Medicare Physician Fee Schedule: Practice Expense Payments to	 
Oncologists Indicate Need For Overall Refinements (31-OCT-01,	 
GAO-02-53).							 
								 
Medicare's physician fee schedule establishes payments for more  
than 7,000 different services, such as office visits, surgical	 
procedures, and treatments. Before 1992, fees were based on	 
charges physicians billed for these services. Since then, the	 
Health Care Financing Administration (HCFA), which runs Medicare,
has been phasing in a new fee schedule on the basis of the amount
of resources used to provide that service relative to other	 
services. The development of the resource-based practice expense 
component was a substantial undertaking. The implementation of	 
the resource-based methodology has been the subject of		 
considerable controversy, partly because of HCFA's adjustments to
the underlying data and basic method and partly because payment  
changes were required to be budget-neutral--which means that	 
total Medicare spending for physician services was to be the same
under the new payment method as it was under the old one. As a	 
result, Medicare payments to some specialties have increased	 
while payments to other specialties have decreased. Oncologists  
claim that their practice expense payments are particularly	 
inadequate for some office-based services, such as chemotherapy. 
Oncology practice expense payments in 2001 are eight percent	 
higher than they would have been had charged-based payments	 
continued. Oncology practice expense payments compared to their  
estimated practice expenses are about the same as the average for
all physicians. 						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-53						        
    ACCNO:   A02400						        
  TITLE:     Medicare Physician Fee Schedule: Practice Expense	      
Payments to Oncologists Indicate Need For Overall Refinements	 
     DATE:   10/31/2001 
  SUBJECT:   Cancer						 
	     Medical fees					 
	     Payments						 
	     Physicians 					 
	     Health care costs					 
	     Medicare Program					 

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GAO-02-53
     
Report to Congressional Committees

United States General Accounting Office

GAO

October 2001 MEDICARE PHYSICIAN FEE SCHEDULE

Practice Expense Payments to Oncologists Indicate Need for Overall
Refinements

GAO- 02- 53

Page i GAO- 02- 53 Medicare Physician Fee Schedule Letter 1

Results in Brief 4 Background 5 Oncology Fares As Well As the Average
Specialty, Although Data

Concerns Remain 10 Alternative Method Results in Large Changes in Payments
for Many

Oncology Services 16 Conclusions 23 Recommendations for Executive Action 24
Comments From CMS and Others 25

Appendix I Scope and Methodology 31

Appendix II Overview of Medicare?s Basic Practice Expense Method and
Adjustments 34

Appendix III Overview of Medicare?s Alternative Method for Calculating
Practice Expenses for Nonphysician Services 39

Appendix IV Comments From the Centers for Medicare and Medicaid Services 41

Related GAO Products 41

Tables

Table 1: Comparison of Estimated Physician Payments Calculated with
Resource- based Practice Expense Payments and Charge- based Practice Expense
Payments, 2001 12 Table 2: Comparison of Total Estimated Practice Expense

Payments and Estimated Practice Expenses, Relative to the Average Across All
Specialties, 2001 13 Contents

Page ii GAO- 02- 53 Medicare Physician Fee Schedule

Table 3: Estimated Practice Expense Payments Calculated Under the Basic and
Alternative Methods for Selected Nonphysician and Physician Services, 2001
18 Table 4: Estimated Effect of the Alternative Method on Practice

Expense Payments Compared to the Basic Method, for Selected Specialties,
2001 19 Table 5: Oncologists? Service Mix, Practice Expense Shares, and

Estimated Practice Expense Payments Compared to Estimated Practice Expenses,
2001 21 Table 6: Mix of Nonphysician and Physician Services Provided by

Oncologists, 1999 22

Figure

Figure 1: Detailed Example of HCFA?s Practice Expense Method for Physician
Services 38

Abbreviations

AMA American Medical Association ASCO American Society of Clinical Oncology
CPEP clinical practice expert panel CMS Centers for Medicare and Medicaid
Services E& M evaluation and management HCFA Health Care Financing
Administration PEAC Practice Expense Advisory Committee RUC Relative Value
Update Committee RVU relative value unit SCHIP State Children?s Health
Insurance Program SMS Socioeconomic Monitoring System

Page 1 GAO- 02- 53 Medicare Physician Fee Schedule

October 31, 2001 Congressional Committees Medicare?s physician fee schedule
establishes payments for more than 7,000 different services, such as office
visits, surgical procedures, and treatments. Prior to 1992, fees were based
on charges physicians billed for these services. Since then, in accord with
a statutory requirement, the Health Care Financing Administration (HCFA), 1
which administers the Medicare program, has been phasing in a new fee
schedule that bases the payment for each service on the amount of resources
used to provide that service relative to all other services. 2 The first
part of the resource- based fee schedule, implemented in 1992, was the
physician work component, the payment for the physician?s time and effort to
provide the service. Beginning in January 1999, resource- based payments
were incorporated for the practice expense component, which compensates
physicians for the costs incurred in operating their practices. 3

The development of the resource- based practice expense component was a
substantial undertaking. It began with an estimate of each physician
specialty?s total practice expenses and then used information gathered from
expert panels to allocate those expenses to individual services. Because of
limitations in the available data and concerns about the payment rates
established for some services, HCFA made adjustments to the data and the
basic methodology. In an earlier report, we noted that the basic methodology
was reasonable and a good starting point in establishing resource- based
practice expense payments. 4 Although each of the data sources used in the
basic methodology has limitations, the data

1 In June 2001, HCFA?s name was changed to the Centers for Medicare and
Medicaid Services (CMS). This report refers to the agency as HCFA when
discussing actions taken before the name change and as CMS when discussing
actions taken since the name change.

2 42 U. S. C. 1395w- 4. 3 Practice expenses include rent, utilities,
equipment, supplies, and the salaries of nurses, technicians, and
administrative staff. 4 Although the fee schedule includes a single payment
for every service, each payment has three components physician work,
practice expense, and malpractice. This report refers to the practice
expense component of payments as ?practice expense payments.? See Medicare
Physician Payments: Need to Refine Practice Expense Values During Transition
and Long Term (GAO/ HEHS- 99- 30, Feb. 24, 1999).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 02- 53 Medicare Physician Fee Schedule

remain the best available for deriving service- specific practice expense
estimates. However, we recommended that HCFA conduct sensitivity analyses to
identify issues with the methodology that have the greatest effect on
payments and that it target additional data collection and analysis efforts
to address these issues.

The implementation of the resource- based methodology has been the subject
of considerable controversy, partly because of HCFA?s adjustments to the
underlying data and basic method and partly because payment changes were
required to be budget- neutral- which means that total Medicare spending for
physician services was to be the same under the new payment method as it was
under the old one. 5 As a result, if Medicare payments to some specialties
increased, payments to other specialties had to decrease. In fact, such
redistributions have occurred, prompting concern from various specialties
that their revised practice expense payments are too low. Oncologists
(cancer specialists) claim that their practice expense payments are
particularly inadequate for certain office- based services, such as
chemotherapy administration.

For several years, considerable attention has been focused on Medicare
payments for covered drugs related to a physician?s services, such as cancer
chemotherapy. HCFA initiated steps in September 2000 to lower these payments
based on investigations that revealed that Medicare?s payments were much
higher than the actual acquisition costs of these drugs. This would have
substantially reduced revenues to oncologists. Although in November 2000
HCFA suspended its efforts to reduce Medicare?s drug payments, there
continues to be interest in lowering Medicare?s payments for covered drugs,
including chemotherapy drugs.

In light of these concerns, the Congress directed us to conduct three
studies. A report on one study, issued in September 2001, examined
Medicare?s payments for drugs. 6 We concluded that Medicare?s method for
establishing drug payments is flawed and that Medicare payments far

5 42 U. S. C. 1395w- 4 (d). 6 Medicare: Payments for Covered Outpatient
Drugs Exceed Providers? Cost (GAO- 01- 1118, Sept. 21, 2001). This report
was mandated in section 429 of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (P. L. 106- 554, Appendix F, 114
Stat. 2763, 2763A- 522).

Page 3 GAO- 02- 53 Medicare Physician Fee Schedule

exceed widely available prices to providers. 7 The other studies focus on
Medicare payments under the physician fee schedule, one related specifically
to oncology services 8 and one related to the data used to establish
payments for all specialties. 9 In this report, we have examined the
practice expense component of the Medicare fee schedule, and in particular
payments for oncology services. Specifically, we have analyzed (1) the
effects of HCFA?s application of the practice expense payment methodology on
overall payments to oncologists and other specialties and (2) how
adjustments that HCFA made to the basic practice expense payment methodology
affected payments for specific services provided by oncologists. The third
study, which is underway, will examine issues related to the adequacy of the
data used to establish practice expense payments under Medicare?s physician
fee schedule for all specialties and ways the Centers for Medicare and
Medicaid Services (CMS) can improve the data.

To conduct the work for this report, we reviewed the methodology that HCFA
used in computing resource- based payments and had extensive discussions
with its staff. We also met with representatives from the American Society
of Clinical Oncology (ASCO) and oncology practices to obtain their views on
the practice expense methodology and interviewed oncology researchers to
discuss current chemotherapy administration practices. We estimated the
effect of various adjustments HCFA made in computing payment amounts, and we
estimated the effect of potential adjustments using the data that HCFA had
used. We did not test the validity of these data or gather new data on
physician practice expenses. Because the fee schedule methodology is such
that changes in the payment rate for a single service affects the payment
rates for all other services, we examined the impact of the adjustments on
the payment rates for all services provided by all specialties. (For a more
complete discussion of our scope and methodology, see appendix I.) We
performed

7 Our study found that Medicare?s payments for physician- billed drugs were
at least $532 million higher than providers? acquisition costs in 2000.
Medicare Part B Drugs: Program Payments Should Reflect Market Prices (GAO-
01- 1142T, Sept. 21, 2001).

