Consequences of Reimbursement Changes

Bladder cancer is a high-cost disease.  It generates a number of procedures for treatment and monitoring.  Medicare has borne much of this expense.  Many of the procedures could be done in either an office or hospital setting, with the outpatient being significantly less costly.  To encourage use of the less costly physician setting, Medicare in 2005 raised outpatient fees, in some cases by several times the prior amount, while keeping inpatient payment relatively flat.  A study published in Cancer examines the experience of one practice following this change.   (Cancer Article) (Abstract Only)

The research looked at procedures done by a ten physician practice before and after the Medicare payment revision.  Basically, office procedures increased, as Medicare wanted, but hospital procedures did not decrease significantly and total costs therefore rose.  Unfortunately, one explanation may be that the physicians just found more patients to do a procedure on when they knew they could make more money per procedure.  Without a comprehensive medical record review by experts, which was not part of the study, it would be difficult to judge the appropriateness of each procedure, but it seems unlikely that such a rapid increase right after a reimbursement change could be completely clinically justified.

The study has obvious limitations because it was at only one practice and there might be other reasons for the results, but it provides a good insight into the effect of Medicare’s attempt to move the site of care.  The study also demonstrates that like any economic entity, a physician practice or a hospital will attempt to maintain, if not grow, revenue; and will utilize whatever incentives or features of a reimbursement system it can to reach that objective.  Policymakers need to consider all possible outcomes from a reimbursement change and ensure that they make a comprehensive enough set of rules to get exactly the result desired.