APPENDIX E. MEDICARE REIMBURSEMENT TO PHYSICIANS

                        PHYSICIAN PAYMENT REFORM

    The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989)
provided for the implementation, beginning January 1, 1992, of
a new payment system for physicians' services paid for by
Medicare. A new fee schedule payment system replaces the
previous reasonable charge payment system. The new system was
enacted in response to two principal concerns. The first was
the rapid escalation in program payments. Over the 1965-89
period, Medicare spending for physicians' services had
increased at an average annual rate of 11.7 percent,
outstripping both the increase in medical care inflation and
the rate of growth in the number of Medicare enrollees. The
second concern was that the use of the reasonable charge
payment had led, in many cases, to payments which were not
directly related to the resources used.
    Under the new system, payments are made under a fee
schedule which is based on a resource-based relative value
scale (RBRVS). The new system is being phased in over the 1992-
96 period. OBRA 1989 also created a volume performance standard
to moderate the rate of growth in physician expenditures.
Further, it increased protections for beneficiaries by placing
more stringent limits on amounts that physicians can bill in
excess of Medicare's approved payment amount. Taken together,
these three elements are referred to as the three-part
physician payment reform package. The legislation also
authorized increased funding for research on patient outcomes
for selected medical treatments and surgical procedures to
assess their appropriateness, necessity, and effectiveness. The
Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) contained
several modifications and clarifications to the OBRA 1989
provisions. Further changes were included in the Omnibus Budget
Reconciliation Act of 1993 (OBRA 1993).
    The Department of Health and Human Services (DHHS) issued
final implementing regulations on November 25, 1991. Additional
regulations were issued on November 25, 1992 and December 2,
1993.

                         MEDICARE FEE SCHEDULE

    The Secretary of DHHS is required to establish a fee
schedule before January 1 of each year that sets payment
amounts for all physicians' services furnished in all fee
schedule areas for the year. The fee schedule amount for a
service is equal to the product of:
          The relative value for the service;
          The geographic adjustment factor (GAF) for the
        service for the fee schedule area; and
          The national dollar conversion factor for the year.
    Relative value unit. The relative value unit (RVU) for each
service has three components.
          The physician work component reflects physician time
        and intensity, including activities before and after
        patient contact.
          The practice expense or overhead component includes
        all categories of practice expenses (exclusive of
        malpractice liability insurance costs). Included are
        office rents, employee wages, physician compensation,
        and physician fringe benefits.
          The malpractice expense component reflects costs of
        obtaining malpractice insurance.
The proportion that each component represents of the total RVU
varies by service.
    Geographic adjustment factor. The second major factor used
in calculation of the fee schedule is the geographic adjustment
factor (GAF) for the fee schedule area. There are currently 217
fee schedule areas nationwide.
    The GAF is designed to account for geographic variations in
the costs of practicing medicine and obtaining malpractice
insurance as well as a portion of the difference in physicians'
incomes that is not attributable to these factors.
    The GAF is the sum of three indices. Separate geographic
practice cost indices (GPCIs) have been developed for each of
the three components of the RVU, namely a work GPCI, a practice
expense or overhead GPCI, and a malpractice GPCI. In effect, a
separate geographic adjustment is made for each component.
However, as required by law, only one-quarter of the geographic
variation in physician work resource costs is taken into
account in the formula. (Table E-25 at the end of this chapter
shows the GAF values for each of the 217 fee schedule areas
nationwide.)
    The three GPCI-adjusted RVU values are summed to produce an
indexed RVU for each locality.
    Conversion factor. The conversion factor is a dollar
multiplier which converts the geographically adjusted relative
value for a service to an actual payment amount for the
service. The law requires the establishment of an initial
dollar conversion factor. The conversion factor is updated
annually beginning in 1992.
    The law required the calculation of an initial dollar
conversion factor which was budget neutral relative to 1991
predicted expenditure levels. This means that if the initial
conversion factor had applied in 1991, Medicare spending would
equal what was projected to be spent under the reasonable
charge payment system in that year. The law also contained
provisions relating to payment calculations during the 1992-96
phase-in period; these are the transition provisions. The
Department's final implementing regulations included an
adjustment to reconcile the calculations required under both
the budget neutrality and transition provisions. (This
adjustment to the ``adjusted historical payment basis'' is
discussed under ``Transition rules'' below.)
    The initial dollar conversion factor was set at $30.42. The
1992 update was set at 1.9 percent. (See discussion of update
calculation below.) Therefore the 1992 conversion factor was
$31.001.
    In 1993 two conversion factors applied--one for surgical
services and one for nonsurgical services. The 1993 conversion
factor for surgical services was $31.96, and the conversion
factor for nonsurgical services was $31.25.
    Beginning in 1994, a third conversion factor applies for
primary care services. The 1994 conversion factor for surgical
services is $35.15; the conversion factor for primary care
services is $33.72; the conversion factor for other nonsurgical
services is $32.91.
    Payment formula. In simplified terms the payment for each
service is calculated as follows:

PAYMENT=   CFx  [(RVUwork x GPCIwork) +
                 (RVUpractice expense x GPCIpractice expense) +
                 (RVUmalpractice x GPCImalpractice)]


    Where:
    CF=conversion factor
    RVUwork=physician work relative value units for the
service;
    GPCIwork=geographic practice cost index value for
physician work in the locality (the value reflects only one-
quarter of the variation in physician work as required by law);
    RVUpractice expense=practice expense or overhead
relative value units for the service;
    GPCIpractice expense=geographic practice cost index
value for practice expense or overhead applicable in the
locality;
    RVUmalpractice=malpractice relative value units for
the service;
    GPCImalpractice=geographic practice cost index value
for malpractice applicable in the locality.

    Transition rules. The law establishes specific payment
rules for the 1992-1996 phase-in period. To determine payments
in 1992, comparisons were made between the fee schedule amount
and the ``adjusted historical payment basis'' (AHPB) in the
payment locality. Generally, the AHPB was equal to the average
Medicare allowance for the service in the locality in 1991,
updated to 1992. Implementing regulations applied a 5.5 percent
downward adjustment to this amount in order to maintain budget
neutrality over the 5-year transition period.
    If the reduced AHPB in a locality was less than 15 percent
over or under the fee schedule amount, payments were made on
the basis of the fee schedule beginning in 1992. A transition
was provided in the case of differences larger than 15 percent.
In 1992, the reduced AHPB amounts were increased or decreased
by 15 percent of the fee schedule amount, whichever was
appropriate. Thus, for a service more than 15 percent below the
fee schedule the payment equaled the reduced AHPB plus 15
percent fee schedule amount. For a service more than 15 percent
above the fee schedule, the payment equaled the reduced AHPB
minus 15 percent fee schedule amount.
    For 1993-95, payment is based on a blend of the previous
year's amount (updated to the current year) and the fee
schedule amount; over the period, a gradually increasing
portion is based on the fee schedule. In 1993, 75 percent was
based on the previous year's amount adjusted by the update
factor specified for the year and 25 percent was based on the
fee schedule amount for the year. The percentage attributable
to the previous year's fee is reduced to 67 percent in 1994 and
50 percent in 1995. All services are paid on the basis of the
fee schedule beginning in 1996.

    MEDICARE VOLUME PERFORMANCE STANDARDS; CONVERSION FACTOR UPDATE

    A key element of the fee schedule is the conversion factor.
One consideration in establishing the annual update in the
conversion factor is whether efforts to stem the annual rate of
growth in physician payments have succeeded. This is measured
by the Medicare volume performance standard (MVPS).
    Medicare volume performance standards. The law requires the
calculation of annual MVPSs, which are standards for the rate
of expenditure growth. The purpose of these standards is to
provide an incentive for physicians to get involved in efforts
to stem expenditure increases. The relationship of actual
expenditures to the MVPS is one factor used in determining the
annual update in the conversion factor.
    Implementation of the MVPS provision began in fiscal year
1990. OBRA 1989 effectively set a performance standard rate of
increase for fiscal year 1990 for all physicians' services and
specified a process for determining the standard in future
years. OBRA 1990 specified that the fiscal year 1991 MVPS rates
of increase were to be set at the estimated baseline percentage
increase in expenditures, minus 2 percentage points. The amount
of this reduction is referred to as the ``performance standard
factor.'' OBRA 1993 increased the performance standard factor
from 2.0 to 3.5 percentage points for 1994, and to 4 percent
points for each succeeding year. OBRA 1990 also provided,
beginning for fiscal year 1991, for the calculation of a
standard for all physicians' services, and for two
subcategories of physicians' services: surgical services and
other services. Beginning in fiscal year 1994, OBRA 1993
required separate MVPS rates of increase for surgical, primary
care, and other nonsurgical services.
    Generally, the Congress is expected to specify the
performance standard rates of increase. The Secretary of DHHS
is required to make a recommendation to the Congress by April
15 each year. In making the recommendation, the Secretary is to
consider inflation, changes in the number of part B enrollees,
changes in technology, appropriateness of care, and access to
care. The Physician Payment Review Commission (PhysPRC), a
Congressional advisory body, is required to review the
Secretary's recommendation and submit its own recommendation by
May 15.
    The Congress is then expected to establish the standard
rates of increase. If the Congress does not specify the MVPS,
however, the rates of increase are determined based on a
default formula. The default standard is the product of the
following four factors reduced by a performance standard
factor:
          Secretary's estimate of the weighted average
        percentage increase in physicians' fees for services
        for the portions of the calendar years included in the
        fiscal year involved;
          Secretary's estimate of the percentage change from
        the previous year in the number of part B enrollees;
          Secretary's estimate of the average annual percentage
        growth in volume and intensity of physicians' services
        for the preceding 5 fiscal years; and
          Secretary's estimate of the percentage change in
        physician expenditures in the fiscal year (not taken
        into account above) which will result from changes in
        law or regulations.
    In fiscal year 1991, the performance standard factor was 1
percentage point; this increased to 1.5 percentage points in
fiscal year 1992, to 2 percentage points in fiscal year 1993,
to 3.5 percentage points in fiscal year 1994, and to 4.0
percentage points in subsequent years.
     The MVPS for fiscal year 1994 is based on the default
formula. It is set at 8.6 percent for surgical services, 10.5
percent for primary care services, 9.2 percent for other
nonsurgical services, and 9.3 percent for all physicians'
services (see table E-1).

       TABLE E-1.--MEDICARE VOLUME PERFORMANCE STANDARDS
                              [In percent]
------------------------------------------------------------------------
                                 Surgical  Nonsurgical  Primary
          Fiscal year                                    Care      All
------------------------------------------------------------------------
1990...........................     (\1\)      (\1\)      (\2\)      9.1
1991...........................       3.3        8.6      (\2\)      7.3
1992...........................       6.5       11.2      (\2\)     10.0
1993...........................       8.4       10.8      (\2\)     10.0
1994...........................       8.6        9.2       10.5      9.3
------------------------------------------------------------------------
\1\Separate performance standards for surgical and nonsurgical services
  not required for fiscal year 1990.
\2\Separate performance standards for primary care services not required
  for fiscal years 1990-93.