8 The study was mandated in section 213 of the Medicare, Medicaid and SCHIP
Balanced Budget Refinement Act of 1999 (P. L. 106- 113, Appendix F, 113
Stat. 1501, 1501A- 350). 9 The study was mandated in section 411 of the
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of
2000 (P. L. 106- 554, Appendix F, 114 Stat. 2763, 2763A508).

Page 4 GAO- 02- 53 Medicare Physician Fee Schedule

our work from September 2000 through September 2001 in accordance with
generally accepted government auditing standards.

Oncology?s practice expense payments in 2001 are 8 percent higher than they
would have been had charge- based payments continued. Oncology?s practice
expense payments compared to their estimated practice expenses are about the
same as the average for all physicians. Oncology representatives continue to
have concerns that the data HCFA used and the adjustments it made result in
their practice expenses, and consequently their payments, being understated.
For example, HCFA appropriately reduced oncology?s reported supply expenses
to exclude the cost of drugs, which are paid for separately, before
calculating practice expense payments. However, HCFA based its reduction on
average physician supply expenses rather than on oncology?s supply expenses.
An adjustment based on oncology- specific information may result in higher
payments to oncologists. Addressing other data and methodological issues
raised by oncologists would have an uncertain impact on oncologists?
payments under the fee schedule. Payment levels are determined by allocating
the budget neutral target for physician spending among services according to
the relative amounts of resources each service requires. More current or
precise information for all specialties could increase, decrease, or leave
unchanged estimated practice expenses for oncology services relative to the
expenses of other specialties. Payments would change accordingly.

HCFA used an alternative methodology to establish practice expense payments
for certain services that substantially reduced payments for some oncology
services while raising payments for some of oncology?s other services. The
agency implemented the alternative method to correct perceived low payments
for services that do not involve direct physician participation, such as
many chemotherapy administration services. This alternative method relies on
historical physician charges- rather than the expert panel estimates of the
resources needed for each service- to allocate practice expenses across
services. HCFA indicated that the expert panel estimates may have been
inaccurate for nonphysician services. HCFA has allowed all medical
specialties to choose whether to use the basic or the alternative method for
determining payments for their nonphysician services, further affecting
payments. For over 40 percent of nonphysician services, including many
chemotherapy services, these modifications reduced rather than increased
payments. At the same time, payments for many services with direct physician
involvement increased. Results in Brief

Page 5 GAO- 02- 53 Medicare Physician Fee Schedule

Moreover, in adopting the alternative method, HCFA has not addressed the
inappropriate allocation of indirect expenses to all services.

To ensure that practice expense payments better reflect differences in the
costs of providing services, we are recommending that the Administrator of
CMS examine the effect of the adjustments made to the basic methodology on
average fees across specialties and classes of services, including the
adjustment to oncologists? reported medical supply expenses; improve the
allocation of indirect expenses across all services; and calculate payments
for services without direct physician involvement using the basic method
and, if necessary, validate the underlying resourcebased estimates of direct
practice expenses for all nonphysician services.

CMS, the American Medical Association (AMA), and ASCO provided us with
written comments on a draft of this report. CMS agreed with our findings and
acknowledged the importance of improving the oncology supply expense
estimate and evaluating the indirect cost allocation method and the impact
of the alternative method for calculating payments for nonphysician
services. However, it indicated that it will not change the way it
calculates practice expense payments until better approaches are identified.
The AMA and ASCO both disagreed with our findings and recommendations. Both
organizations raised concerns about the scope of our analyses and report and
our use of existing data to analyze the adequacy of oncology payments.

The Medicare physician fee schedule has three components. The first, the
physician work component, provides payment for the physician?s time, skill,
and training required to provide a given service. The second, the practice
expense component, reflects the expenses incurred in operating a practice,
such as rent; utilities; equipment; supplies; and the salaries of nurses,
technicians, and administrative staff. Finally, the malpractice component
establishes payments for the costs of obtaining professional liability
coverage. In 1999, the three components accounted for approximately 55
percent, 42 percent, and 3 percent, respectively, of the average fee.

Payments for the physician work component were the first to be converted
from being charge- based to resource- based, beginning in 1992. Using
specialty- specific physician expert panels, physician time and effort
Background

Page 6 GAO- 02- 53 Medicare Physician Fee Schedule

in providing various services were estimated and used to establish payments
for this component. In 1999, the practice expense component began to be paid
under a resource- based methodology. 10 Resource- based payments for the
third component, malpractice expenses, were implemented a year later. The
resource- based payments were required to be budget neutral with respect to
the former payment method, meaning that Medicare?s aggregate payments to
physicians could not change as a result of the implementation of the new
methodology. 11

Medicare?s physician payment system ranks services on a common scale based
on the relative amount of resources needed to provide each service, and then
makes payments for each service proportional to those resources. The need to
estimate and rank practice expenses for thousands of medical services
presents enormous challenges. Most physicians? practices have readily
available data on their costs, such as wages for administrative and clinical
staff and the costs associated with rent, electricity, and heat. However,
Medicare pays physicians by service, such as for a skin biopsy or a stress
test, so CMS needs to estimate the portion of total practice expenses
associated with each service- data that are not readily available.

The task of estimating practice expenses is made more difficult because
there is considerable variation in practice expenses among specialties. This
variation is likely due to historical differences in practice styles, the
mix of services provided, and the setting in which services are provided.
For example, physicians in some specialties may provide almost all services
in their offices, thus incurring all of the expenses associated with
providing the service, including medical equipment, technicians, and medical
supplies. Physicians in other specialties may deliver most of their services
at a hospital, thus incurring only expenses such as rent, administrative
labor, and general office equipment. A physician in a solo practice is also
likely to have practice costs different from those of a physician in a group
practice. As a result, practice expenses, even for the same service, can
vary considerably by specialty or by physician practice.

The effect of both problems- the difficulty in allocating practice expenses
to services and the variation in expenses across practices- is mitigated

10 The resource- based practice expense component is being phased in over 4
years, from 1999 through 2002. 11 P. L. 103- 432, Sec. 121, 108 Stat. 4398,
4408 (1994).

Page 7 GAO- 02- 53 Medicare Physician Fee Schedule

somewhat because Medicare?s fee schedule payment for each service is based
on the service?s cost relative to all other services. Even though the actual
expenses associated with a service cannot be precisely measured and vary
across physicians? practices, the cost of one service relative to another is
easier to estimate and is likely to vary less across practices.

Medicare recognizes over 65 different physician specialty groups, such as
internal medicine, cardiology, and oncology. Specialties differ in the types
of services they provide. Most specialties provide evaluation and management
(E& M) services (for example, an office visit for an established patient)
that make up almost half of physician services provided to Medicare
beneficiaries. However, only certain specialties generally provide each of
the remaining physician services for example, cardiologists, general
internists, and family practitioners provide the majority of
electrocardiogram services. A small share (5 percent) of services, though
billed by physicians, do not involve a physician?s time because they are
performed by nurses or other clinicians services such as the drawing of
blood or administration of certain chemotherapy treatments. 12 These
services are referred to in this report as nonphysician services.

The basic methodology for developing resource- based payments for practice
expenses has three steps. 13 First, each specialty?s total practice expense
pool- that is, the total costs that physicians in that specialty incur to
operate their practices- is estimated. Second, this practice expense pool is
allocated to the services provided by that specialty, based on estimates of
the resources required to deliver each service. This results in an estimate
of practice expenses for each service provided within each specialty. Third,
when the same service is provided by more than one specialty, an average of
those specialties? expenses for the service is computed. A final adjustment
is made so that total physician payments are budget neutral- that is, the
same as they would have been under the

12 Some specialties, for example oncology and allergy/ immunology, have a
higher proportion (a third to half) of nonphysician services in their mix of
services. 13 Additional details on earlier payment proposals and refinements
can be found in our earlier reports. Medicare: HCFA Can Improve Methods for
Revising Physician Practice Expense Payments (GAO/ HEHS- 98- 79, Feb. 27,
1998) and Medicare Physician Payments: Need to Refine Practice Expense
Values During Transition and Long Term (GAO/ HEHS- 99- 30, Feb. 24, 1999).
Basic Method for

Determining ResourceBased Practice Expense Payments

Page 8 GAO- 02- 53 Medicare Physician Fee Schedule

previous payment system. (See appendix II for a more complete discussion of
the basic methodology).

Each specialty?s total practice expense pool was derived from 1995through-
1998 practice expense data collected by the AMA?s Socioeconomic Monitoring
System (SMS) survey and from Medicare physician billing data. From the SMS
survey, the average expense per hour of physician time were calculated for
each of six expense categories, clinical labor (nurses and medical
technicians), medical equipment, medical supplies, administrative labor
(such as an office manager or billing clerk), office expenses (such as rent
and utilities), and other expenses. These hourly expense estimates were
multiplied by the total hours spent by all physicians in each specialty
treating Medicare beneficiaries (information obtained from Medicare billing
data) to estimate each specialty?s total practice expense pool.

