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1991.05.31 :  Medicare Physician Fee Schedule

Contact:  Bob Hardy (202) 245-6145
May 31, 1991

        A national Medicare fee schedule for physician services
was proposed today by HHS Secretary Louis W. Sullivan, M.D., who
said the new payment system "will provide fair reimbursement to
physicians based on the work and costs involved in providing
medical services."
        The secretary said the fee schedule will also "help
address longstanding imbalances between Medicare payments to
urban and rural physicians and between primary care physicians
and certain specialties, such as surgeons.  We want to provide
fairer payment to all physicians, and in particular we want to
improve Medicare reimbursement for the primary care so often
provided by the family doctor and the general practitioner."
        In the proposed rule to be published June 5 in the
Federal Register, each procedure performed by a doctor is
assigned a number representing the relative value of the
procedure based on the resources needed to furnish the service.
        Relative values for more than 4,000 medical services that
account for approximately 85 percent of annual Medicare payments
to physicians are included in the proposed rule.  Comments are
invited for the next 60 calendar days, through Aug. 5.


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       "We welcome comments from physicians and other health care

providers," Secretary Sullivan said.  "This is an important
opportunity to continue dialogue with the medical community as we
enter the final phase of developing the fee schedule." 
       Relative values for additional services will be included
in a final regulation to be published in October.  The Omnibus
Budget Reconciliation Act of 1989 requires that the fee schedule
be implemented beginning Jan. 1, 1992.
       Relative values are produced by calculating the average
amount of work, overhead costs and malpractice insurance costs
associated with each medical service.  The proposed rule includes
a "conversion factor" to translate relative values into dollar
amounts for each medical service.  The relative values will be
adjusted to reflect different local practice costs.
       Gail R. Wilensky, Ph.D., administrator of the Health Care
Financing Administration, said the proposed fee schedule
represents "the first major revision of the system for paying
physicians in the 25-year history of the Medicare program. 

       "Physician payment reform in large part succeeds in
correcting historical price distortions, especially for
specialized procedures, which have been traditionally overvalued,
and primary care, which has been undervalued," she said.

       Generally, payments for primary care services will
increase relative to services provided by surgeons, radiologists
and other specialists.  Also, payments to physicians in rural
areas will generally increase relative to payments in major
metropolitan areas.

       Development of a relative value scale for Medicare
physician payments was mandated by a series of acts of Congress
beginning
in 1985.  A Harvard University research team led by William
Hsiao, Ph.D., has worked with HCFA to produce the relative value
scale.


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       "The new fee schedule represents an enormous amount of
work, from research and development to coordinating phase-in with
                                 
Medicare carriers," Dr. Wilensky said.  The carriers are
insurance companies that work under contracts with HCFA to
process and pay Part B Medicare claims, which includes those from
physicians.
     
       Medicare currently pays physicians according to their
actual or customary charge for a service, or according to the
prevailing charge in the area, whichever is less.  Prevailing
charges have been calculated annually for 240 localities, but the
system was widely criticized for paying specialists too much and
primary care physicians too little.

       A preliminary model of the fee schedule was published last
Sept. 4 in the Federal Register to inform the public on
methodology and to invite comments.  Dr. Wilensky said, "The new
fee schedule should help beneficiaries understand the Medicare
program and what Medicare and they will be expected to pay when
they visit their doctors."
     
       The proposed rule includes provisions to protect
beneficiaries by limiting the charges by nonparticipating
physicians that exceed the fee schedule amounts.  In calendar
year 1992, charges may not exceed 20 percentage points above the
fee schedule amounts for nonparticipating physicians.  The limit
drops to 15 percentage points above the fee schedule amounts for
nonparticipating physicians in 1993 and thereafter.
     
       Participating physicians are those who enter annual
agreements to accept Medicare approved charges, or fee schedule
amounts beginning in 1992, as full payment for their services. 
Medicare payments to nonparticipating physicians are five
percentage points less than payments to participating physicians.
     
       In addition to physicians, the new fee schedule will apply
to optometrists, dentists, oral and maxillofacial surgeons,
podiatrists, chiropractors and physical and occupational
therapists. Also affected in varying degrees will be physician
assistants, nurse practitioners or clinical nurse specialists,
certified registered nurse anesthetists, nurse midwives, clinical
psychologists and clinical social workers.

       Comments on the proposed rule may be mailed to the Health
Care Financing Administration, Attn: BPD-712-P, P.O. Box 26676,
Baltimore, Md. 21207.



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