                TABLE E-2.--CBO PROJECTIONS OF MEDICARE VOLUME PERFORMANCE STANDARDS\1\
                                           [Fiscal years, in percent]
----------------------------------------------------------------------------------------------------------------
                                                           1993    1994    1995    1996    1997    1998    1999
----------------------------------------------------------------------------------------------------------------
MVP standard overall\2\.................................    10.0     9.3    10.0     4.8     5.0     4.0     4.1
Growth in overall expenditures..........................     5.5     8.9    11.2    10.7    11.1     9.6     9.1
Difference..............................................     4.5     0.4    -1.3    -6.0    -6.1    -5.6    -5.1
Maximum allowable reduction.............................    -2.0    -2.5    -5.0    -5.0    -5.0    -5.0    -5.0
MEI adjustment..........................................    -1.3     9.3     4.5     0.4    -1.3    -5.0    -5.0
Legislative adjustments\3\..............................     0.0    -2.3    -2.2     0.0     0.0     0.0     0.0
Projected MEI (calendar year)...........................     2.7     2.3     2.9     2.8     2.7     2.6     2.5
Adjusted overall MEI (calendar year)....................     1.4     9.3     5.2     3.2     1.4    -2.4    -2.5
----------------------------------------------------------------------------------------------------------------
\1\Because of uncertainty over the redistributive effects of the physician fee schedule on the categories of
  services, CBO projects only an overall default standard for 1995-99.
\2\The 1993 and 1994 Standards were announced by the Secretary of HHS. Standard values for 1995-99 are CBO
  projections.
\3\The increase in physician's fees in 1994 and 1995 were reduced by OBRA 1993 legislation. Surgical services
  were reduced by 3.6% in 1994 and 2.7% in 1995. Medical services (other than primary care) were reduced by 2.6%
  in 1994, 2.7% in 1995. The numbers shown in this table reflect a weighted reduction across all physician
  services that were used by CBO to calculate an overall update.
Source: Congressional Budget Office.

    Table E-2 shows CBO projections of the MVPS and components
of the MVPS through fiscal year 1999.
    Conversion factor update. Annual updates in payments under
the fee schedule are made by updating the dollar conversion
factor. The Congress is generally expected to specify the
percentage increase in the conversion factor. In April of each
year (beginning in 1991), the Secretary of DHHS is required to
recommend to the Congress an update (or updates) in the
conversion factor for the following year.
    In making the update recommendation, the Secretary is
required to consider a number of factors including the
percentage change in actual expenditures in the preceding
fiscal year compared to the MVPS for that year, changes in
volume and intensity of services, beneficiary access to care,
and the increase in the Medicare Economic Index (MEI). The MEI
is a percentage figure which is revised annually; it has been
used in the program to limit annual increases in recognized
fees. The MEI is generally intended to reflect annual increases
in the costs of operating a medical practice; however, for
several years the MEI percentage was set by the Congress. (See
table E-3 for a history of MEI updates.)
    The PhysPRC is required to review the Secretary's update
recommendation and submit its own recommendation to Congress by
May 15 of each year.
    For 1993, separate updates were required for surgical and
nonsurgical services. Beginning with the 1994 update, OBRA 1993
required separate updates for surgical services, primary care
services, and other nonsurgical services. OBRA 1993 also
modified the MVPS by including anesthesia services in the MVPS
for surgical services.
    The Congress either specifies the update to the conversion
factor or a default formula, specified in law, applies. The
default fee update is equal to the Secretary's estimate of the
MEI increased or decreased by the percentage difference between
the increase in actual expenditures and the MVPS for the second
preceding fiscal year. (Thus, the 1994 updates reflect actual
fiscal year 1992 experience.) However, the law specifies a
lower limit on the default update. Before the enactment of OBRA
1993, the maximum downward adjustment in the update was 2
percentage points in 1992 and 1993, 2.5 percentage points in
calendar years 1994 and 1995, and 3 percentage points for any
succeeding calendar year. However, OBRA 1993 changed for
maximum downward adjustment for 1995 and any succeeding year to
5.0 percentage points. There is no restriction on upward
adjustments to the MEI.
    OBRA 1993 required the MEI for calendar year 1994 to be
reduced by 3.6 percentage points for surgical services and 2.6
percentage points for nonsurgical services other than primary
care services. OBRA 1993 also required the MEI to be reduced by
2.7 percentage points in 1995 for both surgical and nonprimary
care nonsurgical services. Primary care services were exempt
from the statutory reductions in the MEI in 1994 and 1995.
    The default formula was used to calculate the update for
calendar year 1994. The 1994 MEI is 2.3 percent. The conversion
factor was increased to 10 percent for surgical services, 7.9
percent for primary care services, and 5.3 percent for other
nonsurgical services. The fee updates were set above the MEI
because the growth rates in spending for both surgical and
nonsurgical services were less than the fiscal year 1992 volume
performance standards. (See table E-3 for previous fee schedule
updates.

       TABLE E-3.--MEDICARE UPDATE FACTORS FROM 1973-1994
------------------------------------------------------------------------
                                                                Annual
              Medicare economic index                 Index    increase
                                                      value    (percent)
------------------------------------------------------------------------
July 1, 1973......................................     1.000       NA
July 1, 1975 to June 30, 1976.....................     1.179       17.90
July 1, 1976 to June 30, 1977.....................     1.276        8.23
July 1, 1977 to June 30, 1978.....................     1.357        6.35
July 1, 1978 to June 30, 1979.....................     1.426        5.08
July 1, 1979 to June 30, 1980.....................     1.533        7.50
July 1, 1980 to June 30, 1981.....................     1.658        8.15
July 1, 1981 to June 30, 1982.....................     1.790        7.96
July 1, 1982 to June 30, 1983.....................     1.949        8.88
July 1, 1983 to June 30, 1984.....................     2.063        5.85
July 1, 1984 to Apr. 30, 1986.....................     2.063     \1\0
May 1, 1986 to Dec. 31, 1986......................     2.148     \2\4.15
Jan. 1, 1987 to Mar. 31, 1988.....................     2.217     \3\3.20
------------------------------------------------------------------------


------------------------------------------------------------------------
                                                         Anesthesiology,
                                 Primary       Other       radiology, &
                                   care       services      overvalued
                                 services                 procedures\8\
------------------------------------------------------------------------
Apr. 1, 1988 to Dec. 31, 1988      \4\3.60      \4\1.00             1.00
Jan. 1, 1989 to Mar. 31, 1990      \5\3.00      \5\1.00             1.00
Apr. 1, 1990 to Dec. 31, 1990      \6\4.20      \7\2.00                0
Jan. 1, 1991 to Dec. 31, 1991         2.00            0                0
------------------------------------------------------------------------


------------------------------------------------------------------------
                                  Primary                      Other
 Physician fee schedule update      care       Surgical     nonsurgical
                                  services     services      services
------------------------------------------------------------------------
Jan. 1, 1992 to Dec. 31, 1992.         1.90         1.90            1.90
Jan. 1, 1993 to Dec. 31, 1993.         0.80         3.10            0.80
Jan. 1, 1994 to Dec. 31, 1994.         7.90        10.00            5.30
------------------------------------------------------------------------
\1\MEI was held constant during fee freeze.
\2\Percentage increase was mandated by Public Law 99-272 and applied
  only to participating physicians.
\3\Percentage increase was mandated by Public Law 99-509 and applied to
  both participating and nonparticipating physicians. Prevailing charges
  of nonparticipating physicians were 96 percent of the prevailing
  charges for participating physicians.
\4\Percentage increase was mandated by Public Law 100-203. Prevailing
  charges for services provided by nonparticipating physicians are 95.5
  percent of the prevailing charges for participating physicians.
\5\Percentage increase was mandated by Public Law 100-203. Prevailing
  charges for services provided by nonparticipating physicians are 95
  percent of the prevailing charges for participating physicians.
\6\Prevailing charges for services provided by nonparticipating
  physicians are 95 percent of the prevailing charges for participating
  physicians.
\7\Percentage increase was mandated by P.L. 100-239. Prevailing charges
  for services provided by nonparticipating physicians are 95 percent of
  the prevailing charges for participating physicians.
\8\Services considered overpriced are specified in table 2 in the
  ``Joint Explanatory Statement of the Committee of Conference''
  submitted with the conference report to accompany P.L. 100-239.
NA--Not applicable.

Source: Health Care Financing Administration, Office of the Actuary,
  Office of Medicare and Medicaid Cost Estimates.

                    LIMITS ON BENEFICIARY LIABILITY

    Medicare pays 80 percent of the fee schedule amount after
the beneficiary has met the $100 deductible for the year. The
beneficiary is responsible for the remaining 20 percent, known
as coinsurance. If a physician does not accept assignment on a
claim, the beneficiary may be liable for additional charges
known as balance billing charges. However, the law places
certain limits on these balance billing charges.
    Assignment/participation. The new payment system retains
the Medicare concepts of assignment and participation. As under
the previous reasonable charge payment system, a physician is
able to choose whether or not to accept assignment on a claim
paid under the fee schedule. In the case of an assigned claim,
the physician bills the program directly and is paid an amount
equal to 80 percent of the fee schedule amount (less any unmet
deductible). The physician may not charge the beneficiary more
than the applicable deductible and coinsurance amounts. In the
case of nonassigned claims, the physician still bills the
program directly; however, Medicare payment is made to the
beneficiary. In addition to the deductible and coinsurance
amounts, the beneficiary is liable for the difference between
the fee schedule amount and the physician's actual charge,
subject to certain limits. This is known as the balance billed
amount.
    A physician may become a participating physician. A
participating physician is one who voluntarily enters into an
agreement with the Secretary of DHHS to accept assignment on
all claims for the forthcoming year. Medicare patients of these
physicians never face balance billing charges.
    The law includes a number of incentives for physicians to
become participating physicians, chief of which is higher
recognized fee schedule amounts. The fee schedule amount for a
nonparticipating physician is only 95 percent of the recognized
amount for a participating physician.
    The law specifies that physicians are required to accept
assignment on all claims for persons who are dually eligible
for Medicare and Medicaid. This includes ``qualified Medicare
beneficiaries'' (QMBs); these are persons with incomes below
poverty for whom Medicaid is required to pay Medicare premiums
and cost-sharing charges.
    Balance billing limits. For several years, the law has
placed limits on balance billing charges. From 1987-90, the
program placed a physician-specific limit on actual charges of
physicians which was known as the maximum allowable actual
charge or (MAAC). Beginning in 1991, new limits were phased in.
    The new limiting charges are set at a maximum percentage
above the recognized payment amount (the prevailing charge in
1991 or the Medicare fee schedule amount in subsequent years)
for nonparticipating physicians. Recognized payment amounts for
nonparticipating physicians are 95 percent of such amounts for
participating physicians. The limiting charges are therefore a
percentage of this reduced amount.
    In 1991, a physician's limiting charge was the same
percentage (not to exceed 25 percent) above the 1991 recognized
payment amount as their 1990 MAAC was above the 1990 recognized
payment amount. This was referred to as the 125-percent limit.
In 1991 only, the limit for evaluation and management services
was 140 percent.
    In 1992, a physician's limiting charge was the same
percentage (not to exceed 20 percent) above the 1992 payment
amount as their 1991 limiting charge was above the 1991
recognized payment amount. This was referred to as the 120-
percent limit. For 1993 and subsequent years, the limiting
charge for nonparticipating physicians is 115 percent of the
fee schedule amount.
    Because certain items and services are excluded from the
physician fee schedule, beneficiaries do not have limiting
charge protection for them. OBRA 1993 expanded the scope of the
limiting charge protection, however. Beginning in 1994, the
limiting charge provision applies to drugs and biologicals that
are furnished incident to physicians' services. In addition,
the limiting charge provisions now apply to nonparticipating
suppliers.

