Which Specialties Get the Biggest Markups Over Medicare Rates?

Alicia Ault

October 21, 2021

Anesthesiologists charge private insurers more than 300% above Medicare rates, a markup that is higher than that of 16 other specialties, according to a study released recently by the Urban Institute.

The Washington, DC–based nonprofit institute found that the lowest markups were in psychiatry, ophthalmology, ob-gyn, family medicine, gastroenterology, and internal medicine, at 110% to 120% of Medicare rates. Dermatology on average charged just 90% of Medicare rates.

In the middle: cardiology and cardiovascular surgery (130%), urology (130%), general surgery, surgical and radiation oncology (all at 140%), and orthopedics (150%).

 

At the top end were radiology (180%), neurosurgery (220%), emergency and critical care (250%), and anesthesiology (330%).

The wide variation in payments could be cited in support of the idea of applying Medicare rates across all physician specialties, say the study authors. Although lowering practitioner payments might lead to savings, it "will also create more pushback from providers, especially if these rates are introduced in the employer market," write researchers Stacey McMorrow, PhD, Robert A. Berenson, MD, and John Holahan, PhD.

It is not known whether lowering commercial payment rates might decrease patient access, they write.

The authors also note that specialties in which the potential for a fee reduction was greatest were also the specialties for which baseline compensation was highest — from $350,000 annually for emergency physicians to $800,000 a year for neurosurgeons. Annual compensation for ob-gyns, dermatologists, and opthalmologists is about $350,000 a year, which suggests that "these specialties are similarly well compensated by both Medicare and commercial insurers," the authors write.

The investigators assessed the top 20 procedure codes by expenditure in each of 17 physician specialties. They estimated the commercial-to-Medicare payment ratio for each service and constructed weighted averages across services for each specialty at the national level and for 12 states for which data for all the specialties and services were available.

The researchers analyzed claims from the FAIR Health database between March 2019 to March 2020. That database represents 60 insurers covering 150 million people.

Pediatric and geriatric specialties, nonphysician practitioners, out-of-network clinicians, and ambulatory surgery center claims were excluded. Codes with modifiers, J codes, and clinical laboratory services were also not included.

The charges used in the study were not the actual contracted rates. The authors instead used "imputed allowed amounts" for each claim line. That method was used to protect the confidentiality of the negotiated rates.

With regard to all specialties, the lowest compensated services were procedures, evaluation and management, and tests, which received 140% to 150% of the Medicare rate. Treatments and imaging were marked up 160%. Anesthesia was reimbursed at a rate 330% higher than the rate Medicare would pay.

The authors also assessed geographic variation for the 12 states for which they had data.

Similar to findings in other studies, the researchers found that the markup was lowest in Pennsylvania (120%) and highest in Wisconsin (260%). The US average was 160%. California and Missouri were at 150%; Michigan was right at the average.

For physicians in Illinois, Louisiana, Colorado, Texas, and New York, markups were 170% to 180% over the Medicare rate. Markups for clinicians in New Jersey (190%) and Arizona (200%) were closest to the Wisconsin rate.

The authors note some study limitations, including the fact that they excluded out-of-network practitioners, "and such payments may disproportionately affect certain specialties."

Urban Institute. "Commercial Health Insurance Markups Over Medicare Prices for Physician Services Vary Widely by Specialty." Published online October 18, 2021. Abstract

Alicia Ault is a Lutherville, Maryland-based freelance journalist. You can find her on Twitter @aliciaault.

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