HCFA convened 15 expert panels comprising physicians, nurses, and practice
administrators to estimate the practice expense resources needed for
specific services. Based on these service- specific resource estimates,
practice expenses that are regarded as direct clinical labor, medical
equipment, and medical supplies are allocated to particular services based
on estimates of the quantity and cost of these resources required to provide
each service. The indirect expenses, or overhead administrative labor,
office expenses, and other expenses are allocated to specific services in
proportion to the direct expenses and physician work involved in providing
each service. 14 Thus, a service that requires high direct costs (such as
the use of an expensive, dedicated piece of equipment) or that has a high
physician work value, indicating that it is a time- consuming or complex
service, would have relatively high indirect costs.

As required by law, the Medicare physician fee schedule must establish a
single value or fee for each service, regardless of which specialty provides
it. 15 Consequently, when more than one specialty provides a service, an
average is computed based on the frequency with which each specialty
provides that service. As a result, specialties that perform a service more

14 Indirect expenses are between 55 and 90 percent of total practice
expenses, depending on the specialty. For oncology, indirect expenses are
approximately 60 percent of their total practice.

15 42 U. S. C. 1395w- 4 (c) (2) (A) (i).

Page 9 GAO- 02- 53 Medicare Physician Fee Schedule

frequently have more influence over establishing the fee for that service
than specialties that rarely perform it.

To compensate for potential shortcomings in the basic methodology and
limitations in the data used to establish payments, HCFA made several
adjustments to the specialties? practice expense pools and the method for
calculating the payment rates for individual services. In response to
concerns from various specialties regarding perceived low payments for
nonphysician services, such as certain chemotherapy administration services,
HCFA developed an alternative method to calculate payments for these
services. The alternative method creates a separate practice expense pool
for all nonphysician services and then allocates the practice expense pool
using historical charges rather than the expert panels? estimates of the
resources required for each service. 16 Recognizing that this alternative
method did not always increase payments for the targeted services, HCFA
allowed all specialties (in the second year of implementation of the
resource- based practice expense payments) to identify individual
nonphysician services that would ?opt- out? of the alternative methodology
and have payments determined using the basic methodology for all physician
services. Several specialty societies requested that HCFA calculate payments
for some or all of their specialties? nonphysician services under the basic
method, and all such requests were granted. (See appendix III for a
discussion of the alternative method for estimating practice expenses for
nonphysician services.)

An adjustment specific to oncologists? practice expense estimates
substituted the average medical supply expenses reported by all physicians
for those expenses oncologists reported in the SMS survey. An adjustment was
necessary because the oncologists? reported supply expenses included the
costs of drugs administered in physicians? offices, most notably
chemotherapy drugs, which are reimbursed separately. In the first year, the
adjustment reduced the supply expense reported by oncologists from $87.20
per physician hour to $7.20 the supply expense of the average physician
specialty to avoid paying twice for drugs.

In its ongoing efforts to improve payments, CMS receives recommendations
from the Practice Expense Advisory Committee (PEAC) for refinements to
direct practice expense estimates for specific services,

16 HCFA used historical charges as the allocators for nonphysician services
because its analyses indicated that the panel estimates for these services
were inaccurate. Adjustments to Basic

Resource- Based Method

Page 10 GAO- 02- 53 Medicare Physician Fee Schedule

and it has implemented many of these refinements. 17 The agency has also
made changes to its estimates of specialties? practice expense pools based
on supplemental practice expense survey data submitted by some specialties.
In accordance with recent legislation, all physician specialties may submit
supplemental data to CMS, and the agency is required to consider these data
in updating the physician fee schedule. 18 As of August 2001, three
specialty societies have done so. 19

The implementation of the resource- based practice expense payments did, as
expected, result in a redistribution of payments across specialties with
some specialties? payments increasing and others decreasing. Oncology?s
practice expense payments in 2001 are 8 percent higher than they would have
been had the charge- based fee schedule continued in 2001. Oncology has
fared at least as well as the average specialty under the new fee schedule,
in that its payments equal about the same share of estimated practice
expenses as the average for all specialties. Nonetheless, oncologists have
expressed concern that their payments are too low because of certain
adjustments HCFA made to the basic methodology and inadequacies in the
survey data used to estimate practice expenses. However using higher
estimates of oncology?s medical supply expenses would have only a modest
impact on oncology payments because the alternative method is used to
calculate payments for nonphysician services. Potential future improvements
in the practice expense data may affect estimated expenses for other
specialties as well. Because the fees are established to reflect the
relative costs of services across specialties, it is not clear whether
payments to oncologists would increase, decrease, or stay the same with
changes to the underlying data.

17 The PEAC is a subcommittee of the AMA?s Relative Value Update Committee
(RUC), a panel of physicians with representatives from all of the major
physician specialty societies that meets regularly and makes recommendations
to CMS on the resources required to perform services.

18 Section 212 of the Medicare, Medicaid and SCHIP Balanced Budget
Refinement Act of 1999 (P. L. 106- 113, Appendix F, 113 Stat. 1501, 1501A-
350). 19 Data were submitted by the American Association of Vascular Surgery
and the Society for Vascular Surgery and were accepted by CMS. Data were
also submitted by the American Physical Therapy Association, but CMS
indicated that the data were imprecise, so they were not used. Oncology
Fares As

Well As the Average Specialty, Although Data Concerns Remain

Page 11 GAO- 02- 53 Medicare Physician Fee Schedule

Oncology is among the specialties that benefit from resource- based practice
expense payments. Its practice expense payments are 8 percent more than they
would have been had the charge- based fee schedule continued in 2001 (see
table 1). Although other specialties? payments are also higher than they
would have been had the previous system remained in effect, many
specialties? practice expense payments are lower. For example, dermatology?s
resource- based practice expense payments are 46 percent higher than what
they would have been under the charge- based system. Other specialties?
practice expense payments decreased, ranging from 9 percent to 35 percent
less than what their practice expense payments would have been under the
charge- based system. Total payments calculated with resource- based
practice expenses ranged from 20 percent higher than total payments
calculated with charge- based practice expenses to 17 percent lower.
Resource- Based Practice

Expenses Increased Oncologists? Payments

Page 12 GAO- 02- 53 Medicare Physician Fee Schedule

Table 1: Comparison of Estimated Physician Payments Calculated with
Resourcebased Practice Expense Payments and Charge- based Practice Expense
Payments, 2001

Specialty Practice expense

payments (ratio) Total payments a (ratio)

Dermatology 1. 46 1. 20 Obstetrics and gynecology 1.24 1.10 Urological
surgery 1. 21 1. 09 Allergy and immunology 1.20 1.14 Otology, laryngology,
rhinology 1.19 1.09 Ophthalmology 1.17 1.08 General family practice 1.17
1.07 Plastic surgery 1. 13 1. 05 Pediatrics 1.09 1.04

Oncology 1.08 1.04

Psychiatry 1.05 1.01 Orthopedic surgery 1. 03 1. 02 Neurology 1.02 1.01
Radiation oncology 1.02 1.01 General internal medicine 1.00 1.00 Radiology
.91 .95 Pathology .90 .96 General surgery .90 .96 Pulmonary disease .85 .94
Cardiovascular disease .79 .89 Neurological surgery .74 .88 Emergency
medicine .66 .90 Gastroenterology .65 .84 Cardio- thoracic, vascular surgery
.65 .83

Note: 1999 Medicare utilization data were used to estimate practice expense
payments. Chargebased payments were based on the 1998 fee schedule, inflated
to reflect 2001 spending levels. When resource- based practice expense
payments equal charge- based practice expense payments, the ratio will be
1.00. a Only the practice expense component of the total charge- based
payment is based on charges.

Source: GAO analysis of practice expense payments under the Medicare fee
schedule for 2001.

The budget neutrality requirement results in practice expense payments on
average equaling approximately 70 percent of estimated practice expenses.
However, payments equal different shares of estimated practice expenses for
different specialties (see table 2). Payments are a smaller share of
practice expenses for those specialties with higher- than- average hourly
practice expenses and a larger share of expenses for specialties with below-
average hourly expenses. This is primarily because of the

Page 13 GAO- 02- 53 Medicare Physician Fee Schedule

statutory requirement that there be a single fee for each service regardless
of which specialty provides it. A single fee for each service is calculated
by averaging the service- specific practice expense estimates of the
specialties that perform the service. This requirement has a substantial
impact on many specialties? payments, in part because E& M services, which
are provided by most specialties, constitute a large share of many
specialties? services.

Table 2: Comparison of Total Estimated Practice Expense Payments and
Estimated Practice Expenses, Relative to the Average Across All Specialties,
2001

Specialty Payments compared to

practice expenses a (ratio)

Radiology 1.54 Allergy and immunology 1.43 Radiation oncology 1. 28
Emergency medicine 1.17 Pulmonary disease 1. 16 Psychiatry 1.06 General
surgery 1. 04 Internal medicine 1.04

Oncology 1.04

Pediatrics 1.02

Average (all specialties) 1.00

General family practice .99 Urological surgery .97 Gastroenterology .96
Obstetrics and gynecology .96 Otology, laryngology, rhinology .94
Dermatology .94 Cardiovascular disease .93 Neurology .91 Neurological
surgery .88 Ophthalmology .84 Orthopedic surgery .84 Cardio- thoracic,
vascular surgery .76 Pathology .75 Plastic surgery .65

Note: 1999 Medicare utilization data were used to estimate practice expense
payments. When estimated practice expense payments equal estimated practice
expenses, the ratio will be 1.00. a Each specialty?s payments relative to
its practice expenses are compared to the average for all

specialties. Source: GAO analysis of practice expense payments under the
Medicare fee schedule for 2001.