            MEDICAL CARE OUTCOMES AND EFFECTIVENESS RESEARCH

    In the fourth part of the physician payment reform package,
Congress created a new agency, the Agency for Health Care
Policy and Research, which replaced the then existing National
Center for Health Services Research in the Public Health
Service. The mission of the new agency is to enhance the
quality, appropriateness and effectiveness of health care
services and access to such services. These goals are to be
accomplished by establishing a broad base of scientific
research and promoting improvements in the clinical practice of
medicine and the organization, financing and delivery of health
care services.
    Specifically, the agency is directed to conduct and support
research, demonstration projects, evaluations, training,
guideline development and the dissemination of information on
health care services and delivery systems, including activities
on: (1) the effectiveness, efficiency, and quality of health
care services; (2) the outcomes of health care services and
procedures; (3) clinical practice, including primary care and
practice-oriented research; (4) health care technologies,
facilities and equipment; (5) health care costs, productivity
and market forces; (6) health promotion and disease prevention;
(7) health statistics and epidemiology; and (8) medical
liability.

                    IMPACT OF MEDICARE FEE SCHEDULE

    The Medicare Fee Schedule was designed to remove many of
the inequities of the previous payment system by shifting
payment away from tests and procedures toward evaluation and
management services. Because the fee schedule was intended to
be implemented in a budget-neutral fashion, total outlays under
the new system were expected to match the outlays that would
have occurred under the previous payment system. In general,
under the new payment system, primary care physicians were
expected to receive higher payments per service, and specialty
physicians were expected to receive lower payments per service.
    The overall payment level under the Medicare Fee Schedule
is established through the conversion factor. In effect, the
conversion factor translates the relative value units for
individual procedures into actual dollar payments. Increaes or
decreases in the overall level of payments are accomplished by
adjusting the level of the conversion factor. In moving from
the former payment system to the fee schedule, DHHS was
required to set the initial conversion factor in a budget-
neutral manner. Inaccuracies in setting the conversion factor
could result in either underpayment to physicians or in excess
outlays by the Medicare program. This calculation of the
conversion factor required DHHS to make a number of important
assumptions regarding both the number and type of services that
would be provided. Of particular importance was the projected
increase in the volume and intensity of services in response to
changes in payment rates. The Department contended that past
experience suggested that implementation of the new payment
system would be accompanied by increases in volume and
intensity of services. To account for these increases, DHHS
made a ``baseline adjustment'' in the conversion factor.
    Using data from 1991, 1992, and 1993, PhysPRC has examined
the initial impact of the Medicare Fee Schedule on physicians.
Table E-4 shows the change in Medicare payment to physicians
between 1991 and 1993, by specialty. Changes in payment
measured from 1991 to 1993 reflect four aspects of payment
reform: two years of transition to the Medicare Fee Schedule,
the uniform upate for 1992, the differential update for
surgical and nonsurgical services for 1993, and refinements to
the relative values for 1993.
    From 1991 to 1993, physicians' payments per service
declined by 4 percent. Surgical specialties had about an 8
percent reduction in payment per service compared with the 2
percent increase for medical specialties. Specialties that
predominantly provide evaluation and management services fared
better. Payments to general and family practitioners increased
by 17 percent over the two-year period, while those to
internists rose by 2 percent. Pathologists and thoracic
surgeons had the largest reduction of 16 percent, followed by
gastroenterologists, radiologists, and cardiologists with
reductions ranging from 10 percent to 12 percent.
    The total Medicare payment a physician receives depends not
only on the payment per service but also on changes in the
number and intensity of services billed. Although physicians
had about a 4 percent reduction in payment overall, a 6 percent
increase in the number and intensity of services per physician
led to about a 4 percent increase in total Medicare payment per
physician over the 2-year period.
    While payment rates to a majority of specialties fell, on
average, most of these specialties provided more services.
These increases, however, did not completely offset the
reductions for most surgical specialties which had net
reductions in Medicare payment. With restrictions on balance
billing and higher participation rates, most surgical
specialties had total reductions in Medicare revenue ranging
from 6 percent to 12 percent over the 2-year period. Only
urologists saw no change from 1991 to 1993. With increases in
both payment per service and the number of services provided,
family and general practitioners saw total Medicare payment
increase by 23 percent from 1991 to 1993, while total Medicare
revenue increased by 19 percent.
    Using data from 1991 and 1993, PhysPRC also examined the
initial impact of the Medicare Fee Schedule on physicians by
state. Table E-5 shows the estimated change in Medicare payment
rates by state and service category between 1991 and 1993.
Overall, payment rates for all services declined by 3 percent
from 1991 to 1993, while those for primary care services
increased by 11 percent. Medicare payment rates for all
services declined in all but 13 states. In contrast, payment
rates for primary care services increased in all but 4 states.
Changes in payment rates for all services ranged from a 5
percent increase in Colorado to a 9 percent decrease in Alaska
and Nevada. Payment rates for primary care services increased
substantially in many states, with 19 states experiencing
increases of 20 percent or more. Payment rate changes for
primary care services ranged from a 32 percent increase in
Mississsippi to a 9 percent decrease in Alaska.

                     TABLE E-4.--CHANGE IN MEDICARE PAYMENT, BY SPECIALTY, 1991-93
                                               [Percentage change]
----------------------------------------------------------------------------------------------------------------
                                                                           Volume and
                                                               Medicare    intensity     Medicare     Medicare
                         Specialty                           payment per  of services  payment per   revenue per
                                                               service        per       physician   physician\1\
                                                                           physician
----------------------------------------------------------------------------------------------------------------
Medical....................................................            2            8            8             4
    Cardiology.............................................          -10           19            8             4
    Family/general practice................................           17            6           23            19
    Gastroenterology.......................................          -12           21            8             6
    Internal medicine......................................            2           -4           -2            -6
    Other medical..........................................            0           19           16            12
Surgical...................................................           -8            4           -4            -8
    General surgery........................................           -6            4           -2            -6
    Ophthalmology..........................................           -8            2           -8           -10
    Orthopedic surgery.....................................           -8            4           -4           -10
    Thoracic surgery.......................................          -16           10           -8           -12
    Urology................................................           -4            8            4             0
    Other surgical.........................................           -2            4            2            -2
Radiology/Pathology........................................          -12           16            2             0
    Radiology..............................................          -12           15            0             0
    Pathology..............................................          -16           32           10             6
All Physicians.............................................           -4            6            4             0
----------------------------------------------------------------------------------------------------------------
\1\Includes balance billing.

Note.--For these analyses, ER physicians were redesignated as general practitioners, which lead to substantial
  changes in estimates of payments per service for family and general practitioners and for internists. In
  addition, vascular surgeons were combined with general surgeons, while cardiac surgeons were combined with
  thoracic surgeons.

Source: Physician Payment Review Commission analysis of 1991 and 1993 Medicare claims, 5 percent sample of
  beneficiaries.


 TABLE E-5.--ESTIMATED PERCENT CHANGE IN MEDICARE PAYMENT RATES, BY
               STATE AND CATEGORY OF SERVICE, 1991-93
------------------------------------------------------------------------
                                                     Primary
                 State                      All        care      Other
                                          services   services   services
------------------------------------------------------------------------
Alabama................................         -1         14         -5
Alaska.................................         -9         -9         -9
Arizona................................         -6         -3         -7
Arkansas...............................         -3         21         -8
California.............................         -6          0         -7

Colorado...............................          5         21          2
Connecticut............................         -5          0         -6
Delaware...............................          0         16         -4
District of Columbia...................         -3          6         -5
Florida................................         -7          1         -9

Georgia................................         -2         19         -6
Hawaii.................................         -6         -3         -8
Idaho..................................          2         21         -2
Illinois...............................         -2         15         -6
Indiana................................         -1         19         -6

Iowa...................................          3         28         -1
Kansas.................................         -1         21         -5
Kentucky...............................          1         23         -3
Louisiana..............................         -3         23         -8
Maine..................................          0         18         -5

Maryland...............................         -5          7         -8
Massachusetts..........................         -3          2         -4
Michigan...............................          1         21         -3
Minnesota..............................          1         24         -3
Mississippi............................          4         32         -1

Missouri...............................         -1         17         -4
Montana................................         -1         17         -4
Nebraska...............................         -1         21         -5
Nevada.................................         -9         -6        -10
New Hampshire..........................          4         27         -1

New Jersey.............................          0         17         -3
New Mexico.............................         -2         15         -7
New York...............................         -2          8         -4
North Carolina.........................          0         18         -4
North Dakota...........................         -1         19         -5

Ohio...................................         -3         11         -6
Oklahoma...............................         -1         17         -4
Oregon.................................          1         13         -2
Pennsylvania...........................         -3         12         -6
Puerto Rico and Virgin Islands.........         -5          1         -7

Rhode Island...........................          0         17         -4
South Carolina.........................          2         28         -3
South Dakota...........................         -1         19         -4
Tennessee..............................          0         21         -4
Texas..................................         -2         20         -6

Utah...................................          4         28         -1
Vermont................................          2         22         -4
Virginia...............................          1         20         -3
Washington.............................          0         15         -3
West Virginia..........................         -2          9         -5

Wisconsin..............................          0         14         -3
Wyoming................................          4         21          0

All States.............................         -3         11         -5
------------------------------------------------------------------------
Note.--CPT codes for visit services were converted from 1991 to 1993
  coding before calculating fee changes. Therapeutic radiology services
  and dialysis services were omitted due to difficulties calculating
  fees per unit of service.

Source: PPRC analysis of Medicare 1993 BMAD procedure file and 1993 5
  percent beneficiary Standard Analytic File data. 1993 data are
  calculated from claims incurred in the first six months of 1993 only.


