Primary Care Physician Supply, Physician Compensation, and Medicare

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Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 natIonal health polIcy 8orum FacilitatiNg dialogue. FosteriNg uNderstaNdiNg.

Primary Care Physician Supply, Physician Compensation, and Medicare Fees: What Is the Connection? Laura A. Dummit, Principal Policy Analyst oVerVIeW 4 Primary care, a cornerstone of several health reform e.orts, is believed by many to be in a crisis because of inadequate supply to meet future demand.

This belief has focused a/ention on the adequacy of primary care physician supply and ways to boost access to primary care. One sug- gested approach is to raise Medicare fees for primary care services. Whether higher Medicare fees would increase physician interest in primary care specialties by reducing compensation disparities between primary care and other specialties has not been established.

Further, many questions remain about the assumptions underlying these policy concerns. Is there really a primary care physician crisis? Why does compensation across physician specialties vary so widely?

Can Medicare physician fee changes a.ect access to primary care? These questions defy simple answers. This issue brief lays out the latest information on physician workforce, compensation di.erences across physician specialties, and Medicare 9s physician fee-se/ing process.

Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 2 n+=i87+5 h/+5=2 ... more. less.

p85i-B 88;>6 F+-353=+=3n1 .3+581>/. F8<=/;3n1 >n./;<=+n.3n1. 2131 K s=;//= NW, s>3=/ 500 W+<h3n1=8n dc 20037 202/872-1390 202/862-9837 [f+x] nhpf@1w>./.> [/-m+35] www.nhpf.8;1 [w/b] J>di=2 mi55/; J87/s Director S+55B c8b/;5B Deputy Director m87iq>/ m+;=i7/+> Publications Director Primary Care Physician Supply, Physician Compensation, and Medicare Fees: What Is the Connection? Predictions of a looming shortage of primary care physicians 4family prac- titioners, general internists, and pediatricians 4forecast not only di4culty for patients in gaining access to basic health care services but also further fragmentation of health care delivery. However, evidence to back up these predictions is mixed. Although graduates of U.S. allopathic medical schools exhibit a growing preference for more lucrative specialties, graduates of foreign and osteopathic medical schools have ensured that primary care residencies are 1lled. Continued growth in the numbers of both medical school graduates and nonphysician primary care practitioners, particularly when future needs are not known, raises the question of whether primary care is really on the wane. Expected compensation is one factor that a3ects choice of medical spe - cialty, and primary care physicians typically make considerably less than other specialists, such as orthopedic surgeons and radiologists. These di3erences are due to a variety of factors. Many contend that physician fees for services provided by specialists, such as surgeries and diagnostic tests, are more pro1table than those for o4ce visits, which dominate pri - mary care practices. Compensation di3erences are also a3ected by certain characteristics of the fragmented, fee-for-service health care environment that allow some specialty practices to create additional income through the volume and types of services they deliver and oversee. Because Medicare is the largest single health care payer, its payment poli - cies, including the level of its physician fees, may be used to in2uence other aspects of the health care system, such as workforce and physician specialty distribution. Consequently, even though scheduled changes should raise Medicare fees for o4ce visits when they are fully implemented, some have suggested that Medicare explicitly increase its fees for primary care services to boost compensation for primary care physicians. Given the other factors that a3ect physician compensation and other in2uences on choice of specialty, it is not clear whether raising some fees would have the desired e3ect on the choice of physician specialty. Such a policy would be a departure from Medicare 9s intent to ensure that its physician fees re2ect the relative di3erences in resource requirements across physician services. It could, however, be a way to address concerns about undervaluation of primary care services. Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 3 a prImary care WorK 8orce crISIS? Between 1995 and 2005, the number of primary care physicians per 100,000 population increased by 12 percent, compared to 5 percent for other physi- cian specialties. 1 Over this same period, the supply of physician assistants and nurse practitioners, health care professionals who are licensed to perform some primary care activities, almost doubled. The number of physician assistants grew at an average annual rate of 4 percent from 1995 through 2007. Nurse practitioner supply rose an average of 9 percent a year from 1999 through 2005. Combined, these increases yielded an e3ective primary care workforce of 126 per 100,000 population in 2005, up from 101 per 100,000 a decade earlier. The supply of physicians and primary care professionals is likely to con- tinue to grow. Several states are adding or expanding medical schools. 2 Osteopathic schools have increased in number and capacity, which is particularly noteworthy because a higher share of their graduates enter primary care residencies. And, fueled by increases in nurse practitioner training programs, the number of nurse practitioners will probably con- tinue to expand. Even though fewer U.S. allopathic medical school graduates are entering primary care residencies, the number of primary care residents has risen in recent years, largely as a result of an in2ux of graduates of international medical and osteopathy schools into those residencies. 3 The number of graduates of U.S. allopathic medical schools in primary care residencies declined by 1,655 between 1995 and 2005. These medical students, who may have more options for residencies than other graduates, increasingly choose non 3primary care specialties. During the same period, graduates of international medical schools in primary care residencies rose by 2,540 and osteopathy graduates increased by 1,415. These 1gures, however, in - clude the rising number of primary care residents who later extend their training to become subspecialists. These statistics provide a mixed picture of the future of primary care and beg the question of what is the right number of primary care profession- als. Some analysts point to the swelling ranks of the baby boomers and their higher use of health care services, as well as to the baby boomer physicians reaching retirement age, as evidence of the need for more primary care physicians and geriatricians. They emphasize that the elderly are more likely to have multiple chronic conditions that require the continuity and coordination of care that can best be provided by these practitioners. 4 Others point to the geographic maldistribution of physicians and question whether greater numbers necessarily mean broader access to primary care services. 5 Many factors a3ect a physician 9s choice of where to practice medi - cine, including the availability of colleagues and nearby medical resources; indeed, new physicians o5en choose to practice in areas with higher per t2/ s>995B 80 92Bsi- -i+7s +7d 9;i6+;B -+;/ 9;80/ssi87+5s is 5ik/5B =8 -87=i7>/ =8 g;8w. Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 4 capita numbers of practicing physicians. Thus, even increasing physician supply may not maintain or improve access to primary care services for all segments of the population. Assessing current and future workforce requirements is notoriously di4 - cult, because the demand for health care services depends on the organiza- tion and delivery of care, the state of the economy and people 9s incomes, and the needs of the population. 6 Projections based on historical experience implicitly assume that factors that have a3ected demand in the past will continue to shape it in the future. More dynamic projection approaches a6empt to use changes in the health care environment to determine the likely future size and structure of the workforce; for example, such a pro- jection led to the belief that the e4cient systems of care associated with the managed care movement would constrain the need for physicians. Whatever the assess- ment methods, however, declining interest in primary care among some medical students and rising interest in subspecialization, combined with the uneven geographic distribution of health care providers, should serve to keep workforce issues on any health reform agenda. phySIcIan compenSatIon acroSS SpecIaltIeS Primary care physicians typically make less than other physicians, which undoubtedly contributes