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Physicians*
1. Physician Practice Arrangements
2. Physician Payment Incentives
3. Physician Income by Specialty4. Physician Supply
*Presentation includes material developed by Dan Polsky, UPA MedicalSchool
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Allison Liebhaber and Joy M. Grossman, Physicians Moving to Mid-Sized, Single-SpecialtyPractices, Tracking Report No. 18, Center for Studying Health System Change, Washington, D.C.(August 2007).
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Notable increase in hospital component
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Various Methods of Paying Physicians
Insurance
Company
MD
Fee-for-service
(FFS)
Insurance
Company
Capitation (occurs@ a group level)
Payment depends Salary plus Pre-payment on a per-
on what services possible bonus enrollee, per-month basis
an MD actually regardless of what the MD
performs does to the patient
MD
Salary to MDs
HMO
MD
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26.3
50
12.7
8.2 1.8
Private health insurance and self-pay FFS
Medicare FFSCapitation(all payers)
Medicaid FFSCharity care
Source: MGMA Cost Survey.
FFS From Private Health Insurers Accounts for
50% of Physicians Practice Revenue, on Average
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Still most in a Fee For
Service environment
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Hospital
Physician
Radiology, Anesthesiology, Hospitals ThatPathology, Emergency Med. Purchase a MDs Practice HMO as Employer
MD Group
Practice
Salary
Contract ($)
Hospital/
Health
System
Physician
Salary
Health system collects MD only treats that
practice revenues, pays HMOs patients. HMO
all practice expenses, covers all expenses.keeps any profit.
Health system may have
little control over where
MD admits patients
Staff Model
HMO
Physician
Salary
Many Other Practice Arrangements Where
Physicians Receive a Salary
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3516 17
32
30 26
13
20 27
2034 30
New MDs
Productivity
Prod. 50%-99%Salary 50%-99%
Salary
Source: Physician Compensation and Production Survey, MGMA, 1999.
Established
PCPs
Established
Specialists
Percentage of MD Compensation by Type
Most Experienced Physicians in Group Practices
Have Strong Performance Incentives
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Medicare Pays MDs With a FFSSystem Called RBRVS
RBRVS (Resource-Based Relative Value Scale) Introduced in 1992 Replaced customary and usual charge system
MDs accept RBRVS payment amounts when they decidewhether or not to participate in Medicare. Theycan notnegotiate rates. 91% of MDs do participate in Medicare
Goals: Level the playing field between specialists and primary care physicians
(family practice, pediatrics, internal medicine) Slow the growth rate of Medicare Part B spending Limit out-of-pocket payments for elderly
IT HAS FAILED TO ACCOMPLISH ANY OF THESE GOALS
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RBRVS: How it works (for Medicare)
Each physician service performed has aunique code (8000)
Current Procedural Terminology (CPT)
Each CPT is assigned 3 separate relativevalue units (RVU) (52-44-4)
1. Work RVU (time, mental effort, technical skill)
1. Little over half RVU. Practice expense RVU (e.g., rent, salaries)
1. Little less than half RVU
3. Malpractice expense RVU (potential lawsuits)2.15.11 11
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Heres the formula:Heres the formula: (w/o geographic(w/o geographicadjustments)adjustments)
WorkWork Relative Value Units (RVU)Relative Value Units (RVU)
++ Practice expensePractice expense RVURVU
++ Malpractice expenseMalpractice expense RVURVU
== Total RVUsTotal RVUs
Each CPT code has RVUs assigned to it
You can find out the RVUs from cms.gov
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Heres the formula:Heres the formula:
Total RVUsTotal RVUsxx Conversion Factor ($Conversion Factor ($37.8975 in 07)37.8975 in 07)(typically revised annually)(typically revised annually)
== Fee Schedule Payment AmountFee Schedule Payment Amount
(Allowable(Allowable or what you should get paidor what you should get paid
by Medicare and patient together)by Medicare and patient together)
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X-ray exam of breast 0.16
Breast cancer screening by physician 0.45
Breast Biopsy 1.59
Removal of breast lesion 5.56Breast reconstruction after mastectomy 30.00
Breast Procedures and RVUs for "Work"
Considerable Variation in Work RVUsBetween Services
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ButBut
It costs more to practice inIt costs more to practice inManhattan than in MontanaManhattan than in Montana
So, Medicare appliesSo, Medicare appliesGeographic Practice CostGeographic Practice CostIndexesIndexes (GPCI)(GPCI) for work,for work,practice expense andpractice expense and
malpractice expense RVUsmalpractice expense RVUs
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So, the formula is really moreSo, the formula is really more
complexcomplex(Work RVU x Work GPCI)
+ (Practice expense RVU x PE GPCI)
+ (Malpractice expense RVU x ME GPCI)
= Total RVUs
x Conversion Factor
= Payment Amount for a specific location
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Source: adapted from Feldstein, 2007.