                      SELECTED FEE SCHEDULE ISSUES

    Establishment of relative values. Relative value units
(RVUs) for physician work were based primarily on work done by
a Harvard University research team. DHHS used panels of carrier
medical directors to review comments received on the values
contained in the proposed regulations to fill gaps in the
Harvard relative value scale (RVS), and to resolve identified
anomalies.
    In recognition of that fact that further refinements might
be necessary, DHHS designated the relative work values
implemented on January 1, 1992 as ``initial'' values. Final
RVUs for existing procedure codes under the fee schedule and
interim RVUs for new and revised codes were issued in November
1992 and again in December 1993.
    Due to changes in RVUs for codes reviewed as part of the
refinement process, the addition of new codes to the fee
schedule, and the revisions in payment policies, DHHS
determined that net increases would have added a projected $45
million in expenditures in calendar year 1994. Because certain
revisions to the fee schedule are to be made in a budget-
neutral manner, a uniform adjustment factor of -1.3 percent was
added to all RVUs for 1994. This budget-neutral adjustment
factor is the sum of two different adjustment factors that were
necessary. The $45 million that would have been added to
Medicare payments required an adjustment to all RVUs of -0.1
percent to ensure budget neutrality. Two additional OBRA 1993
changes, elimination of electrocardiogram (EKG) reductions and
new physician reductions, required an adjustment to all RVUs of
-1.2 percent to ensure budget neutrality for these issues.
    OBRA 1993 required that an adjustment be made to practice
expense RVUs for services for which practice expense RVUs
exceed 128 percent of the corresponding work RVUs (and whose
services are performed less than 75 percent of the time in an
office setting). For services meeting these criteria, the 1994
practice expense RVUs were reduced by 25 percent of the amount
by which the practice expense RVUs exceed the 1994 work RVUs.
In 1995 and 1996, the excess, as determined for 1994, will be
reduced an additional 25 percent each year. Practice expense
RVUs will not be reduced to an amount less than 128 percent of
the 1994 work RVU for a service. Certain services that are
provided in office settings at least 75 percent of the time are
exempt from cuts in practice expense RVUs.
    Visit codes. Approximately one-third of Medicare
expenditures for physicians' services are made for medical
visits and consultations; these are referred to as evaluation
and management services. Physicians bill for these services
based on current procedure and terminology (CPT) codes
developed by the American Medical Association (AMA).
    Historically, there were wide variations in the way
physicians used visit codes. To a degree, these differences
could be accommodated under the old reasonable charge payment
system. However, uniform definitions were needed under the new
fee schedule. This is because a single relative value is
assigned to each code nationwide.
    The CPT editorial panel adopted new definitions and new
code numbers for all visit categories, effective January 1,
1992. The physician work relative value units are based on
these new definitions. The new definitions rely primarily on
the clinical content of the visit to differentiate among levels
of care. Most codes also indicate the typical amount of time
spent by a physician in performing the service; this is an
ancillary factor in code selection.
    PhysPRC's analysis of claims data for all of 1992 and the
first half of 1993 reveals some important successes concerning
the new coding system. Physicians appear to be using the new
codes in a more discriminating fashion. For all classes of
visits (for example, office visit with a new patient) fewer
physicians used only one level of service in coding, and more
physicians used all the levels of service. The most substantial
improvements came in hospital visits. Tracking the average
level of service within classes of visits over the first six
quarters demonstrated stable patterns of coding over time.
    Global surgery policy. Medicare carriers have typically
bundled payment for services associated with a surgery into one
code, which is referred to as a global surgical service.
Historically, there have been differences among carriers in the
scope and duration of services included in the global surgery
payment.
    A uniform global surgery policy has been in effect since
January 1992. The services included in the package are all
preoperative services provided on the day before the surgery,
all intraoperative services that are a normal and necessary
part of the surgical procedure, and all related services
provided during a 90-day postoperative period (with the
exception of services provided in connection with return trips
to the operating room). The initial consultation with the
surgeon is outside the global surgical package.
    Specific rules also apply for minor surgeries and
endoscopies. No payment will generally be made for a visit on
the same day as the procedure unless a separately identifiable
service is furnished. A zero or 10 day postoperative period
applies for minor surgeries. (Those with a 10 day period are
listed in an addendum to the final regulations.) There is no
postoperative period for endoscopies performed through an
existing body orifice. Other endoscopies are subject to either
the major or minor surgical service policy, whichever is
appropriate.
    Anesthesia services. For several years, payments to
anesthesiologists were made on the basis of a fee schedule
which predated the RBRVS fee schedule. This anesthesia fee
schedule used a separate set of relative values, known as the
relative value guide, for anesthesia services which were
developed by the American Society of Anesthesiology. Generally,
the number of relative value units was the sum of base units
and time units.
    Generally, the allowable base units from the relative value
guide were used when anesthesia services were integrated into
the overall fee schedule. Unlike the policy for other services,
DHHS temporarily retained the use of actual time in the final
regulations; this was done pending further study of the issue.
The retention of actual time requires that anesthesia services
have a separate conversion factor. The anesthesia conversion
factor in 1994, which reflects updates and budget neutrality
adjusters, is $14.20.
    Anesthesia services may be performed directly by the
anesthesiologist, by a certified registered nurse anesthetist
(CRNA) under the medical direction of an anesthesiologist or by
a nonmedically directed CRNA. If a physician personally
performs the anesthesia service, payment is based on the
anesthesia-specific conversion factor and unreduced base units
and time units with each time unit equivalent to 15 minutes. If
a physician medically directs an anesthesia service on or after
January 1, 1994, the allowance is 60 percent of the allowance
for the same service personally performed by the
anesthesiologist. This percentage is reduced each year so that
beginning January 1, 1998, it is 50 percent.
    The allowance for an anesthesia service furnished by a
medically directed CRNA on or after January 1, 1994 is
calculated at 60 percent of the allowance for the same service
personally performed by the anesthesiologist. This percentage
is reduced each year so that beginning January 1, 1998, it is
50 percent. Anesthesia services furnished by a nonmedically
directed CRNA are calculated based on allowable base and time
units, the same as for anesthesia services personally furnished
by an anesthesiologist, and a statutorily mandated national
conversion factor, that is geographically adjusted. The
nonmedically directed conversion factor is limited by the
physician anesthesia conversion factor for the same payment
area.
    Beginning in 1994, the allowance for the teaching
anesthesiologist's involvement in a single anesthesia case with
an anesthesia intern or resident is determined in the same
manner as the allowance for the anesthesa service personally
furnished by the nonteaching anesthesiologist.
    Radiology services. Prior to 1992, radiology services
performed by radiologists (or physicians for whom radiology
services accounted for at least 50 percent of their Medicare
billings) were paid under a radiology fee schedule. The
relative values were based on values developed by the American
College of Radiology. In 1992, as required by law, the
radiologist fee schedule was integrated into the overall
physician fee schedule. Prior relationships among radiology
services were preserved, while appropriate modifications were
made to develop consistent relationships between the physician
work involved in radiology services and all other physician
services. The work, practice expense, and malpractice RVUS were
integrated separately.
    Special payment rules apply to certain categories of
radiology services. For portable x-ray services, national
relative value units have been established which reflect
equipment set-up costs per procedure. Associated transportation
costs will continue to be priced locally.
    The use of complete procedure codes has been discontinued
for interventional radiological services; this is consistent
with CPT changes. Payment of the full fee schedule amount is
made for the radiological portion (supervision and
interpretation code) of an interpretive radiologic service and
for the primary nonradiologic service (the surgical code). For
any other procedure codes, a reduction applies.
    Payments for electrocardiograms (EKGs). For the 1994 fee
schedule, separate payment for EKG interpretations performed in
conjunction with visits and consultations is restored.
(Separate payment had been barred since January 1, 1992.) The
RVUs for visits and consultations will be reduced by the number
of RVUs that were added to account for EKG interpretations. To
ensure budget neutrality, a 0.3 percent reduction will be made
to all RVUs including EKGs, visits, and consultations. (The 0.3
percent reduction corrects an error made in HCFA's original
calculation in adding EKG RVUs to visit and consultation RVUs.)
To ensure the provision is budget neutral throughout the
remainder of the transition to the physician fee schedule, HCFA
will reduce the 1994 transition payment amount by 0.7 percent.
    New physicians. Prior to January 1, 1994, new physicians
were paid at a reduced rate for the first four years of
practice. This policy did not apply to primary care services or
services furnished in health manpower shortage areas. This
policy was first incorporated in OBRA 1987; it was subsequently
expanded and modified by OBRA 1989 and OBRA 1990. The payment
adjustment was rescinded by OBRA 1993, so Medicare payments for
services furnished by new pysicians and practitioners are now
the same as payments made for the same services furnished by
established physicians. To maintain budget neutrality, a 0.9
percent reduction was applied to all fee schedule RVUs and
transition amounts for physician services (but not anesthesia
services), anesthesia conversion factors, and the prevailing
charge or fee schedule amount for practitioner services.
    Physician pathology services. A limited number of the
services listed in the pathology section of the CPT are
identified as physician pathology services. The remainder are
generally clinical diagnostic laboratory services which are
paid under a separate fee schedule.
    The law requires an adjustment to reflect the technical
component of furnishing physician pathology services through a
laboratory that is independent of a hospital and separate from
a physician's office. DHHS set the technical component at 15
percent of the professional component amount. DHHS also
identified a new category of services--clinical laboratory
interpretation services. Fifteen clinical laboratory codes have
been identified for which a separate payment may be made if the
interpretation is requested by the patient's attending
physician, results in a written narrative report, and requires
exercise of medical judgment by the pathologist.
    Defining geographic payment localities. Under the
reasonable charge system, Medicare used 240 payment localities
nationwide. These payment localities have been retained under
the fee schedule except in five States (Nebraska, North
Carolina, Ohio, Oklahoma, and Minnesota) where physicians
demonstrated overwhelming support for using statewide
localities. There are currently 217 payment localities under
the fee schedule.
    OBRA 1989 required PhysPRC to conduct a study to determine
the feasibility of using an alternative configuration, such as
States or metropolitan statistical areas, for payment purposes
under the fee schedule. PhysPRC recommended use of statewide
fee schedule areas except in States with high intrastate price
variation; in these States, up to five areas would be defined.
DHHS is examining this and other recommendations. A change in
the current locality structure would require a statutory
change.

                PAYMENT FOR CLINICAL LABORATORY SERVICES

    Since 1984, payment for clinical laboratory services has
been made on the basis of a fee schedule established on a
regional, statewide or carrier service area basis. As a matter
of practice, the Secretary has established fee schedules on a
carrier service area basis. The law set the initial fee
schedule payment amount for services performed in physicians'
offices or independent laboratories at the 60th percentile of
the prevailing charge level established for the fee screen year
beginning July 1, 1984. Similarly, the initial fee schedule
payment amount for services provided by hospital-based
laboratories serving hospital outpatients was set at the 62nd
percentile of the prevailing charge level. Subsequent
amendments limited the percentage differential to ``qualified
hospitals.'' A qualified hospital is a sole community hospital
(as that term is used for payment under Medicare's hospital
prospective payment system) which provides some clinical
diagnostic tests 24 hour a day in order to serve a hospital
emergency room which is available to provide services 24 hours
a day, 7 days a week.
    The fee schedule payment amounts have been increased
periodically since 1984 to account for inflation, though
scheduled increases have in some instances been delayed and in
one case did not occur. Allowable annual increases in 1991,
1992, and 1993 are limited to 2 percent. Allowable annual
increases in 1994 and 1995 would be 0 percent.
    Effective April 1, 1988, the law reduced the fee schedule
amounts by 8.3 percent for certain automated tests and tests
(except for cytopathology tests) that were subject to lowest
charge level limits prior to implementation of the fee
schedule. The reduced payment amounts serve as the basis for
all future updates for these services.
    Beginning in 1988, the law established national ceilings on
payment amounts. Initially the ceiling was set at 115 percent
of the median for all fee schedules established for that test.
This percentage has been lowered several times. Beginning
January 1, 1991, the level is set at 88 percent of the median
of all fee schedules for that test. The national ceiling on
payment amounts would be lowered to 84 percent beginning
January 1, 1994, 80 percent beginning January 1, 1995 and 76
percent beginning January 1, 1995.
    Payment for clinical laboratory services (except for those
provided by a rural health clinic) may only be made on the
basis of assignment. The law specifically applies the
assignment requirement to clinical laboratory services provided
in physicians offices. Payment for clincial laboratory services
equals 100 percent of the fee schedule amount; no beneficiary
cost-sharing is imposed.
    Laboratories are required to meet the requirements of the
Clinical Laboratory Improvement Act (CLIA). This legislation,
which focuses on the quality and reliability of medical tests,
was substantially revised in 1988 (CLIA 1988). CLIA 1988
strengthened Federal regulation of laboratories and expanded
Federal oversight to virtually all laboratories in the country,
including physicians office laboratories. Implementing
regulations were issued February 28, 1992; technical and
clarifying corrections were issued January 19, 1993.

                            HISTORICAL DATA

                       ASSIGNMENT RATE EXPERIENCE

    The total number of assigned claims as a percentage of
total claims received by medicare carriers for physicians and
other medical services is known as the total assignment rate.
Initially, the net assignment rate was computed in the same
manner except that it omitted hospital-based physicians and
group-practice prepayment plans which were considered assigned
by definition (this distinction is no longer made). The net
assignment rate declined until the mid-1970's when the rate
leveled off at about 50 percent. Since 1985, the rate has
increased significantly rising to 89.2 percent in 1993. This
reflects both the impact of the participating physician program
as well as the requirement that laboratory services must be
paid on an assigned basis. Chart E-1 and table E-6 show the net
assignment rates for fiscal years 1969-93.