to waning interest in these specialties by some medical students. According to a survey by the Medical Group Manage - ment Association (MGMA), median compensation for general orthopedic surgeons was $454,016 in 2006, compared to $158,378 for family practice physicians who did not provide obstetrical care. 7 (See text box, at right, for information on the use of MGMA data in this paper; see Table 1, next page, for median compensation of physicians in selected specialties.) Accounting for the variation in the number of clinical hours worked reveals an approximate two-fold di3erence in compensation between physicians in primary care practices and the other specialties that are noted. While other data sources report di3erent averages, the story is the same: incomes of primary care physicians are at the bo6om of the scale. 8 Another study found that, in 2003, the average income of surgical specialists was 29 percent higher than that of medical specialists and 86 percent higher than that of primary care physicians. 9 These measures hide considerable income variability within specialties. A 2005 survey found that 35 percent The Medical Group Management Associa - tion (MGMA) represents 21,500 administrators, chief executive o4cers, physicians in management, board members, and o4ce managers from more than 13,500 organizations in which almost 270,000 physi- cians practice. It annually surveys its members on revenues and expenses, provider compensa- tion and production, management compensa- tion, and group performance of medical and academic practices. At a May 2, 2008, National Health Policy Forum session on physician in- come and medical practice di3erences across specialties, David N. Gans, vice president, practice management resources, analyzed MGMA survey data to describe di3erences in income, revenues, and expenses of physi- cian group practices for selected specialties.* These data are represented in this paper as medians to reduce the e3ects of outlier values. Although these data are not representative of all physician medical practices, they reason- ably represent the experience of physicians in group practices. Further, comparisons across specialties re2ect the magnitude of and the reasons for income di3erences. * Laura A. Dummit, cPhysician Income and Medical Practice Di.erences Across Specialties: Should Medicare Care? d National Health Policy Forum, Forum Session, May 2, 2008; available at www.nhpf.org/pdfs_fs/FS_05-02-08_PhysicianIncome.pd f . Mr. Gans 9 slides from his presentation are available at www.nhpf.org/ handouts/Gans.slides_05-02-08.pd f . m/di-+5 G;8>9 m+7+g/6/7= ass8-i+=i87 Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 5 of physician respondents were compensated less than $150,000, while 6 percent were compensated more than $500,000. 10 Among invasive cardiologists, only 10 percent were compensated less than $150,000, compared with 50 percent of family practice physicians. On the other end of the scale, 40 percent of invasive cardiologists received more than $500,000, compared with less than 1 percent of family practice physicians (Figure 1). In general, physician compensation is based on what is le5 from practice revenues a5er other expenses are paid. Although the categories of practice revenues and practice expenses are the same across specialties, di3er - ent proportions of each a3ect the amount remaining for compensating the practice 9s physicians. p;+-=i-/ r/v/7>/s A physician practice 9s revenues depend on the number and mix of services it delivers. Medical services, which are primarily o4ce visits as well as procedures such as electrocardiograms and audiology exams that are typically delivered in the physician 9s o4ce, provide a large share of revenues for most specialties. According to MGMA, medi - cal services comprised about 74 percent of mean gross charges in family practice and internal medicine practices in 2006. Although gross charges do not translate directly into collected revenues, they provide a reasonable taBle 1 m/di+7 p2Bsi-i+7 c869/7s+=i87 bB S9/-i+5=B, 2006 median physician income ($) SpecIaltyp/; y/+;p/; h8>; c+;di858gB n8n3nv+<3v/ $398,034$218 8+6i5B p;+-=i-/ w3=h8>= 8b<=/=;3-< 158,37893 I7=/;7+5 m/di-i7/ 1/n/;+5 167,40098 o;=289/di- S>;g/;B 1/n/;+5 454,016226 u;858gB 361,784196 Source: Medical Group Management Association (MGMA), Physician Compensation and Production Survey: 2007 Report Based on 2006 Data (Englewood, CO: MGMA, 2007) . 