This report responds to the legislative mandate of the Balanced Budget Reconciliation Act (BBRA) of 1999 by: 1) analyzing changes in expenditures for physicians' services; 2) disaggregating, to the extent possible, the changes in Medicare expenditures for physicians' services into the components specified in the legislation. Specifically, the report: briefly describes how the methods used to determine expenditures for physicians' services were updated during the study period, including the changes in services targeted by both the Sustainable Growth Rate (SGR) and Volume Performance System (VPS) and how these targets are calculated; presents the results of researcher's comparison, beginning with a comparison of physicians' services expenditures by fee-for-service (FFS) Medicare with expenditures by other payers; presents the results of researchers' analyses of the determinants of those trends in the Medicare program over the period 1993-1998.

Contents

• Preface
• Summary
• 1. Introduction
  • Background
  • Expenditure Targets
  • Performance Adjustments
  • Updates and Conversion Factors
  • Other Physicians' Services
• 2. Historical Trends in Medicare Expenditure Growth
  • Trends in Performance Targets and Updates
  • Updates and Conversion Factors
  • Historical Trends in Health Expenditures
  • Expenditure Trends
  • Discussion
• 3. Decomposing the Change in Medicare Expenditures for Physicians' Services
  • Policy Changes in Prices and Coverage Rules
  • Changes in the Volume and Intensity of Services Delivered
  • Methods
  • Results
  • Discussion
• 4. Limitations
• 5. Conclusions
  • Implications
  • Future Research
• Appendixes
  • Appendix A Payment for Physicians' Services Under the Resource Based Relative Value Scale
  • Appendix B 1993 OLS Model Estimation Results
  • Appendix C 1993 Two-part Model Estimation Results
  • Appendix D Actual Characteristics of the 1993 FFS, 1993 HMO, 1998 FFS, and 1998 HMO Samples
  • Appendix E Total Actual RVU Use by Beneficiary Age/Gender Categories, 1993 and 1998
  • Appendix F Legislative Changes to Prices and Coverage, 1994-1998
• Exhibit A
• References

Southern California-RAND Evidence-Based Practice Center Program Director: Paul Shekelle, MD, PhD. Program Do-Director: Sally Morton, PhD.

Prepared for: Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services.¹ Contract No. 290-97-0001. Prepared by: Southern California-RAND Evidence-Based Practice Center, Santa Monica, CA.

Suggested citation:

Buntin MB, Escarce J, Goldman D, et al. Determinants of Increases in Medicare Expenditures for Physicians' Services. Technical Review 7 (Prepared by Southern California-RAND Evidence-based Practice Center, under Contract No 290-97-0001). AHRQ Publication No. 04-0008. Rockville, MD: Agency for Healthcare Research and Quality. October 2003.

This report may be used, in whole or in part, as the basis for development of clinical practice guidelines and other quality enhancement tools, or a basis for reimbursement and coverage policies. AHRQ or U.S. Department of Health and Human Services endorsement of such derivative products may not be stated or implied.

AHRQ is the lead Federal agency charged with supporting research designed to improve the quality of health care, reduce its cost, address patient safety and medical errors, and broaden access to essential services. AHRQ sponsors and conducts research that provides evidence-based information on health care outcomes; quality; and cost, use, and access. The information helps health care decisionmakers—patients and clinicians, health system leaders, and policymakers—make more informed decisions and improve the quality of health care services.

The authors of this report are responsible for its content. Statements in the report should not be construed as endorsement by the Agency for Healthcare Research and Quality or the U.S. Department of Health and Human Services of a particular drug, device, test, treatment, or other clinical service.

1

540 Gaither Road, Rockville, MD 20850. www​.ahrq.gov