    <CHART E-1>


     TABLE E-6.--NET ASSIGNMENT RATES,\1\ BY YEAR, 1969-93
                              [In percent]
------------------------------------------------------------------------
                                                                Covered
                    Fiscal year                       Claims    charges
------------------------------------------------------------------------
1969..............................................       61.0         NA
1970..............................................       61.2         NA
1971..............................................       60.1         NA
1972..............................................       56.4         NA
1973..............................................       53.4       49.0
1974..............................................       52.2       47.8
1975..............................................       51.9       47.7
1976..............................................       51.0       47.8
1977..............................................       50.5       47.9
1978..............................................       50.6       49.3
1979..............................................       51.1       50.4
1980..............................................       51.4       51.3
1981..............................................       52.2       52.9
1982..............................................       52.8       53.8
1983..............................................       53.5       55.3
1984..............................................       56.4       57.7
1985..............................................       67.7       67.4
1986..............................................       68.0       69.5
1987..............................................       71.7       73.7
1988..............................................       76.3       79.4
1989..............................................       79.3       82.6
1990..............................................       80.9       84.8
1991..............................................       82.5       87.6
1992..............................................       85.5       90.8
1993..............................................       89.2       94.0
------------------------------------------------------------------------
\1\Both measures of assignment exclude claims from hospital-based
  physicians and group-practice prepayment plans that are considered
  assigned by definition.

Source: Health Care Financing Administration, Bureau of Program
  Operations.

    The statistics included in table E-6 are program-wide data.
Assignment rates vary geographically. For example, the
assignment rate (taken as a percent of dollars) for physician
services in fiscal year 1993 ranged from a low of 50.2 percent
in South Dakota to a high of 99.8 percent in Rhode Island. The
national average assignment rate for physicians services during
this period was 93.2 percent (see table E-7).

 TABLE E-7.--PHYSICIAN ASSIGNMENT RATES AS PERCENT OF ALLOWED CHARGES, BY STATE, FOR SELECTED YEARS\1\
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                              Fiscal year--
                 Census division/State                 ---------------------------------------------------------
                                                         1985    1987\2\   1989    1990    1991    1992    1993
----------------------------------------------------------------------------------------------------------------
National..............................................    65.5     70.8     80.6    83.0    86.1    89.4    93.2
New England:
    Maine.............................................    81.5     84.3     91.4    92.4    94.4    96.7    98.0
    New Hampshire.....................................    56.5     58.3     67.8    69.9    80.8    89.4    93.9
    Vermont...........................................    64.3     71.7     93.4    94.7    95.9    97.8    98.6
    Massachusetts\3\..................................    93.7     98.2     99.3    99.5    99.5    99.6    99.7
    Rhode Island......................................    94.0     95.1     97.1    98.7    99.7    99.7    99.8
    Connecticut.......................................    57.6     62.8     80.4    84.7    87.7    91.7    94.7
Middle Atlantic:
    New York..........................................    70.3     73.9     81.1    81.9    84.4    87.7    90.7
    New Jersey........................................    62.3     63.8     70.4    73.0    76.3    80.5    85.4
    Pennsylvania......................................    88.1     91.0     94.9    95.7    98.5    99.1    99.4
East North Central:
    Ohio..............................................    50.8     58.8     77.8    82.6    87.3    92.5    97.7
    Indiana...........................................    49.6     59.2     74.7    77.2    81.5    85.7    92.9
    Illinois..........................................    51.7     59.9     72.4    75.9    78.8    83.2    89.2
    Michigan..........................................    88.2     89.7     93.6    94.5    94.4    95.9    97.8
    Wisconsin.........................................    51.7     54.6     65.6    68.2    71.7    78.2    86.8
West North Central:
    Minnesota.........................................    30.6     39.9     46.1    47.6    52.3    57.1    67.1
    Iowa..............................................    46.9     53.2     67.5    69.8    73.4    78.8    85.6
    Missouri\4\.......................................    50.1     61.2     72.3    74.9    78.5    83.7    91.6
    North Dakota......................................    30.5     36.3     50.3    55.0    67.1    72.1    74.9
    South Dakota......................................    18.7     26.7     38.7    39.2    40.2    43.3    50.2
    Nebraska..........................................    47.3     43.4     59.6    64.9    70.3    76.8    83.8
    Kansas\5\.........................................    72.7     78.7     87.2    88.8    91.9    94.5    96.2
South Atlantic:
    Delaware..........................................    81.8     81.9     88.1    90.5    92.9    95.2    96.8
    Maryland\6\.......................................    81.6     84.6     91.6    91.4    92.8    94.3    96.7
    District of Columbia\7\...........................    78.1     80.5     86.5    87.5    89.4    92.1    94.1
    Virginia\8\.......................................    66.4     73.4     85.1    87.3    89.6    92.5    95.7
    West Virginia.....................................    66.7     76.9     90.3    93.2    95.5    97.2    98.4
    North Carolina....................................    60.3     66.2     79.2    80.8    83.9    88.8    93.7
    South Carolina....................................    64.9     75.4     85.8    87.1    88.9    91.6    94.4
    Georgia...........................................    63.9     69.1     80.5    83.5    86.6    90.3    94.0
    Florida...........................................    62.2     68.6     80.3    84.1    87.6    91.0    95.0
East South Central:
    Kentucky..........................................    50.3     63.5     80.8    84.8    88.8    91.9    95.5
    Tennessee.........................................    55.6     65.5     80.9    84.0    89.5    93.1    96.3
    Alabama...........................................    74.6     91.7     90.1    92.3    94.9    96.6    98.0
    Mississippi.......................................    63.5     73.5     85.4    88.1    90.6    93.1    95.6
West South Central:
    Arkansas..........................................    72.6     81.1     90.3    92.0    93.7    95.4    96.6
    Louisiana.........................................    51.0     67.8     84.8    88.0    91.0    93.8    95.2
    Oklahoma..........................................    39.0     48.6     66.0    68.2    72.8    77.8    85.0
    Texas.............................................    63.0     67.2     78.0    79.9    83.0    87.4    91.6
Mountain:
    Montana...........................................    42.6     42.9     50.7    53.0    54.8    61.3    72.7
    Idaho.............................................    25.2     26.4     33.7    36.1    40.2    40.1    54.1
    Wyoming...........................................    33.8     30.4     40.2    43.9    48.9    57.5    69.0
    Colorado..........................................    56.0     56.8     67.6    70.4    74.1    79.7    86.8
    New Mexico........................................    58.3     57.6     71.7    76.1    80.1    84.9    91.5
    Arizona...........................................    52.8     57.1     72.0    76.2    80.3    84.4    89.6
    Utah..............................................    63.1     69.4     79.9    80.4    83.1    88.4    92.8
    Nevada............................................    81.6     86.8     94.4    96.0    97.4    98.4    99.0
Pacific:
    Washington........................................    45.5     46.6     50.8    54.8    60.8    69.2    74.3
    Oregon............................................    38.7     46.9     58.4    59.9    63.2    69.3    82.1
    California........................................    71.3     74.0     87.7    84.4    87.4    90.2    93.8
    Alaska............................................    54.4     64.3     78.5    79.6    83.2    89.1    93.9
    Hawaii............................................    61.2     72.0     80.7    82.9    85.8    93.1    96.1
----------------------------------------------------------------------------------------------------------------
\1\Rates reflect covered charges for physician claims processed during the period.
\2\The actual participation period was January 1987 through March 1988, and the participation agreements were in
  effect for that time.
\3\Massachusetts enacted a Medicare mandatory assignment provision, effective April 1986. The fact that the
  assignment rates shown here are not 100 percent may be explained by the inclusion in the data base of billings
  by practitioners other than allopathic and osteopathic physicians, which are included in the Medicare
  statutory definition of ``physician''.
\4\For fiscal year 1993, includes data for all counties in Missouri plus two counties on the State border
  located in Kansas.
\5\For fiscal year 1993, includes data for all counties in Kansas excluding two counties on the State border.
\6\For fiscal year 1993, includes data for all counties in Maryland excluding two counties on the State border.
\7\For fiscal year 1993, includes data for DC plus two counties in Maryland located on the State border plus a
  few counties and cities located in Virginia, near the State border.
\8\For fiscal year 1993, includes data for all counties in Virginia excluding a few counties and cities near the
  State border.

Source: Health Care Financing Administration, Bureau of Program Operations.

                  PARTICIPATING PHYSICIAN PROGRAM DATA

    Physician participation rates have increased significantly
since the inception of the program (see tables E-8 and E-9).
For the calendar year 1993 participation period, the physician
participation rate (including limited licensed practitioners)
had risen to 59.8 percent accounting for 85.5 percent of
allowed charges for physician services during the period.

   TABLE E-8.--MEDICARE PHYSICIAN PARTICIPATION RATES: PERCENT OF
 PHYSICIANS AND LIMITED LICENSED PRACTITIONERS WITH AGREEMENTS AND THEIR
                SHARE OF ALLOWED CHARGES, 1984-1993
------------------------------------------------------------------------
                                                           Participating
                                            Percent of      physicians'
                                            physicians        covered
          Participation period                signing      charges as a
                                            agreements      percent of
                                                             total\1\
------------------------------------------------------------------------
October 1984-September 1985.............            30.4            36.0
October 1985-April 1986.................            28.4            36.3
April 1986-December 1986\2\.............            28.3            38.7
January 1987-March 1988.................            30.6            48.1
April 1988-December 1988................            37.3            57.9
January 1989-March 1990.................            40.2            62.0
April 1990-December 1990................            45.5            67.2
January 1991-December 1991..............            47.6            72.3
January 1992-December 1992..............            52.2            78.8
January 1993-December 1993..............            59.8            85.5
------------------------------------------------------------------------
\1\Rates reflect covered charges for physician services processed during
  period.
\2\The actual participation period was May through December of 1986, and
  participation agreements were in effect for that time. However, charge
  data are generally collected by quarter; thus, the data for the last
  three quarters of 1986 are used as a proxy for the participation
  period.

Source: Health Care Financing Administration, Bureau of Program
  Operations.

    Table E-10 shows the percentage of participating physicians
and limited licensed practitioners as a percentage of total
physicians and limited licensed practitioners for each State.
The national average of participating physicians and limited
licensed practitioners continues to increase. By the calendar
year 1993 participation period, this percentage had risen to
59.8.