8IGure 1 r+7g/ 80 c869/7s+=i87 bB S9/-i+5=B P/;-/n= 8f Phy<3-3+n< r/-/3v3n1... ...l/<< =h+n $150,000 SpecIalty ...g;/+=/; =h+n 8; eq>+5 =8 $ 500,000 10% 40% c+;di858gB (3nv+<3v/) 10% 10% u;858gB 50% 5/<< =h+n 1% 8+6i5B p;+-=i-/ 41% 2% I7=/;7+5 m/di-i7/ Source: Marcy Tolko., cExclusive Earnings Survey: How Are You Doing? d Medical Economics , October 20, 2006. Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 6 estimate of the shares of practice revenues from di3erent services. In car - diology practices, medical services generated about 67 percent of gross charges. Surgical services, which range from simple excisions to complex inpatient surgeries, vary by specialty. Orthopedic and urology practices generated 68 percent and 54 percent of their total charges, respectively, from surgical services. Physician practices also generate revenues by providing ancillary and other services that do not necessarily involve a physician 9s time. Radiology services are among the most notable of these ancillary services; although a physician interprets an x-ray or scan, a technician or other clinical sta3 member o5en performs the test. Charges for other services contributed over 12 percent of gross total charges to urology practices and almost 4 percent to family practice groups. These services are primarily medica- tions 4chemotherapy drugs in the case of urologists and immunizations in the case of family practice physicians. (See Figure 2 for a breakdown of revenue shares for various services.) Source: MGMA, Cost Survey for Single-Specialty Practices: 2007 Report Based on 2006 Data (Englewood, CO: MGMA, 2007) 35.9% 70.9% 57.6% 16.1% 15.6% 31.0% 15.9% 40.9% 42.1% 3.5% 40.8% 3.7% 9.3% 25.6% 4 1. 1% 42.2% 6.6% 59.1% 28.5% 40.6% 12.1% 12.7% 6.6% 0.8% 19.9% 3.7% 4.4% 10.9% 8.7% 5.2% 3.9% 7.5% 4.2% 12.4% Other Radiology Laboratory Surgical services provided in another facility Surgical services provided in the office Medical services provided in another facility Medical services provided in the office Services 100 80 60 40 20 0 Cardiology Family Practice Internal Medicine Orthopedic Urology Gross Revenue Shares (%) 4 0.0% (lab) 8IGure 2 p2Bsi-i+7 S/;vi-/s +s + S2+;/ 80 =2/ p;+-=i-/ 9s G;8ss r/v/7>/, c869+;is87 a-;8ss S9/-i+5=i/s, 2006 Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 7 p;+-=i-/ eA9/7s/s A physician practice 9s expenses 4the salaries and bene1ts of clinical and nonclinical personnel, such as nurses, technicians, and front o4ce and other administrative sta3, and other expenses, such as building, equip - ment, and supplies 4vary across specialties. (See Table 2 for median practice expenses per physician in selected specialties.) In 2006, median expenses of internal medicine practices were almost $290,802 per full-time equivalent (FTE) physician, according to MGMA. In urology practices, median expenses were close to twice as high, at $536,792. Clinical and support sta3 salaries and bene1ts comprised roughly 50 percent of prac - tice expenses across all specialties. The next largest expense category for most specialties was building expenses, ranging from about 10 percent to almost 13 percent. taBle 2 m/di+7 p;+-=i-/ eA9/7s/s p/; 8>55-ti6/ eq>iv+5/7= ( 8te) p2Bsi-i+7, bB p;+-=i-/ S9/-i+5=B, 2006 SPECIALTY c+;di858gB 8+6i5B p;+-=i-/ I7=/;7+5 m/di-i7/o;=289/di-u;858gB practIce expenSeS S>998;= +7d c5i7i-+5 S=+00$ 278,670$ 159,844$ 144,421$ 259,392$ 230,009 t8=+5 G/7/;+5 o9/;+=i7g eA9/7s/s $ 260,940$ 168,000$ 134,601$ 259,621$ 296,971 inf8;m+=38n t/-hn8581y17,4136,9456,63415,96613,265 d;>1 s>pp5y21,64913,7557,77119,77262,549 M/.3-+5 & s>;13-+5 s>pp5y10,3017,6675,42615,80229,679 B>35.3n155,08237,07431,02563,77667,911 F>;n3=>;/ & eq>3pm/n=10,6663,7844,4729,47310,702 a.m3n3<=;+=3v/ 12,79710,87710,93619,73920,905 Phy<3-3+n l3+b353=y in<>;+n-/18,3129,3707,55235,11121,000 c53n3-+5 l+b8;+=8;y2,55312,2327,5642658,123 r+.38581y65,6692,4533,23614,47717,755 M3<-/55+n/8><46,50063,84249,98665,24045,084 t8=+5 9/; 8te p2Bsi-i+7$ 538,135$ 315,782$ 290,802$ 517,302$ 536,792 Note: All categories of expenses were computed separately, so ctotals d are not necessarily sums of the shown dollar amounts. Source: MGMA, Cost Survey: 2007 Report. Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 8 Providing ancillary and other services requires resources, such as drugs and supplies. Drug expenses comprised almost 12 percent of total expenses in urology practices, or $62,549 per FTE physician. This was the highest dol- lar amount across all of these specialties, consistent with urology practices 9 furnishing chemotherapy drugs to patients. Medical and surgical supplies as a share of total expenses were highest in orthopedic and urology practices, at 3 percent and 5.6 percent, respectively. Clinical laboratory constituted 3.7 percent of expenses for family practice groups and 2.7 percent for internal medicine practices. Urology practices incurred higher median laboratory ex- penses than internal medicine practices; however, because urology practices have much higher total expenses, their laboratory expenses were a lower share of their total expenses. Radiology expenses were the highest share of the total for cardiology practices, at 12.2 percent; urology and orthopedic practices had the next highest shares for radiology. Premiums for professional liability, or malpractice, insurance ranged from 2.7 percent of expenses in internal medicine practices to almost 6.8 percent in orthopedic practices. Orthopedic practices spent a median of $35,111 on malpractice insurance per FTE physician, and urology prac- tices spent $21,000, compared to $7,552 in internal medicine. The expense shares devoted to health information technology ranged from 3.2 percent for cardiology practices to 2.1 percent for family practices. Even though information technology was a relatively low share of expenses in urology practices, in absolute dollars they spent about two times as much as family practice and internal medicine practices. meDIcare 9S role As the largest single payer, Medicare a3ects physician practice revenues directly through its payments and indirectly through its fee schedule, which many private payers use. Medicare 9s fees are intended to re2ect the resource use of each service. That is, a service that requires 20 percent more resources has a fee that is 20 percent higher than the average Medicare fee. Medicare relies on the advice of the American Medical Association/Specialty Society Relative Value Scale Update Commi6ee (RUC), which evaluates data on physician time and other resources, in determining the resources used to provide each service. For each service, three categories of resources or inputs 4physician work, practice expenses (clinical sta3, supplies, equip - ment, and overhead), and professional liability insurance (PLI) 4are exam - ined and assigned relative value units (RVUs). The RVUs for any service account for the relative costliness of the inputs used to provide the service. Added together and multiplied by a dollar conversion factor, these RVUs are converted into Medicare 9s fee for the service. (See text box, next page, for more information on the RUC process for establishing RVUs.) The services provided by specialty practices require more resources, as measured by RVUs per hour, than those provided by primary care c87=i7>/d 8n p. 10 ä Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 9 Medicare 9s fee for each physician service is intended to represent the resource re- quirements of providing that service to the typical patient, relative to the average resource requirements of providing a physician ser- vice. That is, if the inputs to provide an extensive of- 1ce visit to a new patient are 20 percent more than the inputs used to provide an intermediate o4ce visit, then its Medicare fee would be 20 percent more. Medicare determines relative values for physician work, practice expenses, and professional liability in- surance.* Physician work, which averages 52 percent of aggregate Medicare physician payments, accounts for the time, technical skill and e3ort, mental e3ort and judgment, and stress to provide a service. Prac- tice expenses, averaging 44 percent of payments, in- clude the nonphysician clinical and nonclinical labor in the o4ce, as well as building expense, equipment, and o4ce supplies. Professional liability insurance comprises four percent of payments. The Centers for Medicare & Medicaid Services (CMS) is responsible for maintaining the fee sched - ule. The Congress requires CMS to review all of the work values every 1ve years. The American Medical Association/Specialty Society Relative Value Scale Update Commi6ee (RUC) advises CMS on updating the fee schedule and recommends values for new or revised services. Every service has a relative value unit (RVU) for each of the three types of resources to re2ect how the resources required