Physicians' Markup Over Medicare Rate Varies Greatly by Specialty, Geography

Diana Swift

January 18, 2017

Most US physicians bill patients for more than Medicare pays, and the excess amounts vary substantially by specialty and region, according to a study published in the January 17 issue of JAMA.

The medical specialties that had the largest markup, relative to Medicare rates, are those in which patients do not get to choose their physicians, such as anesthesiology, radiology, pathology, and emergency medicine.

To determine the extent and variation of physician charges, Ge Bai, PhD, CPA, and Gerard F. Anderson, PhD, from Johns Hopkins University in Baltimore, Maryland, analyzed 2014 data from the Centers for Medicare & Medicaid Services database, including specialty, practice location, Medicare utilization, payment, and submitted charges.

They then calculated the excess charges ratio by dividing submitted charges by Medicare allowable amounts for medical services for each physician. (The Medicare allowable amount is adjusted for local cost of living and other factors and includes the Medicare payment plus the deductible and coinsurance amounts.)

Overall, the median charge-to-Medicare ratio was 2.5 (interquartile range [IQR], 1.8 - 3.6) among 429,273 doctors across 54 specialties. The ratio ranged from 1.0 to 101.1 across individual physicians.

The authors note that the ratio represents the upper limit of a physician's actual excess charge. "It may not be what a patient actually pays, but is useful for interspecialty and interregion comparisons," Dr Bai and Dr Anderson write.

After analysis by specialty, the authors found that anesthesiology had the highest median ratio at 5.8 (IQR, 4.5 - 7.9) and general practice had the lowest at 1.6 (IQR, 1.3 - 2.2).

Other specialties in the top quartile, according to median ratio, were interventional radiology at 4.5 (IQR, 3.3 - 6.6), emergency medicine at 4.0 (IQR, 3.0 - 5.4), pathology at 4.0 (IQR, 3.0 - 5.0), neurosurgery at 4.0 (IQR, 2.9 - 5.3), and diagnostic radiology at 3.8 (IQR, 3.1 - 4.7).

By contrast, those in the lowest quartile, in addition to general practice, were family practice at 1.8 (IQR, 1.5 - 2.3), dermatology at 1.8 (IQR, 1.4 - 2.3), allergy/immunology at 1.7 (IQR, 1.4 - 2.1), and psychiatry at 1.7 (IQR, 1.7 - 2.2).

Median ratios also varied by state, ranging from 2.0 in Hawaii and Michigan to 3.8 in Wisconsin. Whereas physician-dense states such as California (41,075 doctors) and New York (34,138) came in at the 2.5 median, some states with sparser physician populations had higher ratios, with Wyoming (604 doctors) and New Mexico (2518 doctors) both having ratios of 2.6. Vermont (1086 doctors) had a ratio of 2.7, and Iowa (3432 doctors) a ratio of 2.8.

Of the 10,730 doctors with high excess charges, defined as being in the top 2.5% of all physicians, 55% were anesthesiologists and 3% were general practitioners, internists, or family physicians.

Almost a third (32%) of these high-billing clinicians practiced in just 10 of the Unites States' 306 hospital referral regions: East Long Island and Manhattan, New York; Dallas and Houston, Texas; Milwaukee, Wisconsin; Atlanta, Georgia; Camden and Newark, New Jersey; Los Angeles, California; and Charlotte, North Carolina. These 10 regions accounted for 16% of the US physician population, according to the authors.

Physician surcharges were higher for specialties offering patients limited choice of physicians or little opportunity to know physicians' network status. "Patients often have the option to choose their primary care doctor, but usually don't have the option to choose their anesthesiologist, pathologist, ER [emergency room] doctor, or radiologist," Dr Bai told Medscape Medical News. "This distinction, whether patients have options or not to choose doctors, can explain why some specialists have much higher charge ratios than others."

He added that he and Dr Anderson were surprised that the charge ratios presented such a systematic pattern and that doctors with the highest markups are often those that patients do not get to choose.

"To our knowledge, there is no study indicating that Medicare systematically underpays these specialties compared with other specialties," Dr Bai and Dr Anderson write. "Therefore, the relatively high excess charges of these specialties are more likely to be caused by interspecialty variation in charges than by interspecialty variation in Medicare allowable rates."

As for geographic differences in charges, Dr Bai told Medscape Medical News, "We think it might be due to regional differences in practice norms and consolidation. To prove this will be an interesting topic for future studies."

He cautioned that their results may not be generalizable to private or other insurance.

"Although some out-of-network physicians may offer discounts from their full charges, many patients receive unexpected medical bills," write the authors.

Last year, for example, a study found that 22% of emergency department patients received unexpected bills for extra charges not covered by their insurance carriers.

Patient protection is in order. "As the health insurance market shifts toward more restrictive physician networks and high-deductible plans, protecting uninsured and out-of-network patients from high medical bills should be a policy priority," the authors write, pointing to a 2015 law in New York State protecting patients from surprise bills by out-of-network physicians and charges for emergency services.

The authors have disclosed no relevant financial relationships.

JAMA. 2017;317(3):315-318. Abstract

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