    TABLE E-9.--PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS, BY SPECIALTY, FOR SELECTED PARTICIPATION
                                                  PERIODS
----------------------------------------------------------------------------------------------------------------
                              Oct. 1985-  Jan. 1987-  Jan. 1989-  Apr. 1990-  Jan. 1991-  Jan. 1992-  Jan. 1993-
          Specialty            Apr. 1986   Mar. 1988   Mar. 1990   Dec. 1990   Dec. 1991   Dec. 1992   Dec. 1993

----------------------------------------------------------------------------------------------------------------
Physicians (M.D.s and
 D.O.s):
    General practice........        27.3        25.6        35.8        39.7        44.0        48.0        55.1
    General surgery.........        33.9        37.2        52.2        55.8        60.5        66.3        73.8
    Otology, laryngology,
     rhinology..............        24.6        27.0        41.2        45.2        49.6        57.0        66.2
    Anesthesiology..........        21.1        20.3        28.3        30.8        36.5        49.3        64.6
    Cardiovascular disease..        35.6        43.2        55.5        60.6        65.4        72.0        78.7
    Dermatology.............        34.0        38.1        48.7        53.4        57.0        61.6        69.8
    Family practice.........        25.5        27.1        39.7        47.2        50.8        57.7        66.1
    Internal medicine.......        32.5        33.6        45.2        48.8        52.6        57.8        66.2
    Neurology...............        34.8        39.2        49.2        53.1        56.1        63.8        71.8
    Obstetrics-gynecology...        29.1        31.5        44.2        48.8        52.6        58.0        65.7
    Ophthalmology...........        27.3        35.1        50.5        55.6        60.0        66.1        73.2
    Orthopedic surgery......        29.0        32.6        49.2        53.7        58.4        65.5        74.9
    Pathology...............        39.6        41.2        50.6        53.4        59.2        65.8        73.3
    Psychiatry..............        30.0        28.6        37.8        41.6        44.1        48.8        53.5
    Radiology...............        41.3        39.8        49.6        55.6        62.0        68.2        74.7
    Urology.................        27.8        30.9        45.6        49.6        53.6        61.7        71.8
    Nephrology..............        50.8        49.7        60.0        66.5        71.7        76.3        82.4
    Clinic or other group
     practice--not GPPP.....        33.8        50.6        67.8        68.7        73.9        77.0        75.5
    Other medical
     specialties............        32.4        30.1  ..........  ..........  ..........  ..........  ..........
    Other surgical
     specialties............        18.2        14.8  ..........  ..........  ..........  ..........  ..........
    Other physicians........  ..........  ..........  ..........        29.2  ..........        35.9        50.5
      Total physicians......  ..........  ..........  ..........        45.5        49.6        55.3        63.5

Limited license
 practitioners (LLP):
    Chiropractor............        25.4        19.7        24.8        26.2        28.6        31.4        35.6
    Podiatry-surgical
     chiropody..............        38.2        33.4        52.6        54.0        59.6        64.2        70.9
    Optometrist.............        44.0        44.1        48.9        54.0        56.9        59.0        62.7
    Other limited license
     practitioners
     (audiologist,
     psychologist, physical
     therapist).............        36.8        30.9        35.3        38.4        36.4        35.8        43.9
    Certified registered
     midwife................  ..........  ..........  ..........        15.2        23.8        40.7        51.0
    Certified registered
     nurse anesthetist......  ..........  ..........  ..........        12.5        26.3        31.3        43.8
      Total limited license
       practitioners........  ..........  ..........  ..........        40.0        40.0        41.0        47.4
Suppliers:
    Independent laboratory..        28.4        37.2        20.1        45.4        49.7        52.4        55.4
    Durable medical
     equipment suppliers....        22.7        16.6        30.1        21.7        23.1        24.2        30.8
    Ambulance service
     suppliers..............        28.6        27.9        43.8        32.1        32.3        34.4        36.4
    Miscellaneous suppliers
     (orthotists,
     prosthetists, portable
     x ray suppliers).......        22.5        15.5        17.5        17.5        17.7        18.2        25.7
      Total supplies........  ..........  ..........  ..........        21.8        22.6        23.7        29.5
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.


TABLE E-10.--PHYSICIAN AND LIMITED LICENSED PRACTITIONER PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS AND
                LIMITED LICENSED PRACTITIONERS, BY STATE, FOR SELECTED PARTICIPATION PERIODS
----------------------------------------------------------------------------------------------------------------
                              Oct. 1985-  Jan. 1987-  Jan. 1989-  Apr. 1990-  Jan. 1991-  Jan. 1992-  Jan. 1993-
            State              Apr. 1986   Mar. 1988   Mar. 1990   Dec. 1990   Dec. 1991   Dec. 1992   Dec. 1993

----------------------------------------------------------------------------------------------------------------
Alabama.....................        58.2        68.8        75.9        74.6        82.7        83.4        85.1
Alaska......................        10.4        27.1        38.8        48.0        53.8        55.1        60.4
Arizona.....................        15.4        28.1        41.2        53.5        61.3        64.5        76.2
Arkansas....................        45.2        42.0        53.1        53.9        59.9        57.8        62.1
California..................        30.0        38.9        54.0        57.7        60.8        62.6        65.9
Colorado....................        28.1        19.5        28.1        33.9        35.3        48.0        55.7
Connecticut.................        22.2        17.4        29.3        32.8        40.8        48.1        55.4
Delaware....................        23.9        31.2        37.5        42.5        43.9        51.9        57.4
District of Columbia........        30.5        28.0        34.4        37.9        39.8        45.9        50.6
Florida.....................        25.7        24.9        32.8        34.4        36.5        41.5        55.6
Georgia.....................        33.1        25.8        49.7        49.5        53.6        57.2        74.9
Hawaii......................        20.6        47.8        53.7        56.8        57.3        64.1        75.9
Idaho.......................        11.0        10.4        16.0        17.3        19.5        22.9        37.1
Illinois....................        23.1        26.7        40.0        42.3        46.9        50.8        57.6
Indiana.....................        18.2        26.9        40.0        42.6        45.1        49.3        55.8
Iowa........................        29.7        25.1        45.3        48.1        51.9        58.8        61.8
Kansas......................        45.4        51.4        61.6        57.1        62.6        70.3        73.2
Kentucky....................        24.3        34.2        50.5        56.4        59.5        64.0        73.6
Louisiana...................        18.8        18.1        32.6        34.6        42.9        44.6        44.0
Maine.......................        35.4        34.2        51.2        48.7        50.3        51.6        52.0
Maryland....................        30.4        30.1        42.8        45.9        45.3        58.7        72.5
Massachusetts...............        48.1        43.8        46.9        50.5        50.8        50.0        50.2
Michigan....................        44.0        32.7        41.7        44.7        53.7        51.7        58.1
Minnesota...................        18.5        22.4        25.4        27.5        29.3        34.4        44.4
Mississippi.................        19.1        23.6        33.4        38.0        42.7        47.9        53.6
Missouri....................        35.2        24.5        39.6        45.7        49.0        51.8        67.5
Montana.....................        24.3        17.0        21.5        23.4        24.8        23.7        54.7
Nebraska....................        20.0        25.7        42.5        49.2        56.5        61.1        70.6
Nevada......................        21.7        33.5        57.0        69.8        72.9        75.4        84.9
New Hampshire...............        26.9        25.9        28.0        30.9        32.7        38.5        43.0
New Jersey..................        18.0        22.7        26.0        27.6        29.6        36.5        42.6
New Mexico..................        17.7        30.8        36.3        45.6        49.7        53.6        66.8
New York....................        20.8        24.1        29.8        30.4        34.6        36.9        40.7
North Carolina..............        39.1        31.4        54.2        52.9        58.1        68.2        72.8
North Dakota................        10.9        20.5        31.7        42.2        43.9        45.8        55.0
Ohio........................        21.7        28.9        46.8        50.8        52.5        57.3        76.6
Oklahoma....................        13.8        20.8        31.6        36.4        39.0        44.4        53.9
Oregon......................        18.5        26.1        36.9        41.7        46.7        51.7        59.2
Pennsylvania................        50.8        32.1        39.0        42.1        45.9        53.0        59.7
Rhode Island................        46.7        50.8        58.8        67.0        67.8        70.3        80.9
South Carolina..............        17.9        25.3        42.1        55.5        57.9        63.0        67.3
South Dakota................         8.0        12.7        20.0        19.6        20.6        23.7        31.6
Tennessee...................        21.1        43.4        57.6        58.4        63.7        67.6        70.5
Texas.......................        19.7        19.4        28.9        36.4        38.9        52.9        61.3
Utah........................        29.3        42.2        54.7        65.1        65.6        69.5        80.3
Vermont.....................        41.5        34.1        40.5        43.8        45.4        54.2        56.5
Virginia....................        29.6        33.6        40.9        46.0        48.1        49.7        52.2
Washington..................        23.6        26.9        31.4        34.7        46.1        53.1        64.7
West Virginia...............        22.9        37.5        59.1        63.2        66.3        68.4        75.9
Wisconsin...................        31.0        35.1        40.0        46.5        46.8        55.5        66.8
Wyoming.....................        18.3        20.3        19.3        34.6        39.1        50.2        53.3
National....................        28.4        30.6        40.7        44.1        47.6        52.2        59.8
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.

    Table E-11 shows the allowed charges of participating
physicans as a percent of total allowed charges, by State, for
several participation periods. This percentage increased
substantially, rising from 36 percent in the October 1984 to
September 1985 period to 85.5 percent in the calendar 1993
participation period.

  TABLE E-11.--ALLOWED CHARGES OF PARTICIPATING PHYSICIANS AS A PERCENT OF TOTAL ALLOWED CHARGES, BY STATE,
                                   FOR SELECTED PARTICIPATION PERIODS\1\
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                              Oct. 1984-  Jan. 1987-  Jan. 1989-  Apr. 1990-  Jan. 1991-  Jan. 1992-  Jan. 1993-
    Census division/State     Sept. 1985     Mar.      Mar. 1990   Dec. 1990   Dec. 1991   Dec. 1992   Dec. 1993
                                            1988\2\
----------------------------------------------------------------------------------------------------------------
National....................        36.0        48.1        62.0        67.2        72.3        78.8        85.5
New England:
    Maine...................        50.9        64.8        79.4        80.5        84.2        89.9        92.4
    New Hampshire...........        40.1        36.0        42.8        46.2        68.3        80.7        88.1
    Vermont.................        37.3        46.8        81.4        85.9        90.2        93.4        94.8
    Massachusetts...........        70.7        89.1        95.4        95.0        96.7        96.3        95.9
    Rhode Island............        68.7        85.8        88.8        95.2        97.6        98.5        98.9
    Connecticut.............        30.7        45.3        65.9        67.9        76.2        82.4        87.9
Middle Atlantic:
    New York................        31.5        40.8        51.7        58.0        63.7        72.2        77.7
    New Jersey..............        21.5        32.8        42.3        49.6        55.2        61.8        72.6
    Pennsylvania............        71.4        75.1        81.6        87.9        92.3        95.4        98.0
East North Central:
    Ohio....................        24.9        41.5        61.9        70.9        79.1        86.3        94.6
    Indiana.................        18.9        43.3        60.6        65.2        70.2        80.9        89.1
    Illinois................        29.4        42.0        58.1        61.8        66.1        72.2        82.2
    Michigan................        55.4        71.9        85.6        86.0        86.5        92.0        95.1
    Wisconsin...............        31.3        31.7        42.7        48.9        45.6        61.5        76.9
West North Central:
    Minnesota...............         9.9        14.6        20.2        25.4        28.6        35.5        49.5
    Iowa....................        28.5        41.0        54.2        57.8        61.9        71.0        80.8
    Missouri\3\.............        26.7        37.5        41.8        40.1        40.4        45.3        67.7
    North Dakota............         6.9        16.0        32.3        45.5        53.2        61.2        65.8
    South Dakota............         3.2        10.4        19.5        21.2        21.1        24.6        36.0
    Nebraska................        30.5        31.8        51.7        54.8        60.3        69.7        79.8
    Kansas\4\...............        48.0          NA        82.5        82.3        86.8        91.3        94.6
South Atlantic:
    Delaware................        57.0        58.5        70.8        76.6        81.7        87.2        93.5
    Maryland\5\.............        57.8        67.4        80.4        83.3        85.6        86.4        87.1
    District of Columbia\6\.        60.3        66.6        73.9        76.8        80.8        85.4        90.1
    Virginia\7\.............        31.0        53.0        69.5        71.2        78.4        84.1        90.9
    West Virginia...........        34.5        59.3        77.5        80.6        85.2        90.0        93.4
    North Carolina..........        34.4        44.9        55.2        63.9        68.3        82.4        87.1
    South Carolina..........        29.9        55.2        68.5        67.6        71.6        79.3        86.6
    Georgia.................        29.3        43.0        50.7        65.9        74.9        82.8        81.6
    Florida.................        30.0        41.9        61.6        68.8        74.9        81.8        89.0
East South Central:
    Kentucky................        22.3        44.7        64.3        72.6        76.9        84.3        90.7
    Tennessee...............        25.1        41.3        57.4        68.5        76.8        86.8        91.8
    Alabama.................        42.5        66.9        81.3        84.9        88.5        91.7        94.9
    Mississippi.............        14.3        44.9        65.3        68.3        73.9        82.1        88.6
West South Central:
    Arkansas................        47.9        68.3        81.0        84.5        86.5        90.0        93.4
    Louisiana...............        16.2        48.2        71.0        76.7        81.2        86.6        89.4
    Oklahoma................        16.6        24.9        39.1        50.0        57.7        62.8        74.0
    Texas...................        26.2        38.9        52.5        56.9        63.6        72.6        81.5
Mountain:
    Montana.................        25.6        23.8        29.9        29.7        34.1        42.7        58.9
    Idaho...................         8.6         9.3        13.2        17.5        21.1        23.5        41.2
    Wyoming.................        15.7        14.1        19.7        25.8        31.9        44.1        61.0
    Colorado................        23.5        34.0        47.7        50.5        55.9        63.5        76.4
    New Mexico..............        34.1        28.1        39.5        51.1        57.8        64.9        78.2
    Arizona.................        32.7        38.3        49.8        60.2        67.8        75.2        83.7
    Utah....................        43.8        58.4        68.9        65.1        75.1        81.8        83.1
    Nevada..................        41.5        63.4        69.9        82.1        87.5        92.3        96.0
Pacific:
    Washington..............        17.5        20.2        26.9        31.8        37.9        45.2        50.7
    Oregon..................        17.3        25.5        34.8        43.3        50.7        59.8        73.6
    California..............        42.2        50.2        67.2        71.2        75.6        80.0        86.6
    Alaska..................        17.2        34.3        50.0        49.3        58.0        70.9        81.3
    Hawaii..................        39.7        53.5        58.6        70.1        74.3        84.7        90.6
----------------------------------------------------------------------------------------------------------------
\1\Rates reflect covered charges for physician claims processed during the period.
\2\The actual participation period is January 1987 through March 1988, and the participation agreements were in
  effect for that time.
\3\For fiscal year 1993, includes data for all counties in Missouri plus two counties on the State border
  located in Kansas.
\4\For fiscal year 1993, includes data for all counties in Kansas excluding two counties on the State border.
\5\For fiscal year 1993, includes data for all counties in Maryland excluding two counties on the State border.
\6\For fiscal year 1993, includes data for DC plus two counties in Maryland located on the State border plus a
  few counties and cities located in Virginia, near the State border.
\7\For fiscal year 1993, includes data for all counties in Virginia excluding a few counties and cities near the
  State border.

