July 12, 2017
2 min read

Physician reimbursement strongly linked to traditional Medicare

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In the Medicare Advantage market, set rates for traditional Medicare act as a “strong anchor” for physician reimbursement, according to findings published in JAMA Internal Medicine.

The researchers suggested that developing reforms that transition the Medicare program toward premium support models could significantly impact how clinicians are being paid.

“Nearly one-third of Medicare beneficiaries are enrolled in a Medicare Advantage plan, yet little is known about the prices that [Medicare Advantage] plans pay for physician services. Medicare Advantage insurers typically also sell commercial plans, and the extent to which [Medicare Advantage] physician reimbursement reflects traditional Medicare rates vs. negotiated commercial prices is unclear,” Erin Trish, PhD, from the University of Southern California, and colleagues wrote.

Trish and colleagues performed a retrospective analysis of claims data from 2007 to 2012 to compare reimbursement paid to physicians, laboratories and durable medical equipment suppliers under Medicare Advantage, traditional Medicare and commercial plans for 11 Healthcare Common Procedure Coding Systems (HCPCS) codes. The researchers included a 20% sample of traditional Medicare beneficiaries and all Medicare Advantage and commercial enrollees with a large national health insurer that operated in both markets.

Overall, 144 million claims were identified and evaluated. Physician reimbursement in Medicare Advantage was more closely associated with traditional Medicare rates than commercial prices, according to the researchers. However, they noted that physicians were more often paid less under Medicare Advantage plans than traditional Medicare plans. The mean Medicare Advantage price for a midlevel office visit with an established patient (Current Procedural Terminology [CPT] code 99213), was 96.9% (95% CI, 96.7-97.2) of the traditional Medicare price. Mean Medicare Advantage reimbursement varied across the common physician services that were evaluated, ranging from 91.3% of traditional Medicare for cataract removal in an ambulatory surgery center (CPT 66984; 95% CI, 90.7-91.9) to 102.3% of traditional Medicare for complex evaluation and management of a patient in the ED (CPT 99285; 95% CI, 102.1%-102.6%). The researchers found that Medicare Advantage plans take advantage of lower commercial prices for laboratory services and durable medical equipment for which traditional Medicare overpays. These plans ranged from 67.4% of the traditional Medicare payment for a walker (HCPCS code E0143; 95% CI, 66.3-68.5) to 75.8% for a complete blood cell count (CPT 85025; 95% CI, 75-76.6).

“Traditional Medicare’s administratively set rates, and the statutes and implementing regulations that limit billing out-of-network [Medicare Advantage] enrollees above these rates, play an important role in influencing clinician reimbursement in [Medicare Advantage],” Trish and colleagues concluded. “Current policy proposals that would substantially affect traditional Medicare’s role, such as fully transitioning to a premium support model, would have broad implications for clinician reimbursement and thus the affordability of such a reformed Medicare program. In addition, implementing regulations limiting the amount that clinicians can bill for out-of-network enrollees in the commercial market, as currently exist in [Medicare Advantage], may help to provide some check on clinician market power and constrain commercial markups, particularly in the emergency department setting.”

In an invited commentary, James C. Robinson, PhD, from the University of California, Berkeley, wrote that this study offers insight into the dynamics of market competition.

“Physicians do have bargaining leverage with insurers... Consolidation works, especially when physicians combine with hospitals that are protected from competition through mergers, acquisitions, and regulatory barriers to entry,” he wrote. – by Alaina Tedesco

Disclosure: Trish and colleagues report funding from the Robert Wood Johnson Foundation’s Changes in Healthcare Financing and Organization and the National Institute on Aging of the NIH. Robinson reports no relevant financial disclosures.