Practice Expense Data Collection and Methodology: Phase II Final Report.

Each year, Medicare allocates tens of billions of dollars for indirect practice expense (PE) across services on the basis of data from the Physician Practice Information (PPI) Survey, which reflects 2006 expenses. Because these data are not regularly updated, and because there have been significant changes in the U.S. economy and health care system since 2006, there are concerns that continued reliance on PPI Survey data might result in PE payments that do not accurately capture the resources that are typically required to provide services. In this final phase of a study on PE methodology, the authors address how the Centers for Medicare & Medicaid Services (CMS) might improve the methodology used in PE rate-setting, update data that inform PE rates, or both. The authors conclude that this information is best provided by a survey; therefore, they focus on the advantages and disadvantages of survey-based approaches. They also describe the use of a lean model survey instrument, as well as partnering with another agency to collect data. Finally, the authors describe a virtual town hall meeting held in June 2021 to give stakeholders an opportunity to provide feedback on PE data collection and rate-setting. The system of data and methods that CMS uses to support PE rate-setting is complex; thus, CMS must take into account a number of competing priorities when considering changes to the system. With this in mind, the authors offer a number of near- and longer-term recommendations.

Physician Reporting Requirements for Injured Workers in California: A Review of Reporting Processes and Payment Policies.

California's workers' compensation (WC) program provides medical care and wage-replacement benefits to workers who suffer on-the-job injuries and illnesses. Individuals who are injured on the job are entitled to receive the medical care they need to relieve the effects of their injury with no deductibles or copayments. Physicians who treat and provide care to injured workers are required to file reports with the WC payer that address the worker's treatment, medical progress, and work-related issues. California's Division of Workers' Compensation (DWC) asked the RAND Corporation to review the reporting process and pricing structure of the WC-required reports to ensure that the policies are consistent with efficient program administration. This study provides a framework for understanding the current processes for filing WC-required reports in California and establishes a baseline for comparison with other state systems. The objective of this study is to provide an assessment of WC-required reports, including the structure and content, level of effort, and allowances, and to compare the elements and processes with other systems to inform potential improvements and further refinements to California's reporting requirements and policies. The study should be of general interest to stakeholders in California's WC system and in other WC programs.

Testing New Codes to Capture Post-Operative Care.

The Centers for Medicare & Medicaid Services (CMS) uses the resource-based relative value system to determine payment for physicians and nonphysician practitioners for their professional services. For many surgeries and other types of procedures, Medicare payment includes pre- and post-operative visits delivered during a global period of 10 or 90 days. Congress mandated that CMS collect data on the "number and level" of visits in the global period from a representative sample of physicians beginning January 1, 2017. At CMS's request, RAND developed a new set of nonpayment codes that could be used to capture the number and level of visits. In July 2016, CMS issued a proposed rule that included a slightly modified version of the codes developed by RAND and proposed to require their use by practitioners. Given that these codes had never been tested or used by practitioners, CMS asked RAND to pilot the proposed codes to determine whether practitioners understood and could accurately apply the codes. RAND's approach was to create a series of vignettes and to test the use of these vignettes using semi-structured interviews with a small set of physicians, followed by more-extensive testing through surveys with a larger group of physicians. This study provides recommendations on how to use vignettes to test new codes and uncover questions about such codes. Such input could be used to help refine instructions for using codes, as well as to potentially refine the codes themselves.

Implementing a Drug Formulary for California's Workers' Compensation Program.

California Assembly Bill 1124 required the state's Division of Workers' Compensation in the Department of Industrial Relations to establish a drug formulary for all injured workers covered by the state's workers' compensation program. Such formularies serve to reinforce safe and effective prescribing patterns for practitioners and payers. In California, the formulary will need to be consistent with the Medical Treatment Utilization Schedule guidelines that define medically appropriate care for California's injured workers, create incentives to encourage prescribing of medically appropriate drugs, and reduce the administrative burdens associated with utilization review and medical necessity disputes. The objective of this study is to support the Division of Workers' Compensation in establishing the formulary. The authors compare and evaluate the strengths and weaknesses of four existing formularies and the formulary used by California's Medicaid program. The authors then analyze the issues involved in structuring the drug formulary for California to be consistent with the treatment guidelines, explore related policies that should be addressed in implementing the formulary, and offer recommendations.

Estimating Surgical Procedure Times Using Anesthesia Billing Data and Operating Room Records.