Calculating aManhattan Physicians Payment
for a Mid-level Office Visit
Geographic Adjusted
RVU adjustment RVU
Physician work 0.67 X 1.09 = 0.73Physician expense 0.69 X 1.35 = 0.93
Malpractice expense 0.03 X 1.67 = 0.05
1.71
X
Conversion factor $37.90
Payment amount $64.81
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Geographic Practice Cost Index
or Practice a
xpense Practice
an rancisco
t anta
Phi ade phia
Q eens
Geographic Practice Cost Index
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74% of private health insurance plans
pay physicians by adjusting the
Medicare RBRVS schedule (on average
private plans pay 123% of the
RBRVS amount)
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0
10
20
30
40
50
60
70
80
90
89 90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005
Source: Medpac Reports to Congress, 2000-2007.
Note: Medicare data are not available for 1997 and 1998.
Medicare MD payment rates as a % of private insurers rates
83%71%
Medicare
Medicaid
49% 45%
62%
Medicare Currently Pays Physicians
Less Than Private Health Insurers
62%
69%
Medicaid
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Medicaid is least, then
Medicare, then Private
You dont want to choke
private payers because they
pay more than govt payment
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Policy issues related to RBRVSDOC FIX
Sustainable growth rate (SGR) system A formula for annual updates to the conversion factor Formula intended to keep spending growth (a function
of service volume growth) consistent with growth in
the national economy Because service volume has grown faster than
the economy the formula produces conversionfactor updates that would cut physician payment
Congress has generally acted annually to avertthe negative conversion factors called for by theSGR (21% cut if full implementation)
Presidents proposed bill will fix for 2 years for $60+billion
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$0
$50
$100
$150
$200
$250
51 59 65 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98
Year2000
(2000 $s)
Source: American Medical Association, Socioeconomic Monitoring Study.
All physicians
Primary care
physicians
Mean Physician Income, in 2000 ollars
Note: primary care physicians include pediatricians, family practitioners, and general internists.
Physician Income Gre in the 1950s, 1960s, and Late 1980s
$205.7
$152.4
$225.6
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$145
$113$104 $102 $101
$77
$32
U.S. Ne Switz Canada UK France Czec
Source: OECD Data, 2005.
Income of Self-employed General Practitioners ($000)
Converted to $s using
the exchange rate.
Keeping Perspective: General Practitioners Still EarnMore
inthe U.S. Than Other Countries
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Lifetime Earnings of a La yer Versus
an Obstetrician
-$100 000-$5
0 000
$0
$50 000
$100 000
$150 000
$200 000
$250 000
$300 000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
# of years beyond college
Tuition in medical
school or law school
Lawyer
ObstetricianLawyer
earning more
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Overvie of the National Resident
Matching Program (the Match)
Initiated in the early 1950s to try to bring some
organization to a chaotic process of placing medical
students in residency positions.
4th-year medical students interview w/ residency programs.
Students rank their favorite 10 programs (e.g., John Hopkins
pediatrics) in descending order of preference.
Residency programs likewise rank the student applicants.
Computer algorithm assigns students to residency positions
in about 8 minutes. Results announced in March. Students are obligated to attend program they matched to.
Medical school deans help students who dont receive an
assignment during the post-Match scramble.
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92.7 92.1 92.7 93.5 93.8 93.9
95 96 97 98 99 2000
Source: NRMP Data, 2000.
