fees. One such approach to paying physicians, the Resource-Based Relative Value Scale (RBRVS), determines fees by measuring the relative resource costs required to produce them. On January 1, 1992, the Medicare program implemented a new payment system for physician services based on the RBRVS. This article provides a brief history of the RBRVS and a summary of the methods and data used to derive it. This overview represents the culmination of 6 years of research by the Harvard RBRVS study team and provides a road map to the study's concepts and definitions. The overview also provides a context for the articles in this issue that describe five major studies undertaken since 1988. The study's overall results are presented in the last article of the series.

Resource-based relative values for invasive procedures performed by eight surgical specialties.

We surveyed approximately 850 physicians in eight surgical specialties to investigate physicians' work in performing invasive services. Building on our analysis of physician work, we developed a relative value scale of physicians' services based on resource costs. First, we found that physician charges are not set in proportion to the resources required to perform a given procedure: there is a threefold variation, across hospital-based invasive procedures, in the ratio of charges to resource-based relative values. Second, for most procedures, the preoperative and postoperative periods represent 60% to 75% of a physician's total service time, but only 35% to 50% of the total service work. Lastly, intraoperative work per unit of time varies greatly. Work per minute for invasive procedures is two to three times that of medical office visits and is strikingly greater for some specialties. The Resource-Based Relative Value Scale, at a minimum, represents a useful tool for payers to identify procedures with potentially aberrant charges and also offers unique insights into the nature of physicians' work.