OBJECTIVE: The median time required to perform a surgical procedure is important in determining payment under Medicare's physician fee schedule. Prior studies have demonstrated that the current methodology of using physician surveys to determine surgical times results in overstated times. To measure surgical times more accurately, we developed and validated a methodology using available data from anesthesia billing data and operating room (OR) records. DATA SOURCES: We estimated surgical times using Medicare 2011 anesthesia claims and New York Statewide Planning and Research Cooperative System 2011 OR times. Estimated times were validated using data from the National Surgical Quality Improvement Program. We compared our time estimates to those used by Medicare in the fee schedule. STUDY DESIGN: We estimate surgical times via piecewise linear median regression models. PRINCIPAL FINDINGS: Using 3.0 million observations of anesthesia and OR times, we estimated surgical time for 921 procedures. Correlation between these time estimates and directly measured surgical time from the validation database was 0.98. Our estimates of surgical time were shorter than the Medicare fee schedule estimates for 78 percent of procedures. CONCLUSIONS: Anesthesia and OR times can be used to measure surgical time and thereby improve the payment for surgical procedures in the Medicare fee schedule.

Development of a Model for the Validation of Work Relative Value Units for the Medicare Physician Fee Schedule.

The Centers for Medicare & Medicaid Services (CMS) uses the resource-based relative value scale to pay physicians and other practitioners for professional services. The work values measure the relative levels of professional time and intensity (physical effort, skills, and stress) associated with providing services. CMS asked RAND to develop a model to validate the work values using external data sources. RAND's goal was to test the feasibility of using external data and regression analysis to create prediction models to validate work values. Data availability limited the models to surgical procedures and selected medical procedures typically performed in an operating room. Key findings from the study include the following: RAND estimates of intra-service time using external data are typically shorter than the current CMS estimates. Model assumptions about how shorter intra-service times affect procedure intensity have implications for the work estimates. RAND estimates for work on average were similar to current work values if shorter intra-service time is assumed to increase procedure intensity and were on average up to 10 percent lower than current work values if shorter intra-service time is assumed to not impact on procedure intensity. The RAND estimates could be used for two key applications: CMS could flag codes as potentially misvalued if the RAND estimates are notably different from the current CMS values. CMS could also use the RAND estimates as an independent estimate of the work values. In some cases, further review will identify a clinical rationale for why a code is valued differently than the RAND model predictions.

Home Health Care for California's Injured Workers: Options for Implementing a Fee Schedule.

The California Department of Industrial Relations/Division of Worker's Compensation asked RAND to provide technical assistance in developing a fee schedule for home health services provided to injured workers. The fee schedule needs to address the full spectrum of home health services ranging from skilled nursing and therapy services to unskilled personal care or chore services that may be provided by family members. RAND researchers consulted with stakeholders in the California workers' compensation system to outline issues the fee schedule should address, reviewed home health fee schedules used by other payers, and conducted interviews with WC administrators from other jurisdictions to elicit their experiences. California stakeholders identified unskilled attendant services as most problematic in determining need and payment rates, particularly services furnished by family members. RAND researchers concentrated on fee schedule options that would result in a single fee schedule covering the full range of home health care services furnished to injured workers and made three sets of recommendations. The first set pertains to obtaining additional information that would highlight the policy issues likely to occur with the implementation of the fee schedule and alternatives for assessing an injured worker's home health care needs. Another approach conforms most closely with the Labor Code requirements. It would integrate the fee schedules used by Medicare, In-Home Health Supportive Services, and the federal Office of Workers' Compensation. The third approach would base the home health fee schedule on rules used by the federal Office of Workers' Compensation.

Ambulatory Surgical Services Provided Under California Workers' Compensation: An Assessment of the Feasibility and Advisability of Expanding Coverage.

The California Department of Industrial Relations asked RAND to examine the feasibility and appropriateness of including procedures that are typically performed only in an inpatient setting on the workers' compensation Official Medical Fee Schedule for ambulatory surgical center facility fees. The authors used interviews, literature review, and data analysis to assemble information on the requirements applicable to ASCs, assess how the criteria that Medicare uses to assess whether procedures can be safely performed in an outpatient setting apply to the workers' compensation patient population, and to examine alternative methods for establishing fee schedule amounts. The study focused on 23 high-volume workers' compensation inpatient procedures with relatively short average lengths of stay. The study finds that most ASCs that are currently eligible for facility fees are equipped to provide services that do not require a one-night stay. However, the data analyses and literature review did not provide strong support for adding any procedures to the fee schedule with the possible exception of procedures related to cervical spinal fusions. Other than instrumentation used in conjunction with spinal fusions, relatively few of the study procedures are being performed in an ambulatory setting on either WC or privately insured patients ages 18-64. The literature suggests that two-level anterior cervical fusions and the use of instrumentation for one- or two-level fusions can be performed safely on an outpatient basis but does not include evidenced-based selection criteria to suggest which patients are appropriate candidates for having the procedures in an outpatient setting.

Implementing a Resource-Based Relative Value Scale Fee Schedule for Physician Services: An Assessment of Policy Options for the California Workers' Compensation Program.

