PHYSICIAN PAYMENT REVIEW COMMISSION

STATEMENT OF PAUL B. GINSBURG, PH.D., EXECUTIVE DIRECTOR
ACCOMPANIED BY LAUREN LEROY, PH.D., DEPUTY DIRECTOR

BUDGET REQUEST

Senator HARKIN. Next we will hear from the Physician Payment Review Commission. If you will take your seats. I am going to just call a recess here for about 3 or 4 minutes, and I will be right back. [A brief recess was taken.]

Senator HARKIN. The subcommittee will resume its sitting.

The Physician Payment Review Commission is requesting $4.4 million for next year. That is an increase of $717,000 over last year. I am pleased to welcome Dr. Paul Ginsburg, Executive Director of the Commission, before the subcommittee. Since its creation in 1986, the Commission has provided Congress with excellent analyses and recommendations regarding Medicare physician payment system reform and cost containment for physician services under Medicare. This is certainly an issue that lies at the heart of improving the quality of and access to health care in both rural and urban areas. I want to hear more about the Commission's activities and plans for 1992.

Dr. Ginsburg, welcome to the subcommittee. Your statement will be made a part of the record in its entirety, and if you could summarize it, I would sure appreciate it.

Dr. GINSBURG. Thank you, Mr. Chairman. I am pleased to come here to discuss the Commission's budget request for fiscal year 1992. Accompanying me is Dr. Lauren LeRoy, the Deputy Director of the Commission.

The Congress continues to find the Commission's work of value as it grapples with difficult health care policy issues. In OBRA 1989 it enacted a comprehensive Medicare physician payment reform that followed very closely the recommendations of the Commission.

Also in that legislation, the Commission was directed to undertake five specific studies and to prepare a second routine annual report on "Medicare Volume Performance Standards." The specific studies include Medicare payment to assistants-at-surgery, geographic payment areas under the fee schedule, payment to nonphysician practitioners, treatment of practice expense and malpractice expense under the fee schedule, and physician payment in the Medicaid Program. Four of these studies have already been completed either on or ahead of schedule with the fifth scheduled for completion by July 1. The four are included in our 1991 annual report which was summarized in testimony before the Senate Finance Committee 2 days ago. I have copies of that statement for the committee.

In OBRA 1990, the Congress substantially broadened the Commission's mandate. In addition to its role in advising on major implementation issues concerning the Medicare fee schedule and making annual recommendations on the volume performance standard, the following topics were added: physician payment in the Medicaid Program, medical malpractice reform, graduate medical education, access to services in inner-city and rural areas, utilization review and quality of care, constraining the costs of health insurance to employers, and licensure and certification of physicians.

The Commission requests $4.4 million for fiscal year 1992. This would be 16 percent higher than the 1991 level, but it is necessary for the Commission to comply with the work requirements of its expanded mandate. The additional funds would support increased staff and additional computer charges for work with new, large databases.

PREPARED STATEMENT

The Commission has set a challenging agenda for the coming year, and I am pleased to present its plans to you and to respond to any questions you have regarding the Commission's work or its budget request.

[The statement follows:]

STATEMENT OF PAUL B. GINSBURG

Mr. Chairman, I am pleased to come before this Committee as the Commission is nearing completion of its fifth annual report to Congress. The Commission was established in 1986 to advise Congress on reforms in the methods used to pay physicians under Medicare. Since then, its mandate has been expanded three times, first to take on the issue of controlling spending for physician services, then to carry out advisory responsibilities in monitoring and updating the Medicare Fee Schedule, and this past year to look beyond Medicare payment to issues affecting access, quality, and cost. Throughout this time, the Commission has maintained a strong record of accomplishments, providing timely information and advice to Congress and considering the views of groups affected by its work in developing its recommendations. The Commission's activities in the past year reflected both a continuation of its work on issues related to refinement and implementation of the Medicare Fee Schedule and a turn toward work on a broader range of issues. OBRA89 set out new assignments for the Commission in both monitoring and updating the fee schedule and conducting studies of specific issues of concern to Congress. Last May, the Commission issued the first of what will become an annual report on setting standards for expenditure growth and updating fees. It also established an expert panel on access to advise it in commenting on the HHS Secretary's annual report on utilization, access and, quality. In addition, it has already completed four congressionally mandated studies and has one remaining study slated to be submitted to Congress in July.

In OBRA90, the Congress set out the most substantial expansion of the Commission's mandate to date. Formally added to its work plan were such topics as Medicaid physician payment, medical malpractice reform, graduate medical education, access to services in inner-city and rural areas, utilization review and quality of care, and constraining the costs of health insurance to employers. Anticipating the interest of Congress in many of these issues, the Commission already had work underway at the time the legislation was enacted. OBRA90 also formalized the role the Commission has played since 1987 in providing advice on budget options affecting Medicare physician payment.