Source: Health Care Financing Administration, Bureau of Program Operations.

            PARTICIPATION, ASSIGNMENT, AND CHARGE REDUCTIONS

    Historically the difference between the physician's billed
charge and Medicare's approved or reasonable charge was
referred to as the reasonable charge reduction. Beginning in
1992, with implementation of the fee schedule, the term
reasonable charge reduction no longer applies. Instead, the
term charge reduction refers to the difference between the
physicians' billed charge and the fee schedule amount. Charge
reductions were made on 85.5 percent of unassigned claims in
fiscal year 1993. The average amount of the reduction was 16.9
percent of billed charges, or $17.26 per approved claim.
Beneficiaries were liable for these reduction amounts, although
it is not known how often physicians actually collected from
beneficiaries. The total reduced on all unassigned claims was
$797.5 million in fiscal year 1993.
    Through 1984, approximately the same proportions of
assigned and unassigned claims were reduced (see table E-12),
and were reduced by similar proportions and amounts. From 1984
to 1993, the proportions of assigned and unassigned claims
reduced remained about the same, but the percentage and amounts
of the reductions diverged. The percent and dollar reductions
on assigned claims continued to increase while the percent and
dollar reductions of unassigned claims decreased. This pattern
was due to the imposition of limits on the actual charges of
nonparticipating physicians. That is, the MAAC limits, and the
new balance billing limits beginning in 1991, limited the rate
of increase in prices for unassigned services relative to the
overall increase in reasonable charges. The substantial growth
in the overall percentage of services billed on an assigned
basis also may have contributed to this pattern.
    As a result, total beneficiary liability for charge
reductions on unassigned claims fell. Total liability peaked in
1985 at $2,812.7 million, and declined to $797.5 million by
1993.

 TABLE E-12.--REASONABLE CHARGE REDUCTIONS FOR MEDICARE PART B (EXCLUDES CLAIMS FROM HOSPITAL-BASED PHYSICIANS AND GROUP-PRACTICE PREPAYMENT PLANS)
                                    FOR ASSIGNED AND NOT ASSIGNED CLAIMS, FISCAL YEARS 1975, 1980, AND 1985-1993
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              1975      1980      1985      1986      1987      1988      1989      1990      1991      1992      1993
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of claims reduced:
    Assigned..............................      68.3      80.0      81.7      82.5      83.0      85.5      86.3      87.6      86.7      87.0   \1\88.2
    Not assigned..........................      75.6      83.7      84.6      84.9      82.5      85.7      89.2      89.2      90.7      85.4   \1\85.5
Percentage reduction in charges for
 covered services:
    Assigned..............................      16.4      22.5      27.0      28.4      27.9      29.3      30.9      32.6      35.2      39.2      42.1
    Not assigned..........................      16.6      22.3      25.6      26.6      25.5      24.7      25.2      25.3      24.0      19.7      16.9
Amount reduced per approved claim:
    Assigned..............................    $11.13    $21.81    $33.19    $36.43    $36.98    $39.97    $43.72    $48.22    $54.20    $63.60    $79.49
    Not assigned..........................    $13.45    $21.96    $33.12    $33.15    $31.44    $29.47    $29.67    $28.97    $24.84    $18.95    $17.26
Amount reduced on claims not assigned (in
 millions)................................    $450.1  $1,454.0  $2,571.9  $2,812.5  $2,677.8  $2,312.6  $2,213.7  $2,198.0  $1,948.5  $1,317.0    $797.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Figure may be slightly overstated due to the possibility of a claim being counted more than once because more than one type of reduction is applied.

Source: Health Care Financing Administration, Bureau of Program Operations.

    The impact of charge reductions on unassigned claims was
spread unevenly across the population. Calendar 1993 data show
a 16.4 percent national average reduction on unassigned claims
(see table E-13). Beneficiary liability for these charge
reductions ranged from a high of $95.8 million in New York to a
low of $0.1 million in Rhode Island.

 TABLE E-13.--CHARGE REDUCTIONS FOR UNASSIGNED CLAIMS, BY STATE,\1\
                       JANUARY-DECEMBER, 1993
                      [Dollar amounts in millions]
------------------------------------------------------------------------
                            Covered charges\2\     Percent
                          ----------------------  reduction     Amount
  Census division/State                              in        reduced,
                             Total     Unassign  unassigned   unassigned
                                                   charges    charges\2\
------------------------------------------------------------------------
National.................  $76,655.0   $4,155.2        16.4      $683.4
New England:
    Maine................      333.0        6.3        15.3         1.0
    New Hampshire........      260.8       13.3        14.7         2.0
    Vermont..............      120.7        1.9        15.9         0.3
    Massachusetts\3\.....    2,356.7       10.2        14.2         1.4
    Rhode Island.........      369.2        1.5         9.1         0.1
    Connecticut..........    1,267.8       51.9        14.6         7.6
Middle Atlantic:
    New York.............    6,201.3      495.1        19.3        95.8
    New Jersey...........    2,911.8      312.1        16.6        51.9
    Pennsylvania.........    5,821.7       36.3        15.0         5.4
East North Central:
    Ohio.................    3,345.0       44.4        19.4         8.6
    Indiana..............    1,436.7       92.6        17.0        15.7
    Illinois.............    2,953.0      251.2        17.0        42.6
    Michigan.............    3,261.4       62.1        18.2        11.3
    Wisconsin............    1,143.0      126.6        14.7        18.6
West North Central:
    Minnesota............      704.6      205.1        16.1        33.1
    Iowa.................      647.3       79.8        14.5        11.6
    Missouri\4\..........    1,721.5      115.3         5.4         6.2
    North Dakota.........      184.2       41.0        16.2         6.6
    South Dakota.........      155.6       61.8        15.6         9.6
    Nebraska.............      347.0       50.1        16.1         8.1
    Kansas\5\............      528.4       18.0        14.4         2.6
South Atlantic:
    Delaware.............      243.8        6.5        14.6         0.9
    Maryland\6\..........    1,281.3       35.9        16.4         5.9
    District of
     Columbia\7\.........    1,015.6       49.9        17.9         9.0
    Virginia\8\..........    1,253.0       46.6        14.7         6.8
    West Virginia........      549.7        7.5        17.7         1.3
    North Carolina.......    2,061.8       97.5        16.6        16.3
    South Carolina.......      840.9       43.9        21.4         9.4
    Georgia..............    1,794.9       79.7        20.5        16.4
    Florida..............    7,204.7      272.2        18.6        50.5
East South Central:
    Kentucky.............    1,092.1       34.2        15.9         5.4
    Tennessee............   $1,622.7      $48.8        15.0         7.3
    Alabama..............    1,398.5       22.7        17.0         3.9
    Mississippi..........      660.8       23.0        16.5         3.8
West South Central:
    Arkansas.............      774.9       20.1        17.2         3.5
    Louisiana............    1,319.5       44.4        17.4         7.7
    Oklahoma.............      723.2       81.9        16.9        13.9
    Texas................    4,181.9      270.8        17.1        46.4
Mountain:
    Montana..............      159.6       35.7        17.7         6.3
    Idaho................      140.6       53.6        16.1         8.7
    Wyoming..............       50.2       11.2        15.1         1.7
    Colorado.............      626.0       57.8        17.1         9.9
    New Mexico...........      252.3       17.2        17.1         3.0
    Arizona..............    1,018.4       87.7        16.3        14.2
    Utah.................      256.9       15.9        17.0         2.7
    Nevada...............      452.4        4.8        18.5         0.9
Pacific:
    Washington...........      769.6      144.1         4.5         6.4
    Oregon...............      553.1       82.6        16.5        13.6
    California...........    7,677.3      377.9        18.2        68.8
    Alaska...............       46.7        2.4        17.6         0.4
    Hawaii...............      219.4        7.6        20.0         1.5
------------------------------------------------------------------------
\1\Rates reflect covered charges for physician claims processed during
  the period. National data exclude data for Puerto Rico, the Virgin
  Islands, the Railroad Retirement Board, and Parenteral and Enteral
  Claims. As a result of report changes effective April 1, 1992, charge
  reductions include: reasonable charge medical necessity and global fee/
  rebundling.
\2\Amounts in millions.
\3\Massachusetts enacted a Medicare mandatory assignment provision,
  effective April 1986. The fact that the assignment rates shown here
  are not 100 percent may be explained by the inclusion in the database
  of billings by practitioners other than allopathic and osteopathic
  physicians, which are included in the Medicare statutory definition of
  ``physician''.
\4\For fiscal year 1993, includes data for all counties in Missouri plus
  two counties on the State border located in Kansas.
\5\For fiscal year 1993, includes data for all counties in Kansas
  excluding two counties on the State border.
\6\For fiscal year 1993, includes data for all counties in Maryland
  excluding two counties on the State border.
\7\For fiscal year 1993, includes data for DC plus two counties in
  Maryland located on the State border plus a few counties and cities
  located in Virginia, near the State border.
\8\For fiscal year 1993, includes data for all counties in Virginia
  excluding a few counties and cities near the State border.