Page 14 GAO- 02- 53 Medicare Physician Fee Schedule

Medicare payments to oncologists equal about the same share of estimated
practice expenses as the average for all specialties. Compared to oncology,
6 specialties had practice expense payments that equaled a larger share of
their estimated practice expenses, while 15 specialties had practice expense
payments that equaled a smaller share. Payments to two specialties,
radiology and allergy and immunology, equaled a much larger share of their
estimated practice expenses compared to other specialties.

Oncology representatives have raised several concerns about HCFA?s estimate
of their total practice expenses. HCFA reduced oncology?s practice expense
pool to account for the costs of drugs that are reimbursed separately.
Oncology representatives acknowledge that a reduction is appropriate but
state that the all- physician average supply expense that HCFA substituted
understates oncology?s supply expenses. In our earlier report, we noted this
concern and recommended that HCFA assess the validity of using the all-
physician average. 20 To date, CMS has not developed an independent estimate
of oncologists? supply expenses. An alternative estimate of supply expenses
based on a methodology proposed by ASCO yields an estimate almost twice as
high ($ 13.25) as the 2001 all- physician average ($ 7.30). 21 Using this
higher estimate, oncology?s practice expenses would increase 6 percent and
practice expense payments based on this estimate would increase 1 percent.
22

Some oncologists we spoke with have raised other issues that they believe
caused their practice expense pool to be underestimated. The first is that
only physician time is used to estimate the practice expense pools. HCFA
estimated the practice expense pools by multiplying the number of physician
hours spent serving Medicare patients by the estimated practice

20 Medicare Physician Payments: Need to Refine Practice Expense Values
During Transition and Long Term (GAO/ HEHS- 99- 30, Feb. 24, 1999). 21 Data
supplied by a national oncology practice management company indicated that
their actual medical supply expenses are higher than the current all-
physician average. These data, however, are not representative of all
oncology practices.

22 Payments do not go up as much as expenses for two reasons. First, the
nonphysician service payments, calculated under the alternative methodology,
are based on average hourly expenses across all specialties, so a higher
estimate of oncology supply expenses does not change the payment amount for
about one- third of the services oncologists provide. Second, payments for
E& M services (which represent two- thirds of oncology services) are
determined by the average E& M practice expenses across all specialties and,
because oncology is a small specialty, its actual expenses have a limited
effect on the average payment calculation. Oncologists Express

Concerns About Practice Expense Method and Data

Page 15 GAO- 02- 53 Medicare Physician Fee Schedule

expense per physician hour. The method HCFA used to calculate the practice
expense per physician hour, however, results in an estimate that captures
the expenses associated with both physician and nonphysician services rather
than just the expenses associated with physician services. Therefore, what
some oncologists believe to be understated hours are used with expenses
associated with physician plus nonphysician services to estimate the total
practice expense pool. As a result, the pool may not be understated.

Some oncology representatives believe that their practice expense estimates
are too low because they do not account for certain expenses incurred in
operating a practice, such as the time spent providing uncompensated care
and extended periods of patient monitoring. Some also believe Medicare
patients are more expensive to treat than the average patient due to their
age and the increased presence of multiple medical conditions, implying that
a higher share of expenses should be allocated to Medicare. Finally, some
oncology representatives believe that their current expenses are higher than
those included in the 1995- through1998 SMS survey data due to changes in
the delivery of outpatient chemotherapy services. Although clinical time
spent on non- billable activities, more expensive- than- average patients,
or changing practice patterns could affect oncologists? practice expenses,
accounting for these factors would not necessarily raise payments to
oncologists. This is because these factors are likely to affect the total
practice expenses of other specialties as well. Payments to oncologists
would only change if their costs increased or decreased relative to the
costs of all other specialties.

Some oncology representatives also state that the SMS survey does not
accurately reflect the mix of oncology practices and, as a result, their
practice expense pool is underestimated. They contend that the 34 oncology
respondents to the SMS survey are not representative of the typical practice
because the survey respondents were disproportionately in practices that do
not provide chemotherapy services in their offices. Because these practices
do not incur the direct costs (such as nursing, equipment, and supplies)
associated with these services, they argue that a disproportionate share of
these practices in the sample led to an underestimation of oncology practice
expenses. They also assert that the survey respondents included some
surgical oncologists, a subspecialty that provides little or no office-
based chemotherapy- again leading to an understatement of the practice
expenses incurred by the typical practice. Although the AMA weights the
sample responses to adjust the survey

Page 16 GAO- 02- 53 Medicare Physician Fee Schedule

results so they are representative of an entire specialty, ASCO contends
these adjustments are inadequate.

The effect on payments to oncologists of using updated or more accurate data
to estimate practice expenses is uncertain, but potentially modest. This is
because the estimates of the practice expenses for other specialties and
other services may change as well. Payment levels change when the estimated
practice expenses of one specialty change relative to the overall average.
Thus, the change in oncologists? payments will depend on how much estimated
practice expenses for oncology increase or decrease compared to practice
expenses for other specialties. In addition, the use of the alternative
method to calculate practice expense payments for nonphysician services
mitigates the impact of any change in the data on the resulting payments.
Our analysis indicates that if estimated practice expenses for oncologists
were increased or decreased 10 percent from their current estimates, their
practice expense payments would only increase or decrease by 1 percent. The
change in payments is less than the change in estimated expenses because
under the alternative practice expense method, which determines payments for
a large share of oncology services, oncology?s actual practice expense
estimates do not determine the payment.

To correct for perceived low payments for services that do not involve
direct physician participation (such as many chemotherapy administration
services), HCFA created an alternative method to establish practice expense
payments for these services. Contrary to the intended purpose, payments for
over 40 percent of nonphysician services provided by all specialties
actually decrease after the alternative method is applied, and payments for
many physician services increase. Payments for some chemotherapy
administration services decline, and oncology?s average payments are
actually lower than they would be if payments for all services were
calculated under the basic method. Other specialties fare differently for
example, payments to radiation oncology are considerably higher as a result
of the alternative method. This alternative method does not address the more
fundamental issue affecting payments for nonphysician services, the
allocation of indirect expenses to all services. Alternative Method

Results in Large Changes in Payments for Many Oncology Services

Page 17 GAO- 02- 53 Medicare Physician Fee Schedule

Four elements of the alternative method developed by HCFA to correct for
perceived underpayments for nonphysician services (including chemotherapy
administration) affect the relative payments for oncologists as well as
other specialties. First, the alternative method involves creating a single
practice expense pool for all nonphysician services provided by all
specialties, so differences in practice expenses across specialties are not
recognized, as they are under the basic method. Thus, payments for services,
such as chemotherapy administration, that are provided predominately by
higher- cost specialties are lower than they would be if specialty- specific
expenses were used to estimate payments for these services. Second, the
expense pool is allocated to individual nonphysician services based on
average historical charges for each service, rather than on the expert
panels? estimates of the resources needed for each service. For some
services, the charge- based allocations are higher than the expert panels?
estimates; for others, they are lower. Third, HCFA subsequently allowed any
specialty to choose whether or not the alternative method would be used for
their particular nonphysician services. As specialties choose to have
payments for certain nonphysician services computed using the basic method,
the fees for all the other nonphysician services may increase or decrease.
23 Finally, the expenses associated with the nonphysician services are
double counted because they were not taken out of the specialty- specific
practice expense pools when the nonphysician practice expense pool was
established. The resulting specialty- specific practice expense pools were
too high because they included expenses for physician and nonphysician
services, yet they were allocated only to the physician services. As a
result, payments for some physician services increased.

While intended to counter perceived low payments for nonphysician services
under the basic method, the alternative method resulted in higher payments
for only 58 percent of nonphysician services, compared to payments under the
basic method. For example, the practice expense fee for one chemotherapy
service (billing code 96400) would be $59.60 under the basic method, but
decreases to $5.07 under the alternative method (see table 3). In contrast,
the practice expense fee for a chemotherapy infusion service (billing code
96412) increases from $31.32 to $43.11. The use of the alternative method
also has a dramatic effect on payments for some

23 In 2001, payments for nonphysician services that continued to be paid
under the alternative method were 4 percent lower than they would have been
had no nonphysician services opted out of this methodology. Alternative
Method for

Calculating Payments for Nonphysician Services Alters Resource- Based Fees

Page 18 GAO- 02- 53 Medicare Physician Fee Schedule

physician services due to the double counting problem. For example, payment
for chemotherapy intracavitary service (billing code 96445), which involves
a physician?s direct time, increases from $148 to $316.

Table 3: Estimated Practice Expense Payments Calculated Under the Basic and
Alternative Methods for Selected Nonphysician and Physician Services, 2001

Estimated practice expense payments

Service description (billing code) Using

Basic method

Using alternative method for nonphysician

services Difference

between basic and alternative

method Nonphysician Services

Chemotherapy, subcutaneous or intramuscular (96400) $56.90 $5.07 -91%
Injection, (90782) 8.43 3.99 -53 Chemotherapy, push technique (96408) 48.22
36.23 -25 Chemotherapy, infusion method (96410) 70.10 57.97 -17 Intravenous
infusion therapy, 1 hour (90780) 47.54 41.66 -12 Immunotherapy, one
injection (95115) 13.86 14.49 5 Chemotherapy, infusion method add- on
(96412) 31.32 43.11 38 Injection, intravenous (90784) 11.29 17.75 57

Physician Services

Bone biopsy, trocar/ needle (20220) 96.54 181.95 88 Chemotherapy, into
central nervous system (96450) 128.09 255.43 99 Set radiation therapy field
(77290) 124.70 263.48 111 Chemotherapy, intracavitary (6445) 148.14 315.53
113 Bone marrow aspiration (85095) 77.07 168.67 119

Note: 1999 Medicare utilization data were used to estimate practice expense
payments. All payments are for services performed in a physician?s office.
The basic method is used to calculate practice expense payments for all
physician services. The alternative method is used to calculate practice
expense payments for nonphysician services.