COMMISSION REPORTS TO CONGRESS

The Commission now has two reports due each year. OBRA89 added a report on Volume Performance Standards that is submitted to Congress shortly after the Commission's annual report. In that report, the Commission comments on the Secre

tary's recommendations on setting Volume Performance Standards and updating fees and presents its own recommendations and supporting analyses. The approach proposed by the Commission in this year's report, to subtract two percentage points from the Medicare Actuary's best projection of outlay growth, was adopted by Congress for the Volume Performance Standard for fiscal year 1991.

The Commission will be submitting its 1991 Annual Report to Congress at the end of March. Two days ago, we summarized its major conclusions and recommendations for the Senate Finance Committee, and I have brought copies of my testimony for members of this Committee. As you will see in that testimony, the report covers a broad range of topics that fall into three general categories. First, a substantial portion of the report is devoted to unresolved issues in the implementation of the Medicare Fee Schedule. These include refining the scale of relative work, developing resource-based methods for determining practice expense and malpractice expense, defining geographic payment areas, and calculating the conversion factor.

The report next considers a number of specific policy and technical issues concerning the fee schedule. These include payment to nonphysician practitioners (an issue about which this Committee has expressed particular concern), payment to podiatrists and optometrists, the use of time units in payment of anesthesiologists, and issues related to payment for the anesthesia care team, assistants-at-surgery, and electrocardiograms.

The final chapters of the report reflect a turning point in the Commission's work by introducing new issues contained in the OBRA90 mandate. These include physician payment under Medicaid, improving delivery of health services in rural areas, the impact of Medicare payment reform on private payers, profiling physician practice patterns, and medical malpractice reform. While I cannot go into detail on the 1991 report in this brief statement, I will be pleased to answer questions on any of the issues it contains.

COMMISSION WORK PLAN

With the expansions in the Commission's mandate in the past two years, its work plan has grown to include both broad policy areas encompassed in the payment reform legislation and other issues that go beyond Medicare policy. While the initial work on the key elements of the Medicare Fee Schedule will be completed prior to its implementation in January 1992, the Commission expects important refinements to be made after that date. During the next year, it will continue its work to evaluate and refine additional results from the Hsiao study. It will assess new visit coding policies and develop a strategy to monitor their use. The Commission will also begin to explore the potential for establishing broader units of payment, such as bundling payment for certain tests into visits or establishing a payment for the team of physicians involved in the care of patients undergoing transplant surgery. The Commission's work on the practice expense and malpractice expense components of the fee schedule will focus on refining the resource-based methods, assessing their implications, and developing recommendations on these policies for Congress. The Commission is also very interested in the responses of physicians to the Medicare Fee Schedule and the effects of payment reform on beneficiaries. It will analyze claims data to assess the impact of fee changes on volume of Medicare services and the effect of changes in Medicare payment on private sector outlays. It will also conduct a series of analyses and consult with its Advisory Panel on Access to assess the impact of payment reform on beneficiary access.

This coming year, the Commission will again review the HHS Secretary's recommendations on the annual Volume Performance Standard and fee update and make its own recommendations to Congress. To meet this responsibility, the Commission includes in its work plan a series of analyses to determine how to account for such factors as technology change, inappropriate utilization of services, and inadequate access to services in setting the standard. It will also assess actual expenditure patterns along with other factors that should be taken into consideration in determining annual updates in fees. The Commission plans to continue to explore options for moving from a national Volume Performance Standard to a system of subnational standards.

The Commission will have projects underway in each of the new areas included in its mandate in OBRA90. In many cases, they will build on the initial work reported in its 1991 annual report. After completing a general review of rural health care issues this year, the Commission will consider different types of payment incentives to attract and retain physicians in rural areas and examine measures to increase the availability of health care resources to rural populations. It will also begin a review of access problems in the inner city. The work the Commission is conducting

on Medicaid payment policy will be an important element in any strategy to improve access to care. Using data on physician fee levels from its survey of state Medicaid programs, the Commission will analyze the relationship between Medicaid fees and utilization. It will then develop a series of payment options and assess the impact of each on utilization and expenditures.

Medical malpractice reform is also now on the Commission's agenda. The Commission has begun a broad examination of medical malpractice and will present the framework for its analysis in its 1991 report. During the next year, it will assess the merits of alternative systems to assure quality and compensate avoidable injury and will explore whether these two functions should be addressed by different systems. The OBRA90 mandate reflects congressional concerns about measures to improve the quality and appropriateness of care. The Commission has two projects planned in this area during the next year. It will return to its earlier work on practice guidelines to assess the processes set up through the Agency for Health Care Policy and Research to set priorities for guideline development and to develop and disseminate the guidelines. It plans to hold a second conference to explore, among other things, how practice guidelines can be used by Medicare and other payers for both payment and quality assurance.

The Commission also believes that profiling of physician practice patterns has exciting potential for improving both quality assurance and utilization review. It will explore current and future uses of profiling and will develop profiles to test the use of the technique and assess its potential strengths and weaknesses.

