Pressured by traditional health insurers and managed-care plans, annual private-sector physician fee increases are slowing almost to the level of yearly Medicare rate boosts, according to a study by the Physician Payment Review Commission.
The study's findings suggest that the resource-based relative value scale, which Medicare adopted two years ago to better control Part B payments to physicians, has begun setting the pace for private-sector physician payments.
In fact, PPRC officials, who presented the study findings last week in Washington, said they believe private-sector insurers are using the Medicare physician fee schedule in their negotiations with physicians. That could affect physicians' income because the Medicare fee schedule is designed to make payments to primary-care physicians and specialists more equitable by increasing payments to primary-care doctors at a faster rate than payments to specialists.
In the study, the PPRC surveyed physician fees paid by an unidentified insurer, the federal employees' Blue Cross and Blue Shield plan, and Marketscan, a database of private insurer payments.
Although private-sector fee increases have outpaced Medicare fee increases, the difference in fee hikes has slowed, said Christopher Hogan, the PPRC's principal policy analyst.
For example, the average annual private-
sector fees paid to primary-care physicians rose 5% from 1989 to 1993, compared with a 4.5% increase in fees paid by Medicare (See chart).
In fact, the study found that the average annual private-sector fee paid to physicians in all specialties rose just 1% last year, Mr. Hogan said.
"There is a movement on the private-payer side toward adopting the Medicare fee schedule," Mr. Hogan said, adding that some Blues plans were using the Medicare fee schedule as a base and then increasing payments 20% to 30%.
Some private-sector observers said they had expected Medicare fees to become the industry standard when the resource-based relative value scale payment system was implemented in 1992.
Attorney Larry Oday, with Vinson & Elkins in Washington, said he originally had been skeptical that private health plans would adopt the resource-based relative value scale because insurers have been slow to accept Medicare DRG payments as the basis for revamping private-sector hospital reimbursement.
David Gans, director for survey operations at the Medical Group Management Association, said the managed-care plans that have negotiated contracts based on the Medicare payment system can save the administrative cost of establishing their own fee schedule.