for that service compare to the average resources required across all services. The three RVUs are summed and then multiplied by a dollar amount, called a conversion factor, to equal the fee. For example, the Medicare fee for a diagnostic colonoscopy (coded as 45378) is about twice that for an intermediate o4ce visit (coded as 99214), because the inputs for the colonoscopy are about twice what they are for the o4ce visit. The work RVUs for di - agnostic colonoscopy are based on the 75 minutes of physician time required to provide this service. A physician typically spends 30 minutes before the procedure, 30 minutes to perform the procedure, and 15 minutes a5er the procedure. The o4ce visit work RVUs are based on 40 minutes of physi - cian time, of which 5 minutes is spent preparing for the visit and 10 minutes is spent a5er the visit. The physician time actually performing the colonoscopy is weighted more heavily than is the time providing the o4ce visit to re2ect the higher skill and e3ort and associ - ated stress of providing the procedure. Because diagnostic colonoscopies are typically not provided in a physician 9s o4ce, direct practice ex - pense inputs incurred by the practice are valued at just over $8. The medical supplies and equipment inputs are the responsibility of the facility in which the procedure is performed (such as a hospital outpatient department or ambulatory clinic). The physician 9s office still incurs indirect expenses (for administrative sta3 and building and other expenses in running an o4ce), which are valued at $54.70. The direct practice expenses associated with the o4ce visit include clinical sta3, medical supplies, and a small amount for medical equip- ment. Professional liability insurance inputs are six times higher for the colonoscopy than for the o4ce visit, re2ecting the procedure 9s higher risk. The resources for an intermediate o4ce translate into a Medicare fee of almost $90. The diagnostic colonoscopy that is not provided in the physician 9s o4ce has a Medicare fee of about $198. * AMA/Specialty Society, RVS Update Process, American Medical Association, 2006. r/s8>;-/ us/, +s m/+s>;/d bB r/5+=iv/ V+5>/ u7i=s, 08; Di+g78s=i- c85878s-89B +7d I7=/;6/di+=/ o0f-/ Visi=, 2008 Di+g78s=i- c85878s-89Bo0f-/ Visi= total rVus5.642.53 W8;k3.691.42 P;+-=3-/ exp/n</1.651.06 P;8f/<<38n+5 l3+b353=y0.300.05 Source: CMS, 2008 National Physician Fee Schedule Relative Value File, file name RVU08AB; available at www.cms.hhs.gov/ PhysicianFeeSched/PFSRVF/list.asp?listpage= 3 . m/di-+;/ 9s p2Bsi-i+7 8//s Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 10 c87=i7>/d f;8m p. 8 practices (Table 3). Each hour of physician clinical time in cardiology, orthopedic, and urology practices requires from 7.2 to 8.7 RVUs, or about 75 percent more than primary care practices. The primary care prac- tices require 4.0 to 4.5 RVUs. Higher physician work RVUs in specialty practices account for some of the di3erence. For every hour of physician clinical time, the mix of services provided in a specialty practice requires more physician work, that is, technical skill or mental e3ort, 11 than the mix of services provided in primary care practices. The RVUs associated with higher skill or e3ort translate directly into higher net revenues. The di3erence in work RVUs, however, does not fully account for the two-fold discrepancy in compensation per hour between primary care and specialty practices. The higher compensation in specialty practices must come from one of two sources, either net revenues generated on the practice expense portion of their payments or the provision of ancillary services, but the importance of each source will di3er across specialties. Some specialties are more likely to provide ancillary services, such as radiology or laboratory, in their practices. Because they have lower practice expenses, specialties that provide many of their services (notably surgical services) in other se6ings will have less ability to generate additional revenues on the practice expense portion of their payments. Higher compensation for these specialties, therefore, would tend to be gener- ated through providing ancillary services. The lower work RVUs per hour for o4ce visits are assigned in the process Medicare uses to value physi - cian services. O4ce visits may be undervalued not only, as many believe, because of these lower work RVUs, but also because of other characteristics of o4ce visits. 