Forced to fight among themselves for Medicare money, some physicians now want to tap the Medicare stream that's earmarked for hospital care.
The concept of paying physicians out of Medicare hospital funds has yet to show up in major legislation. But language that could end up in a final balanced-budget package raises the specter of such a diversion. The language asks HCFA to study whether doctors' costs have risen because of hospital restructuring.
Meanwhile, the American Medical Association has begun studying whether it makes sense to finance hospital and physician care separately. Its move represents a significant turnaround. Three decades ago, lobbying by the AMA played an important role in the creation of separate payment streams for physician and hospital services.
In federal fiscal 1997, Medicare Part A, which covers hospital and institutional care, is expected to pay out $137.4 billion for services from a trust fund financed by payroll taxes. Medicare Part B, for physician services and other ambulatory care, is expected to distribute $74.6 billion, largely from federal general revenues.
The balanced-budget legislation passed by the House would require HCFA to determine the relationship between hospital cost cutting and increased physician overhead costs. Specifically, it asks to what extent reductions in areas such as clerical staff, equipment, nursing and supplies have resulted in reciprocal increases in physicians' expenditures for such items.
For instance, specialty physicians claim shrinking hospital staffs are forcing them to hire their own nurses and technical personnel to assist them during hospital procedures.
Potentially, the House proposal to study that trend sets the stage for the redistribution of Medicare money to physicians from hospitals.
"If such a study were to show this is widespread . . . the logical implications are that HCFA would have to cut the (hospital) prospective pricing rates," said Robert Doherty, vice president of governmental affairs and public policy at the American Society of Internal Medicine.
Indeed, existing AMA policy calls on Congress to transfer from Medi-care Part A to Part B money that was "inappropriately retained" due to hospital cost cutting (Dec. 16, 1996, p. 2).
Hospital representatives said they don't think HCFA will find evidence of such a cost shift.
"If it proved to be the case, and I doubt it, you could arguably say adjustments should be made" to hospital payments, said Thomas Nickels, vice president and deputy director of federal relations at the American Hospital Association. "(But) I find it hard to believe Congress would be interested in siphoning Part A trust fund money and giving it to the doctors."
The language in the House balanced-budget legislation is included in a provision relating to HCFA's plans to change the formula for compensating physicians' practice expenses. The provision would delay the plans and then gradually transition to the new formula. It also would make HCFA gather additional data to support its revisions. Practice expenses represent roughly 40% of physicians' total Medicare payments.
Current law requires that Medicare compensation for physicians' practice expenses be changed to a "resource-based" system by 1998. Then, the same premise would be used to reimburse physicians for their overhead costs as now is used to reimburse them for medical care.
The change has been particularly controversial because it is expected to shift up to $4 billion a year to primary-care physicians from specialists.
Specialists charge that HCFA's proposal for practice expense compensation, which was released last month, relies on flawed data (June 16, p. 4). They also criticize the proposal for advising that physicians seek compensation from hospitals, rather than Medicare, if they incur costs in the hospital for equipment or supplies that normally would be covered under Part A. HCFA dismissed most claims that physicians should be compensated for their clerical and nursing staffs' contributions to inpatient hospital care.
Because it was not part of Senate-passed language, the study of cost shifting between hospitals and physicians has been part of negotiations on a comprehensive balanced-budget package between House and Senate officials. Last week, the Senate had agreed to the House language, although no proposal is final.
Meanwhile, the AMA study on the need for a unified funding source for hospital and physician care is at least partially in reaction to the political vulnerability of Part B. Doctors are blamed for escalating Part B costs, even though other providers are mostly to blame, said George R. Fisher, M.D., the Philadelphia physician who pushed the AMA House of Delegates for a study.
In addition, Part B is viewed as a much greater factor in the federal budget deficit because nearly three-quarters of it is financed by general revenues, he said. "It raises the question of whether the doctors' part of this ought to get a piece of the payroll tax so it's not such a political victim," Fisher said.