Source: GAO analysis of practice expense payments under the Medicare fee
schedule for 2001.

Payments for oncology?s nonphysician services are 15 percent lower when
calculated under the alternative method than when calculated under the basic
method, while payments for its physician services are 1 percent higher (see
table 4). Across all oncology services, payments are 6 percent

Page 19 GAO- 02- 53 Medicare Physician Fee Schedule

lower when the alternative method is used. 24 Payments to other specialties
that have a large share of nonphysician services are affected differently.
For example, payments for the nonphysician services provided by allergy and
immunology specialists are 13 percent lower when using the alternative
method, while payments for nonphysician services of radiation oncologists
are 14 percent higher. Payments for the physician services of both
specialties increase considerably as a result of the alternative method by
16 percent for allergy and immunology and 20 percent for radiation oncology.

Table 4: Estimated Effect of the Alternative Method on Practice Expense
Payments Compared to the Basic Method, for Selected Specialties, 2001

Specialty Nonphysician services Physician

services All services combined

Oncology -15% 1% -6% Allergy immunology -13 16 2 Otology, laryngology,
rhinology 5 0 0 Radiation oncology 14 20 17

Note: 1999 Medicare utilization data were used to estimate practice expense
payments. More than 25 percent of the services of these specialties are
nonphysician services. The basic method is used to calculate practice
expense payments for all physician services. The alternative method is used
to calculate practice expense payments for nonphysician services that
continue to be paid under this method.

Source: GAO analysis of practice expense payments under the Medicare fee
schedule for 2001.

Recognizing the potential need to modify its practice expense methodology,
HCFA contracted with The Lewin Group to examine practice expense payments
and suggest improvements to the payment method. 25 The contractor raised
concerns that the expense pools of specialties with nonphysician services
may be understated for two reasons. First, it stated that the practice
expense estimates based on the SMS survey may underreport expenses for
nonphysician services because practices that provide only nonphysician
services (such as independent

24 We estimate that using the basic method for establishing payments for
nonphysician services would have increased oncology?s payments by $31
million in 2001. Substituting the estimate of medical supply expenses for
oncology based on the ASCO methodology would have raised payments to
oncologists by an additional $20 million in 2001 if payments were calculated
under the basic method.

25 The Lewin Group, Inc., The Resource- Based Practice Expense Methodology:
An Analysis of Selected Topics (Falls Church, Va., 2001).

Page 20 GAO- 02- 53 Medicare Physician Fee Schedule

laboratories and radiology centers) were not included in the survey and may
have higher practice expenses. Second, it believed that the use of physician
time in estimating the total practice expense pools could understate the
estimate for specialties with nonphysician services, although it
acknowledged that hourly practice expense estimates that include expenses
related to nonphysician services may offset this. It also determined that
indirect expenses are not appropriately allocated to nonphysician services.

The Lewin Group discussed the option of establishing payments for
nonphysician services under the basic method after correcting the allocation
of indirect expense for these services. It also stated that if CMS retains
the alternative methodology, it should consider the option of establishing
specialty- specific practice expense pools for nonphysician services,
instead of the single pool, to account for the differing costs across
specialties. However, the report did not consider the double counting issue,
nor did it address the fact that payments for nonphysician services would
continue to reflect historical charges rather than relative resources, as
required by Congress. CMS said that it plans to evaluate these options and
consider changes to its method for calculating nonphysician services.

While oncologists? average payments equal approximately the same share of
estimated practice expenses as the average for all specialties, the
relationship between payments and estimated practice expenses for different
types of oncology services varies considerably (see table 5). The use of the
alternative method for determining nonphysician service payments and the
requirement for a single payment for each type of service across all
specialties contribute to this variation. Payments for E& M services, which
make up about two- thirds of oncologists? services, are much higher relative
to estimated practice expenses than are payments for other services. In
contrast, payments for nonphysician administered chemotherapy, which
comprises about one- third of oncology services, are a significantly lower
than average share of estimated expenses. Payments Relative to

Estimated Practice Expenses Vary Considerably Across Oncology Services and
Practices

Page 21 GAO- 02- 53 Medicare Physician Fee Schedule

Table 5: Oncologists? Service Mix, Practice Expense Shares, and Estimated
Practice Expense Payments Compared to Estimated Practice Expenses, 2001

Type of oncology service Share of total services

Share of total practice expense

Payments compared to

practice expense

(ratio) a Physician services, total 67.98% 36.61% 1. 60

Evaluation and management 64.89 31.75 1.66 Physician chemotherapy 0. 02 0.
04 2. 07 Other physician services 3.08 4.82 1.21

Nonphysician services, total 32.02% 63.39% 0. 64

Chemotherapy administration 30.90 58.18 0.67 All other nonphysician services
1.11 5.21 0.34

All services 100.00% 100.00% 1. 00

Note: 1999 Medicare utilization data were used to estimate practice expense
payments and expenses. Practice expenses for nonphysician services were
estimated using the basic methodology and a combination of direct expenses
and time to allocate indirect expenses for all services. With these two
exceptions, CMS? methodology was used to calculate practice expenses. a The
ratios in this table have been adjusted so that the average for all oncology
services equals 1. 00.

Source: GAO analysis of practice expense payments under the Medicare fee
schedule for 2001.

These variations in payments relative to expenses across types of services
have implications for different practices and could affect the mix of
services an oncology practice would provide. The practices of individual
oncologists vary considerably in the mix of services they provide (see table
6). While E& M services composed 67 percent of oncology services in 1999,
they made up 84 percent of the services provided by oncologists with small
Medicare practices. Nonphysician services (predominantly chemotherapy
administration) made up more than three times the share of total services
for oncologists with large Medicare practices, compared with oncologists who
had small practices.

Page 22 GAO- 02- 53 Medicare Physician Fee Schedule

Table 6: Mix of Nonphysician and Physician Services Provided by Oncologists,
1999

Type of service Size of Medicare practice Nonphysician

services Physician

evaluation and management

services Other

physician services

Largest practices 34% 63% 3% Smallest practices 10 84 7 Average of all
practice 29 67 4

Note: A practice represents each site where an individual oncologist
provides services. Generally, when a physician provides services at multiple
sites, those services will be reported separately. The largest physician
practices are the top 25 percent of physician practices, by volume of
Medicare services billed; the smallest practices are the bottom 25 percent
of physician practices, by volume of Medicare services billed.

Source: GAO analysis of oncology services, based on HCFA?s 5 percent sample
of 1999 Medicare claims data.

HCFA developed the alternative method for nonphysician services because it
believed the practice expense payments for these services were too low, and
they attributed this to possible inaccuracies in the expert panels?
estimates of resources needed for these services. 26 Regardless of the
accuracy of the panels? expense estimates, the basic method for allocating
indirect expenses for all services, which relies partly on physician work as
the basis for allocation, does not adequately account for the indirect costs
associated with nonphysician services. Because nonphysician services have no
physician work associated with them, they are allocated a lower share of
indirect expenses compared with services that are performed by physicians.

Methods for allocating indirect expenses, other than the current use of
physician work plus direct expenses, could assign these costs more
appropriately across all services. As we noted in a 1999 report, indirect
expenses such as rent, utilities, and office space are more likely to vary
with the time required to perform a service than with the physician?s work,
which also measures the level of skill required to perform the service. 27
For nonphysician services, clinical time could be substituted for physician

26 63 Fed. Reg. 58,814, 58, 821 (1998) (preamble to the final rule with
comment period). 27 Medicare Physician Payments: Need to Refine Practice
Expense Values During Transition and Long Term (GAO/ HEHS- 99- 30, Feb. 24,
1999). Underlying Problem With

Allocation of Indirect Expenses Needs Correction

Page 23 GAO- 02- 53 Medicare Physician Fee Schedule

work to allocate overhead expenses more appropriately. Using only direct
practice expenses to allocate indirect costs is another option, but under
the current fee schedule methodology this option would result in
understating the indirect cost estimates for services provided in hospital
settings and overstating the expenses for office- based services.

In its study of the practice expense methodology, The Lewin Group also
examined the method of allocating indirect expenses. 28 It compared practice
expense estimates using different indirect cost allocation methods across
broad groups of services and specialties. Its analyses showed that for these
groups of services and specialties, practice expenses in most cases did not
change much when the indirect allocation method was changed. Therefore, it
concluded there is no consensus on an appropriate method for allocating
indirect practice expenses and that CMS?s current approach is reasonable.
However, the comparisons did not consistently consider the effect of
averaging the specialty- specific practice expense estimates to determine a
single payment rate. Further, its comparisons indicated how much practice
expense estimates changed relative to expenses estimated with the current
indirect allocation method, which may not be an appropriate benchmark
because it underallocates indirect expenses to nonphysician services and
overallocates them to physician services. The effect of different allocation
methods on nonphysician services was not assessed, even though the current
method is problematic for them as well. Finally, it did not examine the
effects of different allocation methods across individual specialties and
services, even though the effects may have varied considerably.

