Private Insurer Physician Payment Differences Unexplained

Janis C. Kelly

September 11, 2013

Some physicians were paid twice as much as others for the same service, and most of that difference remains unexplained by physicians' or patients' characteristics, according to a study reported in the September issue of Health Affairs.

Geographic region explained only about one third of the fee differences, write Laurence C. Baker, PhD, chief of health services research and professor of health research and policy at Stanford University in California, and coauthors.

The researchers conducted a retrospective analysis of more than 400 million private insurer physician claims from 2007 to examine variations in private payments to physicians and determine whether variations could be explained by patients' and physicians' characteristics and by geographic region.

"We found much variation in payments for these routine evaluation and management services. Physicians at the high end of the payment distribution were generally paid more than twice what physicians at the low end were paid for the same service. Little variation was explained by patients' age or sex, physicians' specialty, place of service, whether the physician was a 'network provider,' or type of plan, although about one-third of the variation was associated with the geographic area of the practice," the researchers wrote.

The researchers analyzed a variety of outpatient services, including office visits for new patients, office visits for established patients, office consultations, and preventive visits with established patients. They adjusted for patient age and sex and for physician's specialty and whether the physician was a "network provider" for the health plan. They also adjusted for insurer characteristics, including whether the plan was a preferred provider organization or a noncapitated point-of-service plan. In the geographic analysis, the researchers used the metropolitan statistical area where the physician was in practice.

Office visits accounted for the majority (75%) of appointments in the study, and 85% of claims were from preferred provider organizations.

The investigators found that payments for each of the services studied varied substantially. For example, payment for the most commonly billed service (intermediate office visit patient with an established patient) ranged from less than $50 to more than $85.

For the next most commonly billed appointment, which involved a detailed exam and history for an established patient and was of moderate complexity, the mean payment allowed was $95, with a standard deviation of $25. Similarly, an exam with a new patient that included a detailed exam and history but was low complexity had a mean allowable amount of $107, with a standard deviation of $24.

"For each service, the patient, physician, and plan characteristics explained little of the variation in payments: less than 1 percent in almost all cases," the authors reported. More than half of the difference was not associated with any of the characteristics examined.

The study did not examine whether the variation was associated with differences in quality of care, such that higher quality might have be associated with higher payments. "Given the magnitude of the differences we observed, however, future research should address whether differences in either measured clinical quality or patients' perceptions of quality are large enough to warrant such large payment differentials," the authors write.

The researchers suggested that promoting more price-consciousness on the part of patients might help reduce healthcare spending.

The study was funded by the Robert Wood Johnson Foundation.

Health Aff. 2013;32:1583-1590. Abstract

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