Service Intensity and Physician Income: Conclusions From Medicare's Physician Data Release

Recently released Medicare physician utilization and payment data¹ illuminate the reasons that physician payments from the Centers for Medicare & Medicaid Services vary. One could expect that while physician payments may vary widely based on the type of physician service, payments indexed to unique patients should not. In addition, physician charges should hew reasonably closely to subsequent payments.

The data released by the Centers for Medicare & Medicaid Services highlight the causes of wide variation in payments to physicians. The Figure shows the ratio of the number of services provided to individual beneficiaries to total Medicare Part B payments, as well as the ratio of submitted charges, by decile, from lowest to highest Medicare recipients in calendar year 2012 (n = 825 108).

These data indicate that higher-earning physicians earn more not by treating more patients but by offering more services per beneficiary. The relationship between these additional services and any meaningful improvement in outcomes is undefined. Given the data on medical service utilization in the United States, it is likely that a substantial portion of these services is unrelated to improved outcomes. For each service offered by a physician in the bottom decile, 5 are offered by a physician in the upper decile. The 20th, 40th, 60th, and 80th deciles for the services to beneficiary ratios are 1.4, 2.2, 3.6, and 6.9 (demarcated as quintiles of services [dashed lines in the Figure]), respectively, highlighting tremendous overall variation in the number of services physicians offer each beneficiary. In Medicare’s fee-for-service system, some physicians are collecting large fees by ordering services munificently.

What remains undetermined from the data released is whether additional services contribute to improved quality of care. For instance, advising a patient that she does not need a computed tomographic scan often takes more skill and time, and may represent higher quality of care, than ordering a scan or performing a service.² An analysis by Medicare and other payers assessing whether outcomes differ between low and high spenders might afford a clearer understanding of how to best use resources to maximize value. Ironically, interventions that improve high-value integration of care for Medicare patients—reducing cost and preventing readmissions—can lead to lost revenue for hospitals whose reimbursements are linked to episodes of care.³

In our analysis, the ratio of charges to payments does not differ meaningfully among the deciles of earners. However, charges consistently outpace payments by a factor of 3. While charges do not affect reimbursement from payer groups, they may affect underinsured patients who pay out of pocket. Given that payers predetermine reimbursement rates by diagnosis and treatment codes, the practice of submitting (inflated) charges may be revisited. Of all payments made, 22% were for outpatient visits, 11% were for hospital care, 3% were for emergency department visits, and 64% were for other services.

Alternative payment models aim to reduce the pernicious financial incentive to perform more services and procedures. Medicare’s bundled payment initiative, for instance, reimburses physicians based on episodes of care rather than on a fee-for-service model.^4,5 Medicare’s Shared Savings Program for accountable care organizations, established in the Affordable Care Act,⁶ stipulates that an accountable care organization agrees to care for a group of Medicare beneficiaries and, if it delivers high-value care, it will share in Medicare’s savings.

The goals of payment reform are currently unrealized, as evidenced in these data. Physicians take an oath to care for patients using “appropriate means and appropriate ends,”⁷ focusing on what is best for the patient, and this centuries-old oath still applies to graduates of medical school classes in 2014. Rather than react to externalities imposed by payers, physicians can lead the movement toward high-value, patient-centered care. We are uniquely empowered to ensure that all individuals access the procedures they need and are not exposed to those they do not.

Corresponding Author: Jonathan Bergman, MD, MPH, Department of Urology, David Geffen School of Medicine, UCLA, 924 Westwood Blvd, Ste 1000, Los Angeles, CA 90024 (jbergman@mednet.ucla.edu).

Published Online: December 8, 2014. doi:10.1001/jamainternmed.2014.6397.

Author Contributions: Drs Bergman and Litwin had full access to all the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis.

Study concept and design: All authors.

Acquisition, analysis, or interpretation of data: All authors.

Drafting of the manuscript: Bergman, Saigal.

Critical revision of the manuscript for important intellectual content: All authors.

Statistical analysis: Bergman.

Administrative, technical, or material support: Bergman, Saigal.

Study supervision: All authors.

Conflict of Interest Disclosures: None reported.