The basic method for determining practice expense payments under the fee
schedule establishes payments for individual services that are resource-
based and reflect the relative costs of all services provided by all
specialties. Practice expenses for most services are estimated using the
best information available, including national data and expert assessments
of the resources required to perform services. As we have reported before,
because of limitations in the fee schedule methodology and the underlying
data used to establish payments, the payment system needs to be analyzed
thoroughly to determine how it can be improved.

28 The Lewin Group, An Evaluation of Health Care Financing Administration?s
Resource- Based Practice Expense Methodology (Falls Church, Va., 2000).
Conclusions

Page 24 GAO- 02- 53 Medicare Physician Fee Schedule

Our analysis of oncologists? estimated practice expenses and their payments
indicates that oncology has fared as well under the resourcebased fee
schedule as it did under the former charge- based system and compared to
other specialties. Yet oncology was disproportionately affected by the
alternative method HCFA used to calculate payments for nonphysician
services, which failed to address the underlying problem with the allocation
of indirect expenses to all services. Further, the use of the all- physician
average supply expenses in estimating oncology practice expenses is
inappropriate without evidence regarding oncologists? actual supply
expenses. Addressing these two problems is likely to increase practice
expense payments to oncologists.

Other concerns oncology representatives raise about the adequacy of the
practice expense data used to establish payments should also be dealt with.
Addressing these underlying data issues, however, is likely to affect the
practice expense estimates of other specialties as well, so the resulting
effect on payments to oncologists is unclear. This is because payments
reflect relative resource use across all specialties and services and
payments must be budget neutral, meaning that increases and decreases are
balanced so that total payments do not change from these kinds of
adjustments. To ensure appropriate payments across all specialties and
services, CMS needs to use current and accurate practice expense data for
all specialties and refined service- specific expense estimates. The
approach to obtaining these data needs to balance the need for valid,
verifiable information with the administrative resources and provider
burdens that collecting it may entail.

Just as more current and accurate data will affect payments for all
services, refinements to the current practice expense methodology will also
affect payments across all specialties and services. The widely varying
effects of elements of the current fee schedule methodology on specialties
and services underscore the importance of examining the effect of future
refinements on payments in the aggregate, for individual specialties, and
for individual services.

To ensure that practice expense payments for all services under the fee
schedule better reflect the costs of providing services, we are recommending
that the Administrator of CMS:

 examine the effects of adjustments made to the basic methodology across
specialties and types of services and validate the appropriateness of these
adjustments, including the adjustment made to oncologists? reported
Recommendations for

Executive Action

Page 25 GAO- 02- 53 Medicare Physician Fee Schedule

medical supply expenses, giving priority to those having larger impacts on
payment levels;

 change the allocation of indirect expenses so that all services are
allocated the appropriate share of indirect expenses; and

 calculate payments for all services without direct physician involvement
under the basic method, using information on the resources required for each
service, and, if deemed necessary, validate the underlying resourcebased
estimates of direct practice expenses required to provide each service.

We received comments from CMS, the AMA and ASCO on a draft of this report.
The comments and our discussion are presented below.

In comments on a draft of this report, CMS agreed with our general findings
(see Appendix IV). CMS agreed that a better estimate of actual oncology
supply expenses is needed and acknowledged the usefulness of reviewing
indirect cost allocation methods and the importance of this allocation for
practice expense payments. It also noted that the studies conducted by The
Lewin Group to evaluate several different allocation options found no reason
to change the current methodology. CMS also agreed that the alternative
methodology used to calculate payments for nonphysician services needs
further evaluation. It stated, however, that as an interim policy, the
alternative methodology is serving its intended purpose and that changing it
would redistribute payments across specialties. CMS did not indicate that it
plans to implement our recommendations. It also provided a summary of its
ongoing efforts to refine practice expense payments.

In agreeing that a better estimate of oncology supply expenses is needed,
CMS indicated that it has suggested changes to the AMA?s SMS survey
instrument to improve the SMS data, with particular suggestions about supply
expenses. A modified survey instrument is an appropriate step in improving
the data, but there are no assurances that the AMA will implement these
changes. Further, CMS has not indicated that it has any plans to examine the
effects of all of the adjustments made to the basic methodology on payments
across specialties and types of services. We believe this type of systematic
evaluation, followed by targeted refinements to areas with a greater impact
on payments, is necessary to improve practice expense payments. Comments
From CMS

and Others CMS Comments

Page 26 GAO- 02- 53 Medicare Physician Fee Schedule

In its comments, CMS said it would be useful to review the allocation of
indirect expenses in establishing practice expense payments, and it asked
The Lewin Group to do the review. The Lewin Group confirmed the problem with
the current indirect allocation method. As two alternatives to improve the
practice expense payment calculations, it proposed that CMS examine
specialty- specific nonphysician practice expense pools or correct the
indirect allocation method for nonphysician services and then return these
services to the basic method. It acknowledged that any changes to practice
expense payment calculations would result in higher payments for some
specialties and lower payments for others, and it urged caution in
implementing any changes. However, indirect costs are systematically under-
allocated to nonphysician services and over- allocated to physician
services. Further, the alternative method, which was intended to increase
payments for nonphysician services, does not consistently do so and it
inflates payments for some physician services. We believe that CMS should
address these issues consistently across all services. We have added
discussion of The Lewin Group studies to the body of our report.

CMS indicated that it does not intend to eliminate the alternative method
for nonphysician services until it can identify and propose a better
approach. Yet our analysis indicates that this interim approach violates
congressional intent that payments be resource- based and significantly
changes payments for some services. Oncology is one of the specialties that
is disproportionately affected by the interim approach. An improved indirect
allocation method- one that allocates an appropriate share of indirect
expenses to all services, including nonphysician services, combined with
calculating payments for all services under the basic method- would result
in resource- based practice expense payments under Medicare?s physician fee
schedule that reflect the relative costs of providing each service. We
believe that these improvements should be made, even though they will cause
payment redistributions. CMS also made technical comments, which we
incorporated as appropriate.

In its comments, the AMA expressed concern about the scope of the report,
questioning whether it provided enough information to the Congress regarding
the adequacy of payments for outpatient cancer therapy. In this context, it
had concerns about the range of physician groups we consulted and whether we
had reviewed all relevant studies conducted for CMS. The AMA said it would
have liked us to conduct a survey of oncologists? supply costs. The AMA also
said that our discussion about how oncology has fared under the fee schedule
relative to other specialties is inconsistent with our conclusion that
oncology?s concerns AMA Comments

Page 27 GAO- 02- 53 Medicare Physician Fee Schedule

about the data and methods underlying their payments should be addressed.
The AMA also stated that it had ?significant concerns? about our
recommendations. Regarding our first recommendation that CMS examine the
effects of all adjustments, the AMA pointed out that CMS had already
simulated the effects of adjustments made to the basic method. With respect
to our recommendation that the allocation of indirect expenses be changed,
the AMA referred us to The Lewin Group studies. Finally, the AMA said that
the nonphysician practice expense pool and ongoing refinement process
precluded the need for other refinement efforts, as we discussed in our
third recommendation.

To address the AMA?s concerns about the scope of our report, we have added
language to the report to make it clear that we were directed to conduct
three related studies. The report on Medicare payments for drugs was issued
in September 2001. A forthcoming report will examine issues related to the
adequacy of the data underlying the practice expense payments and ways that
CMS could improve these data. That study will necessarily involve
discussions with and input from a variety of physician organizations as the
AMA suggests. In the current report, we addressed the adequacy of Medicare
practice expense payments for outpatient chemotherapy services using
national data on practice expenses to reach our conclusions.

Our analysis and recommendations stress the need for ongoing examination and
refinements to the data and methods underlying Medicare?s practice expense
payments, but this is not inconsistent with our conclusion that oncologists
have fared as well as other specialties under the Medicare fee schedule. We
agree with the AMA, that CMS has simulated adjustments to their basic
methodology, but we believe these simulations should be used to focus on-
going refinement efforts. As discussed earlier, we did consider the work
conducted by The Lewin Group in our analysis and have added a more complete
discussion of its work. We believe that all payments should be calculated
under the basic method because this ensures that, as the Congress has
directed, payments reflect the resource use of each service relative to all
other services rather than historical charges. Finally, we agree that CMS?
ongoing refinement process utilizing information supplied by the AMA is an
appropriate way to identify refinements to service- specific resource
estimates. Using this refinement process will be particularly important if
payments for nonphysician services are established under the basic method
because CMS has indicated that these resource estimates for nonphysician
services need refinement.

Page 28 GAO- 02- 53 Medicare Physician Fee Schedule

In its comments, ASCO expressed concern about the scope of this report.
ASCO?s other comments fall into three broad categories. One set of concerns
focuses on the quality, representativeness, and accuracy of the data used to
establish practice expense payments and our use of these data in our
analysis. A second set has to do with payments for nonphysician services,
which ASCO acknowledges are problematic. Finally, ASCO is concerned that
practice expense payments for nonphysician services do not fully cover their
reported practice expense costs. It states that payments for physician work
and drugs are needed to cover the practice expense payment shortfalls and
that without payments that fully cover costs, oncologists may not provide
chemotherapy services in office settings.

