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Nurse Practitioner and Physician Costs of Treating Medicare Beneficiaries

By January 12, 2016Commentary

As the country struggles to contain health spending growth, there are two primary levers.  One is utilization and one is unit prices.  Physicians are relatively expensive clinical labor resources; there are other professionals who may be able to deliver equivalent quality at a lower unit cost, including nurse practitioners and physician assistants.  But do the practice styles of these alternative clinical professionals differ in some way that might also affect health spending.  A study in Health Services Research attempts to explore this question by looking at relative costs in treating Medicare beneficiaries for primary care physicians and nurse practitioners.    (HSR Study)   Depending on state licensing laws, nurse practitioners may or may not be eligible for billing independently in Medicare.  The authors identified, via algorithms, beneficiaries who had either a primary care doctor or a nurse practitioner guiding their care.  They then, using a series of adjustments, compared inpatient spending, all Part B spending, and evaluation and management spending for each type of professional’s beneficiaries.  Medicare mandates that nurse practitioners bill at 85% of the physician fee schedule for the same service (so there is a 15% saving right there) so the authors did an analysis at the actually billing for each professional and at one that adjusted to make the charge to Medicare equivalent.

On an annual basis beneficiaries treated by nurse practitioners had a 7% lower inpatient cost.  And unadjusted for payment differences, all Part B spending was 26% less and evaluation and management spending was 15% lower.  Adjusting for payment differences to the two classes of professionals, there was a 24% reduction in all Part B spending and 17% for E & M.  Adjusted for beneficiary characteristics, the savings are somewhat smaller, but still amount to an average of $2750 per beneficiary per year.  Alternatives to physicians clearly have a lower unit cost.  And it appears they may also lower spending by reducing utilization or using lower cost external resources.  Other research studies have found that nurse practitioners provide equivalent quality compared to physicians.  Physicians have done a lot of turf protecting by restricting the scope of practice of alternative clinical professionals.  It is time for policymakers to remove all those restrictions.  And Medicare should use its preemptive power to allow nurse practitioners and physician assistants everywhere to treat beneficiaries and bill Medicare independently.

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