12 O4ce visits do not lend themselves to e4ciency gains because of their reliance on phy - sician time. While other services may be delivered more e4ciently as practitioners gain expertise, this is not the case for o4ce visits. Further, nonphysician clinical sta3 or equipment may be used to lower the expenses to provide other services. This is particularly the case with respect to ancillary services that the practice manages, which may not involve the physician 9s time at all. In a payment system dominated by fee-for-service, raising volume may have a greater e3ect on revenues than higher fees. 13 In fact, evidence in- dicates that Medicare spending for physician services has been driven by volume, not fees, for the last several years. 14 The Medicare Payment Advisory Commission (MedPAC) and others have recommended that Medicare adjust its physician fees to be6er re2ect relative taBle 3 V+5>+=i87 80 p2Bsi-i+7 W8;k +7d p;+-=i-/ eA9/7s/s bB r/5+=iv/ V+5>/ u7i=s 9/; h8>; SpecIalty t8=+5 rVu< Phy<3-3+n W8;k rVu< P;+-=3-/ exp/n</ rVu<* c+;di858gB 3nv+<3v/ 7.23.93.3 n8n3nv+<3v/ 8.73.55.3 8+6i5B p;+-=i-/ w3=h 8b<=/=;3-< 4.52.22.3 w3=h8>= 8b<=/=;3-< 4.22.22.0 I7=/;7+5 m/di-i7/ 4.02.11.9 o;=289/di-s 7.53.73.8 u;858gB 7.73.54.3 * Includes professional liability insurance RVUs Source: Author 9s calculation using data contained in MGMA, Cost Survey: 2007 Report. Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 11 resource use across all services. 15 It is believed that this would lower fees for certain services typically provided by specialists. At the same time, MedPAC has recommended that Medicare directly increase payments to primary care providers by raising fees for primary care services for clinicians who focus on delivering primary care. 16 Adjustments to the fee schedule are typically implemented in a budget-neutral manner, so that any fee reductions would be redistributed across all fees. Conversely, any fee increases would be o3set by reductions to all of the fees to ensure that total Medicare expenditures are not a3ected. This process results in winners and losers across physician specialties, depending on which fees are changed. concluSIon Every year, Congress considers Medicare physician fees and spending on physician services. Increasingly, this annual rite prompts discussions about the national supply of primary care physicians. Although the primary care workforce has grown faster than the specialty physician workforce, concerns persist that the number of primary care practitioners will not be adequate to meet the complex needs of an aging population. Allopathic medical graduates are more o5en passing over primary care residencies for higher-paid specialties. Lower compensation for primary care physicians is one of the reasons that these specialties are less desirable. The higher compensation for other specialties is due in part to the higher valuation of the services they provide and the greater opportunities that specialty practices have to manage the delivery of ancillary services, which may generate additional revenues for their practices. Many have urged the Congress to raise Medicare fees for primary care services. The ultimate objective of the higher fees is to increase access to primary care services, which some advocate as a way to reform this country 9s expensive and o5en ine4cient health care system. While sup - port for this objective may be widespread, the path to achieving increased access and reform is less apparent. It is not clear whether higher fees for primary care services would reduce the di3erential between primary care and specialty physician compensation or whether this, in turn, would help ensure access to needed services. Adjusting physician fees to re2ect the value of the services may be desirable, but the impact on compensation alone would probably not be su4cient to increase physician interest in practicing primary care or broaden access to those services. enDnoteS 1. Government Accountability O4ce (GAO), cPrimary Care Professionals: Recent Supply Trends, Projections, and Valuation of Services, d GAO-08-472T, February 12, 2008; available at www.gao.gov/new.items/d08472t.pd f . GAO 1gures for nurse practitioners are from 1999, rather than 1995. e7d78=/s / -8n=3n>/. ä Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 12 e7d78=/s / -8n=3n>/. 