We have added language to the report to make it clear that we were asked to
conduct three related studies, as noted in our response to the AMA?s
comments above. This report addresses the issues raised by the Congress
regarding the adequacy of Medicare practice expense payments for outpatient
chemotherapy services. Our report discusses the data concerns raised by ASCO
and others. To illustrate the possible impact of underlying data
limitations, we simulated the impact on payments of increased medical supply
expenses and a 10 percent increase or decrease in practice expenses. Our
conclusions and recommendations emphasize the importance of representative
and reliable SMS data. Our analyses indicate that the alternative method of
establishing practice expense payments for nonphysician services
significantly changes payments for some services and that indirect expenses
are not appropriately allocated across all services. The report includes a
discussion of two ways of allocating indirect expenses, and we recommend
changes to address the problems with the current method of calculating
payments for nonphysician services. We also note that it is important to
assess the effect of any refinements by examining changes in payments across
all services and specialties. Finally, as we have noted, our prior work
indicates that Medicare?s payments to physicians for drugs far exceed the
reduction in payments that result from the use of the alternative method
used to calculate payments for nonphysician services.

We are sending copies of this report to the Administrator of CMS and
interested congressional committees. We will also make copies available to
others upon request. ASCO Comments

Page 29 GAO- 02- 53 Medicare Physician Fee Schedule

If you have any questions about this report, please call me at (202) 5127119
or Carol Carter, Assistant Director, at (312) 220- 7711. Major contributors
include Gerardine Brennan and Iola D?Souza.

Laura A. Dummit Director, Health Care- Medicare Payment Issues

Page 30 GAO- 02- 53 Medicare Physician Fee Schedule

List of Committees The Honorable Max Baucus Chairman The Honorable Charles
E. Grassley, Jr. Ranking Minority Member Committee on Finance United States
Senate

The Honorable Bill Thomas Chairman The Honorable Charles B. Rangel Ranking
Minority Member Committee on Ways and Means House of Representatives

The Honorable W. J. ?Billy? Tauzin Chairman The Honorable John D. Dingell
Ranking Minority Member Committee on Energy and Commerce House of
Representatives

Appendix I: Scope and Methodology Page 31 GAO- 02- 53 Medicare Physician Fee
Schedule

To conduct this work, we recreated the practice expense component of the fee
schedule for 1999 and 2001 and analyzed the impact of the fee schedule on
aggregate practice expense payments to all specialties and for individual
services. Even though this report focuses on payments to oncologists, a
thorough analysis must consider the entire practice expense payment approach
because payments are intended to reflect relative cost differences across
all services and specialties. We examined payments in 1999 because this was
the first year of the transition from charge- based to resource- based
practice expense values. We analyzed payments in 2001 because they reflect
the most current fee schedule and include the most up- to- date refinements
to the resource- based methodology. We also modeled payments under various
other scenarios, which included: (1) assuming that the supply cost estimate
for oncology was nearly double the current estimate ($ 13. 25 vs. $7.30),
(2) assuming that total practice expense cost estimates for oncology
services were 10 percent higher or lower than current estimates for
oncology, and (3) eliminating the separate methodology developed for
nonphysician services.

To model practice expense payments we used several data sources, including
the American Medical Association?s Socioeconomic Monitoring System (SMS)
survey and several data files required to calculate these payments for each
of the years identified. 1 To estimate practice expense payments, the
following files were used: the SMS survey results from 1995 through 1998;
the Health Care Financing Administration?s (HCFA) publicuse utilization
files based on 1997 and 1999 claims; HCFA?s public- use physician- time
files for 1999 and 2001; HCFA?s public- use clinical practice expert panel
(CPEP) summary file for 1999 and 2001; the published physician fee schedules
for 1998, 1999, 2000, and 2001; and files provided to us by HCFA that
included imputed physician fee schedule values for anesthesia codes for 1998
through 2001. Consistent with the method used by HCFA as detailed in the
Federal Register, several adjustments were made to the SMS data.

To estimate each service?s practice expense in table 5, we used the Centers
for Medicare and Medicaid Services?( CMS) basic methodology for calculating
resource- based practice expense payments with two variations. 2 These
variations were intended to account for weaknesses we

1 CMS provides detail on the data required to calculate the physician fee
schedule practice expense payments on its Web site at the following address:
http:// www. HCFA. gov/ stats/ resource. htm.

2 See appendix II for a detailed description of CMS? basic methodology.
Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 32 GAO- 02- 53 Medicare Physician Fee
Schedule

identified in the current nonphysician services payment approach. First, we
did not use the alternative method to calculate payments for the
nonphysician services- all services were calculated using the basic method.
Second, to allocate indirect costs we used time- physician time for
physician services and clinical time for nonphysician services- instead of
physician work. As we noted in a 1999 report, 3 indirect expenses such as
rent, utilities, and office space are more likely to vary with the time
required to perform a service than with the physician?s work. Because the
alternative methodology uses the all- physician average hourly expenses, it
may not be a good estimate of the expenses incurred by oncologists.

The medical supply expense estimate of $13.25 per physician hour was derived
using a methodology suggested by the American Society of Clinical Oncology
(ASCO). Using Medicare claims data, it estimated total drug costs for
oncology of $441 million and medical supply costs of $79 million. These
estimates suggest that medical supplies represent 15 percent of total supply
costs for oncologists. Supply costs (including drugs and medical supplies)
were estimated to be $87.20 per physician hour using SMS data from 1995
through 1997. The medical supply portion would be equal to 15 percent of
that, or $13.25.

We estimated what 2001 charge- based practice expense payments would have
been by using 1998 charge- based payment rates inflated to the 2001 spending
levels.

To analyze the variation in the mix of chemotherapy and physician services
provided by oncologists, we used 1999 Medicare physician claims data. We
based our analysis on each physician?s billing identification number, which
is unique to each site where a physician provides services. This analysis
allowed us to examine the mix of services for each physician billing from
each practice site, but it did not tell us the mix of services for a given
practice in which multiple oncologists provide services. Large physician
practices were defined as the top quartile of service providers, by Medicare
volume, and small physician practices were defined as the bottom quartile.

3 Medicare Physician Payments: Need to Refine Practice Expense Values During
Transition and Long Term (GAO/ HEHS- 99- 30, Feb. 24, 1999).

Appendix I: Scope and Methodology Page 33 GAO- 02- 53 Medicare Physician Fee
Schedule

Throughout this process we held discussions with CMS staff to clarify and
confirm our understanding of their methodology. In addition, we met with
representatives from ASCO and oncology practices to obtain their views on
the practice expense methodology and interviewed oncology researchers to
discuss current chemotherapy administration practices.

Appendix II: Overview of Medicare?s Basic Practice Expense Method and
Adjustments

Page 34 GAO- 02- 53 Medicare Physician Fee Schedule

This appendix details how the Health Care Financing Administration (HCFA)
developed resource- based practice expense payments. 1 Additional details on
earlier proposals and refinements can be found in our earlier reports. 2

The Social Security Act Amendments of 1994 mandated that Medicare pay for
physicians? practice expenses based on the cost of required resources.
HCFA?s method included three basic steps (see figure 1):

1. Estimating practice expense costs for specialties. Data collected in the
American Medical Association?s (AMA) Socioeconomic Monitoring System (SMS)
survey were used to estimate specific practice expense costs for each
specialty per physician hour. Estimates were made in three direct cost
categories (clinical labor, medical equipment, and medical supplies) and
three indirect cost categories (administrative labor, office expenses, and
other expenses). The per hour estimates for each category were multiplied by
the total number of hours in a year spent by physicians in that specialty on
treating Medicare patients. 3 The resulting total expenses for each cost
category were added together to estimate each specialty?s aggregate annual
practice expenses, or ?cost pool.?

2. Allocating total expenses to individual services. The estimated total
practice expense cost pool for each specialty was allocated to individual
services that specialty performs. For direct costs, this allocation was done
with estimates made by clinical practice expert panels (CPEP) convened by
HCFA. These panels enumerated the direct resources (such as nursing time or
medical supplies) that were

1 We relied largely on HCFA?s June 5, 1998, proposed rule (63 Fed. Reg. 30,
818) and November 2, 1998, final rule (63 Fed. Reg. 58, 814). Other sources
included 64 Fed. Reg. 59,380 (Nov. 2, 1999), 65 Fed. Reg. 44, 176 (July 17,
2000), and 65 Fed. Reg. 65, 376 (Nov. 1, 2000).

2 Medicare: HCFA Can Improve Methods for Revising Physician Practice Expense
Payments (GAO/ HEHS- 98- 79, Feb. 27, 1998) and Medicare Physician Payments:
Need to Refine Practice Expense Values During Transition and Long Term (GAO/
HEHS- 99- 30, Feb. 24, 1999). 3 The total hours physicians spent treating
Medicare patients were estimated by multiplying the volume of each procedure
by the amount of time physicians require to perform each procedure and
summing these for all procedures performed by a specialty. HCFA used 1999
Medicare claims data to estimate the volume of services in calculating 2001
practice expense payments. The estimated time a physician spends on each
procedure is a component of the physician work relative value unit (RVU).
Appendix II: Overview of Medicare?s Basic

Practice Expense Method and Adjustments

Appendix II: Overview of Medicare?s Basic Practice Expense Method and
Adjustments

Page 35 GAO- 02- 53 Medicare Physician Fee Schedule

used to deliver each service. The panel estimates were calibrated to the
direct expense pools estimated with the SMS data.

The total indirect cost estimates were allocated to individual services
based on (1) the direct cost estimate for each service and (2) a measure of
physician work involved in the service. These estimates were also calibrated
to the total expense from the SMS data. Finally, direct and indirect cost
estimates were added together to determine total practice expense values per
service for a specialty.