A RAND study used 2011 medical data to examine the impact of implementing a resource-based relative value scale to pay for physician services under the California workers' compensation system. Current allowances under the Official Medical Fee Schedule are approximately 116 percent of Medicare-allowed amounts and, by law, will transition to 120 percent of Medicare over four years. Using Medicare policies to establish the fee-schedule amounts, aggregate allowances are estimated to decrease for four types of service by the end of the transition in 2017: anesthesia (-16.5 percent), surgery (-19.9 percent), radiology (-16.5 percent), and pathology (-29.0 percent). Aggregate allowances for evaluation and management visits are estimated to increase by 39.5 percent. Allowances for services classified as "medicine" in the Current Procedural Terminology codebook will increase by 17.3 percent. In the aggregate, across all services, allowances are projected to increase 11.9 percent. Because most specialties furnish different types of services, the impacts by specialty are generally less than the impacts by type of service.

Does It Cost More to Train Residents or to Replace Them?: A Look at the Costs and Benefits of Operating Graduate Medical Education Programs.

The policy issue underlying this study is whether Medicare support for graduate medical education (GME) should be restructured to differentiate between programs that are less costly or are self-sustaining and those that are more costly to the sponsoring institution and its educational partners. The authors used available literature, interviews with individuals involved in operating GME programs, and analysis of administrative data to explore how the financial impact of operating residency training programs might differ by specialty. The study does not quantify the variation in financial impact, but it provides a framework for examining both the costs and benefits of operating GME programs to the sponsoring institution and its educational partners. It also identifies the major factors that are likely to affect financial performance and influence program offerings and size. Marginal financial impacts are more likely to influence sponsor decisions on changes in GME program size and offerings and help explain why GME program expansions are occurring without additional Medicare funding. If the hospital has service needs, there is a marginal benefit to adding a resident, particularly in the more-lucrative specialty and subspecialty programs, before considering the additional benefits of any Medicare GME-related revenues.

Medical Care Provided Under California's Workers' Compensation Program: Effects of the Reforms and Additional Opportunities to Improve the Quality and Efficiency of Care.

Since 2004, significant changes have been made to the California workers' compensation (WC) system. The Commission on Health and Safety and Workers' Compensation (CHSWC) asked the RAND Corporation to examine the impact that these changes have on the medical care provided to injured workers. This study synthesizes findings from interviews and available information regarding the implementation of the changes affecting WC medical care and identifies areas in which additional changes might increase the quality and efficiency of care delivered under the WC system. To improve incentives for efficiently providing medically appropriate care, California should revise its fee schedule allowances for services provided by hospitals to inpatients, freestanding ambulatory surgery centers, and physicians, create nonmonetary incentives for providing medically appropriate care in the medical provider network (MPN) context through more-selective contracting with providers and reducing medical review requirements for high-performing physicians; reduce incentives for inappropriate prescribing practices by curtailing in-office physician dispensing; and implement pharmacy benefit network regulations. To increase accountability for performance, California should revise the MPN certification process to place accountability for meeting MPN standards on the entity contracting with the physician network; strengthen Division of Workers' Compensation (DWC) authorities to provide intermediate sanctions for failure to comply with MPN requirements; and modify the Labor Code to remove payers and MPNs from the definition of individually identifiable data so that performance on key measures can be publicly available. To facilitate monitoring and oversight, California should provide DWC with more flexibility to add needed data elements to medical data reporting and provide penalties for a claim administrator failing to comply with the data-reporting requirements; require that medical cost-containment expenses be reported by category of cost; compile information on the types of medical services that are subject to UR denials and expedited hearings; and expand ongoing monitoring of system performance. Finally, to increase administrative efficiency, California should use an external medical review organization to review medical-necessity determinations, and it should explore best practices of other WC programs and health programs in carrying out medical cost-containment activities.

Assessing the Performance of Military Treatment Facilities.

The U.S. Department of Defense (DoD) has increasingly confronted financial, managerial, and operational challenges in sustaining health benefits for service members and their families: For example, medical costs are projected to increase to 12 percent of DoD's total budget in 2015, from a level of 8 percent in 2007. To address these challenges, DoD is working to transform business practices within the Military Health System. As part of this effort, DoD has considered setting targets for health care utilization in its military treatment facilities (MTFs) and rewarding or penalizing MTFs according to their performance. In this article, the authors discuss the potential and limitations of using MTF utilization and costs as measures of MTF leaders' performance. Nicosia, Wynn, and Romley report the findings of (1) their qualitative review of performance assessment in the nonmilitary health care sector and (2) their quantitative analysis of how MTF utilization and cost metrics are limited by random variation in the data, and how MTF size and resource-intensive catastrophic cases affect this variation.

Policy Options for Addressing Medicare Payment Differentials Across Ambulatory Settings.