2. John K. Iglehart, cGrassroots Activism and the Pursuit of an Expanded Physician Sup - ply, d New England Journal of Medicine, 358, no. 16 (April 17, 2008): pp. 1741 31749; available at h6p://content.nejm.org/cgi/content/full/358/16/174 1 . 3. National Resident Matching Program, cResults and Data: 2007 Main Residency Match, d April 2007; available at www.nrmp.org/data/resultsanddata2007.pd f . 4. Robert A. Berenson et al., cA House Is Not a Home: Keeping Patients at the Center of Practice Redesign, d Health A.airs, 27, no. 5 (2008): pp. 1219 31230; available with subscrip - tion at h6p://content.healtha3airs.org/cgi/content/full/27/5/121 9 . 5. David Goodman, cTwenty-Year Trends in Regional Variations in the U.S. Physician Workforce, d Health A.airs, Web Exclusive (October 7, 2004): pp. VAR90 397; available at h6p://content.healtha3airs.org/cgi/content/full/hltha3.var.90/DC 2 . 6. David Blumenthal, cNew Steam from an Old Cauldron 4The Physician-Supply Debate, d New England Journal of Medicine, 350, no. 17, (April 22, 2004): pp. 1780 31787. 7. David N. Gans, Medical Group Management Association (MGMA), presentation at the National Health Policy Forum session on cPhysician Income and Medical Practice Di3erences Across Specialties: Should Medicare Care? d May 2, 2008. MGMA analyzed revenue and expense data for 1ve physician specialties to illustrate specialty di3erences for the NHPF meeting. More information about MGMA, its surveys, and its members can be found at www.mgma.com . 8. A survey conducted by the American Medical Group Association (AMGA) reported that cardiologists were compensated $379,975 in 2008, compared to $199,886 for internal medicine physicians. See AMGA, c2008 Medical Group Compensation and Financial Sur - vey, d Alexandria, VA, 2008; available at www.cejkasearch.com/compensation/amga_physi - cian_compensation_survey.ht m . 9. Ha T. Tu and Paul B. Ginsburg, cLosing Ground: Physician Income, 1995 32003, d Center for Studying Health System Change, Tracking Report No. 15, June 2006; available at www. hschange.com/CONTENT/851/ . 10. Marcy Tolko3, cExclusive Earnings Survey: How Are You Doing? d Medical Economics, 86, no. 20 (October 20, 2006): pp. 74 36, 78 380, 82 33. 11. According to the American Medical Association (AMA), cThe factors used to determine physician work include the time it takes to perform the service; the technical skill and physi- cal e3ort; the required mental e3ort and judgment; and stress due to potential risk to the patient. d AMA, cRVS Update Process, d 2007, p. 1; available at www.ama-assn.org/ama1/ pub/upload/mm/380/rvs_booklet_07.pd f . 12. Medicare Payment Advisory Commission (MedPAC), Report to the Congress: Reforming the Delivery System, June 2008; available at www.medpac.gov/documents/ Jun08_EntireReport.pd f . 13. MedPAC, Report to the Congress: Medicare Payment Policy, March 2006, p. 99; available at www.medpac.gov/publications/congressional_reports/Mar05_EntireReport.pd f . 14. Congressional Budget O4ce, cFactors Underlying the Growth in Medicare 9s Spend - ing for Physicians 9 Services, d Background Paper, June 2007; available at www.cbo.gov/ 5pdocs/81xx/doc8193/06-06-MedicareSpending.pd f . 15. MedPAC, Medicare Payment Policy, chap. 2; Paul B. Ginsburg and Joy M. Grossman, cWhen the Price Isn 9t Right: How Inadvertent Payment Incentives Drive Medical Care, d Health A.airs, Web Exclusive (August 9, 2005): pp. W5-376 3384, available at h6p://content. healtha3airs.org/cgi/reprint/hltha3.w5.376v 1 ; Paul B. Ginsburg and Robert A. Berenson, cRevising Medicare 9s Physician Fee Schedule 4Much Activity, Li6le Change, d New England Journal of Medicine, 356, no. 12 (March 22, 2007): pp. 1201 31203. e7d78=/s / -8n=3n>/. ä Iss>/ B;i/0 3 N8. 827 N8v/mb/; 3, 2008 n+=i87+5 h/+5=2 p85i-B 88;>6 | www.nhpf.8;1 13 The National Health Policy Forum is a nonpartisan research and public policy organization at The George Washington University. All of its publications since 1998 are available online at www.nhpf.org. e7d78=/s / -8n=3n>/. 16. Primary care services are co4ce medical services, emergency department services, home medical services, skilled nursing, intermediate care, and long-term care medical services, or nursing home, boarding home, domiciliary, or custodial care medical services d and dintermediate and comprehensive o4ce visits for eye examinations and treatments for new patients. d Federal Register, 61, no. 227 (November 22, 1996): p. 59720.

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