3. Averaging different estimates for services performed by multiple
specialties. Because different specialties often provide the same services,
the specialty- specific practice expense payment estimates had to be
combined to produce one payment per service. To do so, HCFA calculated a
weighted average of the various estimates. Each specialty?s practice expense
estimate for a service was multiplied by the total number of times that
specialty performed the service in a year. The results for all specialties
were then added together. The sum was divided by the total volume of the
services in a year by all specialties, and the result determined the final
practice expense amount. In this way, specialties that perform a given
service frequently have more influence over the payment than specialties
that rarely perform it.

HCFA made several adjustments to the underlying data and modifications to
the basic method to compensate for shortcomings in the basic methodology and
limitations in the data used to establish payments and to update payments.

1. The physician specialty groups reflected in the SMS data were not the
same as the physician specialty groups used by HCFA in establishing
payments. The SMS reports practice expense estimates for 26 specialties,
while HCFA used over 65 specialty categories. To create practice expenses
for all 65- plus specialties, HCFA matched AMA data to its own specialty
categories based on judgments about the best fit.

2. To address perceived low payments for nonphysician services, HCFA
developed an alternative method to calculate payments for these services,
using historical charge- based cost estimates, which it implemented in the
first year of resource- based practice expense payments (see appendix III
for a description of this alternative method). Recognizing that this
alternative method did not always Adjustments to the

Resource- Based Methodology

Appendix II: Overview of Medicare?s Basic Practice Expense Method and
Adjustments

Page 36 GAO- 02- 53 Medicare Physician Fee Schedule

increase payments for the targeted services, HCFA allowed specialties (in
the second year of resource- based practice expense payments) to identify
individual nonphysician services that would ?opt- out? of the separate
methodology and revert to having these services? payments set using the
basic methodology for all physician services.

3. HCFA adjusted the payment rates for services that include both physician
and nonphysician services in performing them. For example, an x- ray
includes a nonphysician activity (taking and developing the film) and a
physician activity (interpreting the film). These services can be billed
together if both are performed in the same office, or separately, if each is
performed at separate locations. To ensure that payments were equal,
regardless of billing, it set the payment for the total service equal to the
sum of the payments when billed individually.

4. In an ongoing effort to improve payments, HCFA receives from the Practice
Expense Advisory Committee (PEAC) recommendations for refinements to direct
practice expense estimates for specific services, many of which have been
implemented. 4

5. HCFA has made changes to its estimates of specialties? total expenses
based on supplemental practice expense survey data submitted by the
specialties, in accordance with the provisions of the Balanced Budget
Refinement Act of 1999.

4 The PEAC is a subcommittee of the American Medical Association?s (AMA)
Relative Value Update Committee (RUC), a multispecialty panel of physicians
with representatives from all of the major physician specialty societies
that meets regularly and provides comments on relative values to CMS.

Appendix II: Overview of Medicare?s Basic Practice Expense Method and
Adjustments

Page 37 GAO- 02- 53 Medicare Physician Fee Schedule

Appendix II: Overview of Medicare?s Basic Practice Expense Method and
Adjustments

Page 38 GAO- 02- 53 Medicare Physician Fee Schedule

Figure 1: Detailed Example of HCFA?s Practice Expense Method for Physician
Services SMS cost pools

+

Clinical labor $150,000,000

Medical equipment $50,000,000

Medical supplies $100,000,000

Administrative labor $150,000,000

Office expenses $200,000,000

Other expenses $100,000,000 Clinical

labor $15

SMS practice expense estimates per physician hour

Medical equipment

$5 Medical supplies

$10 Administrative

labor $15

Office expenses

$20 Other expenses

$10

x =

SMS indirect expenses CP $450,000,000

Step 1

CPEP direct cost estimates

per service

Step 2 Direct expenses

Indirect expenses x Medicare

frequency = CPEP CP

SMS CP/ CPEP

CP

=

CP Cost pool CPEP Clinical practice expert panel

Total physician

hours treating Medicare

patients 10,000,000

00001 $20 x 20,000,000 = $400,000,000 $150,000,000 00002 $ 5 x 5,000,000 = $
25,000,000 $425,000,000

$425,000,000 00001 $ 5 x 20,000,000 = $100,000,000 $ 50,000,000 00002 $15 x
5,000,000 = $ 75,000,000 $175,000,000

$175,000,000 00001 $10 x 20,000,000 = $200,000,000 $100,000,000 00002 $20 x
5,000,000 = $100,000,000 $300,000,000

$300,000,000

For Specialty A, estimate the average practice expenses for six different
expense categories

Allocate Specialty A?s total practice expenses to individual services

CPS Cost per service SMS Socioeconomic Monitoring System

A

Appendix III: Overview of Medicare?s Alternative Method for Calculating
Practice Expenses for Nonphysician Services

Page 39 GAO- 02- 53 Medicare Physician Fee Schedule

Source: GAO Analysis Appendix III: Overview of Medicare?s Alternative Method
for Calculating Practice

Expenses for Nonphysician Services

SMS indirect CP/ CPEP- based

indirect CP Scaling

factor

Step 2 x

CPEP direct cost estimates

per service = SMS CPS

SMS clinical

labor CPS

=

0.35 00001 $20 x .35 = $7.0 00001 $7.0 + $1.5 + $3.3 = $11.8 00002 $ 5 x .35
= $1.8 00002 $1.8 + $4.4 + $6.6 = $12.8

0.29 00001 $ 5 x .29 = $1.5 00002 $15 x .29 = $4.4

0.33 00001 $10 x .33 = $3.3 00002 $20 x .33 = $6.6

SMS medical equipment

CPS Direct

CPS ++

SMS medical supplies

CPS

+ Physician?s work ($)

Indirect cost allocators

=x Medicare frequency = CPEP- based

indirect CP $ 450,000,000 = 0. 35 00001 $44.8 x .35 = $15.7 + $11.8 = $27.5
$1,290,000,000 00002 $78.8 x .35 = $27.6 + $12.8 = $40.4

= Indirect scaling

factor x

Indirect cost allocators = Indirect

CPS + Direct CPS = Estimated

practice expense CPS

Step 3

Est. practice expense CPS

00001 $27.5 20,000,000 00001 N/ A 0 00001 $27.5 00002 $40.4 5,000,000 00002
$20 50,000,000 00002 $21.9 Specialty A Specialty B

Medicare frequency Est. practice

expense CPS Medicare frequency

Weighted avg. per service 00001 $33 = $44.8 x 20,000,000 = $ 896,000,000

00002 $66 = $78.8 x 5,000,000 = $ 394,000,000 $1,290,000,000

Compute a weighted average of the expenses for services performed by
multiple specialties A

Appendix III: Overview of Medicare?s Alternative Method for Calculating
Practice Expenses for Nonphysician Services

Page 40 GAO- 02- 53 Medicare Physician Fee Schedule

Physicians bill for services that involve little or no physician work and
are performed by other staff. For example, many chemotherapy services are
provided in a physician?s office by a nurse or other health care
professional and billed for by the physician. In response to provider
concerns that payments for these nonphysician services were too low, HCFA
developed an alternative method of calculating payments.

In the alternative methodology, the costs of nonphysician services were
aggregated into what was called a ?zero work? pool for all specialties.
This, in effect created a new zero work specialty. The specialty- specific
cost pools, however, were not reduced by the costs associated with the
nonphysician services. Practice expense payments were then calculated for
each of the nonphysician services, as they were for the other services, but
with these notable deviations from the basic methodology:

 SMS data on average practice expenses for all physicians were used,
instead of specialty- specific practice expense data, to calculate the
nonphysician specialty?s practice expense pool.

 Clinical time (including the time of nurses and other clinical personnel)
was substituted for physician time in establishing the cost pool for these
services.

 Direct costs were allocated across services based on historical charges,
rather than the expert panels? estimates of service- specific resource
requirements.

 Indirect cost allocations were based solely on charge- based direct cost
estimates.

There was no need to average payments across specialties for the
nonphysician services because only one payment is estimated for each
nonphysician service.

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Page 41 GAO- 02- 53 Medicare Physician Fee Schedule

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Page 42 GAO- 02- 53 Medicare Physician Fee Schedule

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Page 43 GAO- 02- 53 Medicare Physician Fee Schedule

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Page 44 GAO- 02- 53 Medicare Physician Fee Schedule

Appendix IV: Comments From the Centers for Medicare and Medicaid Services

Page 45 GAO- 02- 53 Medicare Physician Fee Schedule

Related GAO Products Page 46 GAO- 02- 53 Medicare Physician Fee Schedule

Medicare: HCFA Can Improve Methods for Revising Physician Practice Expense
Payments (GAO/ HEHS- 98- 79, Feb. 27, 1998).

Medicare: HCFA Can Improve Methods for Revising Physician Practice Expense
Payments (GAO/ T- HEHS- 98- 105 March 3, 1998).

Medicare Physician Payments: Need to Refine Practice Expense Values During
Transition and Long Term (GAO/ HEHS- 99- 30, Feb. 24, 1999).

Medicare Part B Drugs: Program Payments Should Reflect Market Prices (GAO-
01- 1142T, Sept. 21, 2001).

Medicare: Payments for Covered Outpatient Drugs Exceed Providers? Cost (GAO-
01- 1118, Sept. 21, 2001). Related GAO Products

(201012)

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