Payment policy affects the specialty choices of physicians, and physician supply affects the number and types of services provided to patients. Recognizing these relationships, the Congress asked the Commission to examine the supply and specialty distribution of physicians and the role of Medicare in financing graduate medical education. The Commission has begun work that over the course of the next year should help to define national goals for graduate medical education and the policy options that are consistent with those goals.

ESTIMATE FOR FISCAL YEAR 1992

The Commission requests $4.495 million for fiscal year 1992. This funding level would cover the annual costs of a staff of 26, provide the resources to support their work, cover expenses for Commission meetings, and permit funding of contracts for analyses and data development to supplement the work of the staff. This request amounts to an increase of $717,000 over the Commission's fiscal year 1991 appropriation. The increase is substantial but one that is considered necessary for the Commission to comply with the work requirements in its expanded mandate. The Commission will be adding staff, working with an expanded number of data bases, and conducting surveys and other analytic work requiring outside expertise.

Staffing, mainframe computer services, and contracts for policy analysis and data development continue to be the major elements of the Commission's annual budget. The Commission has recruited a highly trained and motivated staff that has been productive beyond what its size might suggest because of its expertise and commitment to high quality, timely work. The Commission has found from experience that maintaining its effectiveness in developing useful recommendations for Congress requires that much of its work be conducted or managed by senior professionals. It has also factored in the need in the next year for staff to develop new issue areas included in the OBRA90 expansion of its mandate.

The scope of the Commission's analytic work requiring computer and programming services has increased each year primarily for two reasons: 1) the number of data sets available from outside sources or generated by the Commission has increased and 2) a larger proportion of the Commission's analytic work has involved quantitative analyses because of the nature of the issues before it. Given the need for analytic work to support the Commission's roles in refining the fee schedule and advising on Volume Performance Standards and the expansion of data bases required to analyze new issues in the OBRA90 mandate, adequate funds for data management will continue to be a priority in the Commission's budget request.

The Commission uses outside contractors when conducting analyses internally would be more costly and time consuming, when needed data would only become available to staff under contract with outside groups, or when needed technical expertise does not exist within the staff. The Commission's more detailed appropriation justification submitted to this committee last February outlines the projects that would be conducted with the funds requested. The projects encompass specific aspects of the Commission's work on the relative value scale of the Medicare Fee Schedule, the impact of technology on volume and expenditure growth, monitoring

the effects of payment reform, and Medicaid. Funds would also be used to broaden the expertise available to the Commission on malpractice reform, licensure and certification, and graduate medical education. Finally, these funds would allow preparation of expert papers for Commission conferences on profiling and practice guidelines. The Commission has set a challenging agenda for the coming year. I am pleased to present its plans to you and to respond to any questions you have regarding the Commission's work or its fiscal year 1992 budget request.

COMPARISON OF FISCAL YEAR 1991 TO 1992 BUDGET AUTHORITY, OUTLAYS, AND FULLTIME EQUIVALENT POSITIONS

Paul Ginsburg is Executive Director of the Physician Payment Review Commission. The commission is a permanent entity of Congress, charged with advising on physician payment in the Medicare and Medicaid programs, and on several other issues. The Commission developed the physician payment reform proposal that was recently enacted by the Congress and is widely regarded as having been highly influential. Indeed Dr. Ginsburg was cited as "person of the year" in 1989 by The Washington Report on Medicine and Health.

Prior to his employment by the Commission at its inception in 1986, Dr. Ginsburg was a Senior Economist at the RAND Corporation, where he directed projects on hospital payment, physician payment employee health benefit plans, and preferred provider organizations.

From 1978 to 1984 he was Deputy Assistant Director of the Congressional Budget Office, with responsibilities for health and income security policy. He has been an associate professor at Duke University and an assistant professor at Michigan State University. His doctorate in economics is from Harvard University.

BIOGRAPHY OF LAUREN LEROY

Lauren LeRoy, Ph.D. is Deputy Director of the Physician Payment Review Commission. Dr. LeRoy began her career working on health legislation in the Department of Health, Education, and Welfare in Washington, D.Č. She later became the Assistant Director of the Institute for Health Policy Studies at the University of California, San Francisco and directed its Washington, D.C. office for over six years. Prior to coming to the Commission, Dr. LeRoy served as Associate Director of the Commonwealth Fund Commission on Elderly People Living Alone.

Dr. LeRoy is the author of two books analyzing issues related to physician training and practice as well as numerous articles and book chapters on issues related to the physician and nurse labor markets, health and aging, and physician payment reform.

Dr. LeRoy has served as an advisor to both public agencies and private groups on a number of health policy issues. She received her doctorate in social policy planning at the University of California, Berkeley.

MEDICARE

Senator HARKIN. Thank you very much, Dr. Ginsburg. Last year I had a couple of instances of doctors in Iowa that just opted out of the whole Medicare system. They will not see Medicare patients because of the paperwork. I called up one of them and talked to him