Year
Most U.S. Students Receive a Match
Percentage ofUS Medical School Applicants Who Match
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1.9
2.5
2.6
4.5
5.5
10.0
12.913.9
15.6
16.5
27.038.0
Family med
Internal med
Pediatrics
Emergency
OB/GYN
Anesthesiology
Ortho
Gen Surg
Radiation Onc
ENT
Dermatology
Plastic Surg
% of U.S.Medical School Graduates Who id Not Match
in 2006, Among Those Ranking a Single Specialty
Source: Results and Data: 2006 Match, NRMP.2.15.11 31
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NRMP, April 2010
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NRMP, April 20102.15.11 33
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High income specialties have the highest demand
Source: Medical Group Management Association.
164
174
182
193
250
271
349
365
447
447
458
0 100 200 300 400 500
Famil prac ice
Pedia rics
In ernal medicine
Ps chia r
mergenc med
OB/GYN
Derma olog
Anes hesiolog
Orhopedicsurger
adiolog
Car iolog - invasive
Primary care
ENT: $325,000; General surgery: $306,0002.15.11 34
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0
10
20
30
40
50
60
86 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2005 2006
54.1%
43.9%
56.2%
Source: National Resident Matching Program.
Percentage of Graduating U.S.Medical Students Ranking
a Primary Care Specialty as Their 1st Choice in the Match
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173
125140 156
195
229
275
1900 1930 1960 1970 1980 1990 2004
Number of Physicians Per Capita in U.S. Has
Almost oubled Since 1960
Physicians per 100,000 population
Source: Blumenthal, 2004; Feldstein, 2007.
Flexner report (1910):
too many low-quality
MDs in U.S.
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126125125126127126
114
103
9285
0
20
40
60
80
100
120
140
60 65 70 75 80 85 90
2002
2006
2007
40 Ne Medical Schools Opened in the
1960s and 1970s
Source: Association of American Medical Colleges
Year
Number
ofU.S.
medicalschools
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New Medical Schools opening!
In 2007, seven allopathic medical schoolswere in various stages of the accreditationprocess.
Afteronly one new school open in the past 20years.
Five osteopathic schools won provisionalaccreditation, which allows them to start
admitting medical students. The osteopathic community has added 10 schools
since 1981.
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
196
0
196
5
197
0
197
5
198
0
198
5
199
0
199
5
200
0
200
5
200
7
Percent 7% 9% 11% 23% 30%
Female
Source: Association of American Medical Colleges.
Number of Applicants to U.S.Medical Schools and
Number of First-YearMedical Students, 1960-2005
First-year medical students
ApplicantsHealth Manpower
Training Act (1964)
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More students being admitted
A call to increase class size by 15% overthe next 15 years is currently beingadopted
First year class size grew by 2.3% last year 10 schools increased class size by more than
10%
What is the reason for the suddenexpansion?
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Source: Richard Cooper presentation at a Princeton conference, 2007.2.15.11 42
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Source: Richard Cooper presentation at a Princeton conference, 2007.2.15.11 43
Shortage of doctors
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U.S. Government is Already Heavily Involved;
Maintaining the Status Quo is Itself a Policy
How government couldaffect MD workforce
Factors affecting # ofMDs and specialty mix
# ofUS medical schools and
residency programs, and
# of positions in both.
fees/prices physicians receive
for providing medical care
amount of students debt
no longer allow MD organizations
power of accrediting schools and
residency programs.
raise Medicare/Medicaid fees in
shortage specialties
forgive debt of medical students
who enter particular specialties
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Summary
Almost 90% of physicians are in private practice Physicians can be paid according to a fee schedule, by capitation, or
a salary. Capitation, which was fairly common in the 1990s, is no longer widely
used.
Salaried physicians may be employed by hospitals, group practices, orHMOs Medicares RBRVS fee schedule is especially important b/c most private
health insurers also use it as a basis for paying physicians.
Generalist physicians earn less than specialists, but more thangeneralists in other countries
Demand higher than supply for residencies in some specialties and
medical school in general Projected physicians shortages have led to very recent policy
changes to expand the number of medical schools and class sizesof existing schools.
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