Under Medicare, many health care services can be provided in a range of ambulatory settings, and improvements in technology and delivery mean that many services no longer require an inpatient hospital stay. Medicare's payment for physician work and malpractice liability expenses is the same regardless of where a service is provided. However, payment differentials exist between settings for the facility-related components of care, such as nursing and other staff salaries, equipment, buildings, and supplies. A three-phase RAND study examined the available data on various procedure costs and payment differentials and the bundling or packaging of services offered to Medicare beneficiaries in physician offices, ambulatory surgical centers, and hospital outpatient departments. Building on exploratory analyses conducted in the first two phases of the study, this article documents findings from the third phase, which sought to identify options for modifying Medicare payment policies to improve the value of services and address the differential in the amount that Medicare pays for similar facility-related services in various settings. The findings confirm that payments tend to be highest for services provided in hospitals, but they also indicate that payment differentials generally exceed cost differentials and vary by procedure. The proposed policy options offer solutions to standardize these differentials and potentially reduce Medicare spending.

Selection of workers' compensation treatment guidelines: California experience.

OBJECTIVE: Workers' compensation systems increasingly use mandatory treatment guidelines to guide clinicians and for utilization management. This article describes the steps for selecting such guidelines. METHODS: On the basis of experience with the RAND/University of California, Los Angeles project to help California select guidelines, we identified the necessary choices and processes for guideline selection and evaluation. RESULTS: Major steps in guideline selection include: 1) define purpose; 2) assign decision-making authority; 3) decide whether to use existing guidelines or develop new ones; 4) choose whether to use one or multiple existing guidelines; 5) specify clinical topics that guidelines should address; 6) identify and screen guidelines; 7) evaluate guidelines; 8) consider implications of results; 9) select guideline(s); 10) disseminate selection; and 11) assess long-term effectiveness. CONCLUSIONS: Given the many choices required, selecting mandatory workers' compensation guidelines should involve careful planning and a transparent, well-defined process.

Rigorous development does not ensure that guidelines are acceptable to a panel of knowledgeable providers.

BACKGROUND: Rigorous guideline development methods are designed to produce recommendations that are relevant to common clinical situations and consistent with evidence and expert understanding, thereby promoting guidelines' acceptability to providers. No studies have examined whether this technical quality consistently leads to acceptability. OBJECTIVE: To examine the clinical acceptability of guidelines having excellent technical quality. DESIGN AND MEASUREMENTS: We selected guidelines covering several musculoskeletal disorders and meeting 5 basic technical quality criteria, then used the widely accepted AGREE Instrument to evaluate technical quality. Adapting an established modified Delphi method, we assembled a multidisciplinary panel of providers recommended by their specialty societies as leaders in the field. Panelists rated acceptability, including "perceived comprehensiveness" (perceived relevance to common clinical situations) and "perceived validity" (consistency with their understanding of existing evidence and opinions), for ten common condition/therapy pairs pertaining to Surgery, physical therapy, and chiropractic manipulation for lumbar spine, shoulder, and carpal tunnel disorders. RESULTS: Five guidelines met selection criteria. Their AGREE scores were generally high indicating excellent technical quality. However, panelists found 4 guidelines to be only moderately comprehensive and valid, and a fifth guideline to be invalid overall. Of the topics covered by each guideline, panelists rated 50% to 69% as "comprehensive" and 6% to 50% as "valid". CONCLUSION: Despite very rigorous development methods compared with guidelines assessed in prior studies, experts felt that these guidelines omitted common clinical situations and contained much content of uncertain validity. Guideline acceptability should be independently and formally evaluated before dissemination.

Identifying and accommodating statistical outliers when setting prospective payment rates for inpatient rehabilitation facilities.

OBJECTIVE: To demonstrate how a Bayesian outlier accommodation model identifies and accommodates statistical outlier hospitals when developing facility payment adjustments for Medicare's prospective payment system for inpatient rehabilitation care. DATA SOURCES/STUDY SETTING: Administrative data on costs and facility characteristics of inpatient rehabilitation facilities (IRFs) for calendar years 1998 and 1999. STUDY DESIGN: Compare standard linear regression and the Bayesian outlier accommodation model for developing facility payment adjustors for a prospective payment system. DATA COLLECTION: Variables describing facility average cost per case and facility characteristics were derived from several administrative data sources. PRINCIPAL FINDINGS: Evidence was found of non-normality of regression errors in the data used to develop facility payment adjustments for the inpatient rehabilitation facilities prospective payment system (IRF PPS). The Bayesian outlier accommodation model is shown to be appropriate for these data, but the model is largely consistent with the standard linear regression used in the development of the IRF PPS payment adjustors. CONCLUSIONS: The Bayesian outlier accommodation model is more robust to statistical outlier IRFs than standard linear regression for developing facility payment adjustments. It also allows for easy interpretation of model parameters, making it a viable policy alternative to standard regression in setting payment rates.