Source: Health Care Financing Administration, Bureau of Program
  Operations.

    The changing pattern of charge reductions reflects, in
part, overall changes in participation and assignment rates. As
shown in table E-14, participating physicians accounted for a
growing share of total physician charges. During the first
participation period (fiscal year 1985), participating
physicians (30.4 percent of all physicians) accounted for 36.0
percent of all physician charges. In 1993, the proportion of
physicians participating grew to 59.8 percent, and accounted
for 85.5 percent of all physician charges. Total covered
charges represented by unassigned claims declined from 34.5
percent to 6.0 percent over the same period. The proportion of
charges billed by participation and assignment status varies by
State; these data are shown in table E-15.

TABLE E-14.--DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED, BY
 PARTICIPATION STATUS OF PHYSICIAN AND ASSIGNMENT STATUS OF CLAIM, 1984-
                              1993\1\
                              [In percent]
------------------------------------------------------------------------
                                                      Nonparticipants
                                      Participants ---------------------
        Time period           Total                 Assigned  Unassigned

------------------------------------------------------------------------
Oct. 1984-Sept. 1985.......    100.0        36.0        29.5       34.5
Oct. 1985-Mar. 1986........    100.0        36.3        29.4       34.3
Apr. 1986-Dec. 1986\2\.....    100.0        39.1        28.0       32.9
Jan. 1987-Mar. 1988\3\.....    100.0        48.1        25.2       26.7
Apr. 1988-Dec. 1988........    100.0        57.9        21.0       21.1
Jan. 1989-Mar. 1990........    100.0        62.0        19.0       18.5
Apr. 1990-Dec. 1990........    100.0        67.2        16.7       16.1
Jan. 1991-Dec. 1991........    100.0        72.3        14.6       13.1
Jan. 1992-Dec. 1992........    100.0        78.8        11.6        9.7
Jan. 1993-Dec. 1993........    100.0        85.5         8.5        6.0
------------------------------------------------------------------------
\1\Rates reflect covered charges for physician claims processed during
  the period. Data for up to seven carriers missing from various
  quarters.
\2\The actual participation period was May through December 1986, and
  the participation agreements were in effect for that time.
\3\The actual participation period is January 1987 through March 1988,
  and the participation agreements are in effect for that time.

Source: Health Care Financing Administration, Bureau of Program
  Operations.


TABLE E-15.--DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED, BY
  PARTICIPATION STATUS OF PHYSICIAN AND ASSIGNMENT STATUS OF CLAIM, BY
                  STATE, JANUARY-DECEMBER 1993\1\
                              [In percent]
------------------------------------------------------------------------
                                                     Nonparticipating
                                   Participating         physician
Census division/State     Total      physician   -----------------------
                                                   Assigned   Unassigned
------------------------------------------------------------------------
National.............       100.0          85.5          8.5         6.0
New England:
    Maine............       100.0          92.4          5.8         1.8
    New Hampshire....       100.0          88.1          6.5         5.3
    Vermont..........       100.0          94.8          4.0         1.2
    Massachusetts....       100.0          95.9          3.7         0.3
    Rhode Island.....       100.0          98.9          0.9         0.2
    Connecticut......       100.0          87.9          7.4         4.7
Middle Atlantic:
    New York.........       100.0          77.7         13.7         8.7
    New Jersey.......       100.0          72.6         14.0        13.4
    Pennsylvania.....       100.0          98.0          1.5         0.5
East North Central:
    Ohio.............       100.0          94.6          4.4         1.1
    Indiana..........       100.0          89.1          4.8         6.1
    Illinois.........       100.0          82.2          8.6         9.2
    Michigan.........       100.0          95.1          3.0         1.9
    Wisconsin........       100.0          76.9         11.8        11.3
West North Central:
    Minnesota........       100.0          49.5         19.6        30.9
    Iowa.............       100.0          80.8          6.4        12.8
    Missouri\2\......       100.0          67.7         25.3         7.1
    North Dakota.....       100.0          65.8          9.9        24.3
    South Dakota.....       100.0          36.0         16.5        47.5
    Nebraska.........       100.0          79.8          5.8        14.5
    Kansas\3\........       100.0          94.6          2.0         3.4
South Atlantic:
    Delaware.........       100.0          93.5          3.5         3.0
    Maryland\4\......       100.0          87.1          9.9         3.1
    District of
     Columbia\5\.....       100.0          90.1          4.4         5.6
    Virginia\6\......       100.0          90.9          5.4         3.7
    West Virginia....       100.0          93.4          5.2         1.4
    North Carolina...       100.0          87.1          7.1         5.9
    South Carolina...       100.0          86.6          8.3         5.1
    Georgia..........       100.0          81.6         13.3         5.1
    Florida..........       100.0          89.0          6.8         4.3
East South Central:
    Kentucky.........       100.0          90.7          5.5         3.7
    Tennessee........       100.0          91.8          4.9         3.3
    Alabama..........       100.0          94.9          3.3         1.7
    Mississippi......       100.0          88.6          7.5         4.0
West South Central:
    Arkansas.........       100.0          93.4          3.6         3.0
    Louisiana........       100.0          89.4          6.3         4.3
    Oklahoma.........       100.0          74.0         12.8        13.2
    Texas............       100.0          81.5         11.0         7.5
Mountain:
    Montana..........       100.0          58.9         16.1        25.0
    Idaho............       100.0          41.2         16.1        42.7
    Wyoming..........       100.0          61.0         10.7        28.3
    Colorado.........       100.0          76.4         12.1        11.6
    New Mexico.......       100.0          78.2         14.4         7.4
    Arizona..........       100.0          83.7          7.0         9.4
    Utah.............       100.0          83.1         10.9         6.0
    Nevada...........       100.0          96.0          3.1         0.9
Pacific:
    Washington.......       100.0          50.7         25.2        24.0
    Oregon...........       100.0          73.6         11.1        15.3
    California.......       100.0          86.6          8.1         5.4
    Alaska...........       100.0          81.3         13.1         5.6
    Hawaii...........       100.0          90.6          6.0         3.3

------------------------------------------------------------------------
\1\Rates reflect covered charges for physician claims processed during
  the period.
\2\For fiscal year 1993, includes data for all counties in Missouri plus
  two counties on the State border located in Kansas.
\3\For fiscal year 1993, includes data for all counties in Kansas
  excluding two counties on the State border.
\4\For fiscal year 1993, includes data for all counties in Maryland
  excluding two counties on the State border.
\5\For fiscal year 1993, includes data for DC plus two counties in
  Maryland located on the State border plus a few counties and cities
  located in Virginia, near the State border.
\6\For fiscal year 1993, includes data for all counties in Virginia
  excluding a few counties and cities near the State border.

Source: Health Care Financing Administration, Bureau of Program
  Operations.

                   DISTRIBUTION OF PHYSICIAN SERVICES

    Tables E-16 to E-24 show the distribution of physicians'
services for calendar year 1992. These tables provide data from
the first year of the implementation of the Medicare Fee
Schedule. As noted earlier, the fee schedule appears to be
having its intended effect. The projected pattern of
redistribution from the procedurally oriented specialties to
the primary care specialties has begun taking place.
    The 1992 data are tabulations from the 1992 National Claims
History Procedure Summary, which is a summary of all claims
filed with the Medicare carriers.
    The totals shown will differ from total SMI outlay figures
for 1992 shown in the budget for several reasons:
    The amounts shown in these tables are allowed amounts,
rather than reimbursements--that is, they include both
Medicare's and the enrollee's share of approved changes.
    The amounts shown are for services rendered during calendar
year 1992; budget figures are for payments made during the
fiscal year regardless of when the services were rendered.
    The amounts shown are only for services reimbursed by
carriers under the fee schedule; hence, they do not include
Part B payments to hospital outpatient departments or to risk-
based prepaid medical plans.
    Further, the amounts shown underestimate what they are
supposed to represent by a small amount because some claims for
services rendered in 1992 had not been processed by carriers at
the time the 1992 files were submitted to HCFA, and because
some claims recorded had to be eliminated due to recording
errors.
    Table E-16 illustrates that in 1992, 77.2 percent of
allowed amounts under the fee schedule were for physicians'
services, and another 3.0 percent were for the services of
limited license practitioners--psychologists, podiatrists,
optometrists, audiologists, chiropractors, dentists, and
physical therapists. About 4.7 percent went to independent
laboratories in 1992, while 15.1 percent went to suppliers of
medical equipment, prosthetics, and ambulance services.

TABLE E-16.--ALLOWED AMOUNTS FOR CLAIMS, BY TYPE OF PROVIDER, 1992
------------------------------------------------------------------------
                                        Allowed
          Type of provider              amounts   Percent of    Percent
                                      (millions)     total     inpatient
------------------------------------------------------------------------
Physicians..........................   $33,941.0        77.2        39.3
Limited license practitioners\1\....     1,307.0         3.0         1.7
Laboratories........................     2,072.0         4.7          .2
Medical suppliers\2\................     6,625.0        15.1          .8
                                     -----------------------------------
      All providers\3\..............    43,944.0       100.0        30.6
------------------------------------------------------------------------
\1\Includes psychology, podiatry, optometry, audiology, chiropractice,
  dentistry, and physical therapy.
\2\Includes suppliers of medical equipment, prosthetics, and ambulance
  services.
\3\Total does not include charges for hospital outpatient department
  facility fees or for risk-based prepaid medical plans since these are
  not reimbursed under the CPR system.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, National Claims History Procedure Summary.

    Almost 31 percent of all allowed amounts were for hospital
inpatient services, and almost 40 percent of allowed amounts
for physicians' services were inpatient. The share of
physicians' services that are inpatient has dropped in recent
years, from nearly 64 percent in 1981.
    Table E-17 shows the distribution of spending for
physicians' services by specialty. (It excludes limited license
practitioners, labs, and suppliers.) In 1992, generalists
accounted for 27.8 percent of spending, nonsurgical specialists
for 24.1 percent, and surgical specialists for 31.7 percent.
Radiologists, anesthesiologists, and pathologists together
accounted for 13.6 percent of allowed amounts. Radiation
oncologists, osteopathic manipulative therapists, intensivists,
and emergency medicine physicians each accounted for less than
1 percent of total allowed amounts for physicians' services.
    The major physician specialties treating the Medicare
population, in descending order of importance as measured by
total allowed amounts, were general internists (14.9 percent of
allowed amounts), ophthalmologists (10.9 percent), radiologists
(8.6 percent), cardiologists (8.4 percent) and family
practitioners (6.0 percent).
    The share of services provided on an inpatient basis varied
by specialty, generally increasing with specialization. About
33 percent of the services of generalists were inpatient in
1992. The inpatient share for nonsurgical specialists was 46.6
percent and 39.3 percent for surgical specialists.

  TABLE E-17.--ALLOWED AMOUNTS FOR PHYSICIANS' SERVICES, BY MEDICAL
                          SPECIALTY, 1992
------------------------------------------------------------------------
                                     Allowed
            Specialty                amounts     Percent of    Percent
                                    (millions)     total      inpatient
------------------------------------------------------------------------
Generalists:
    General practice.............     $1,114.0          3.3         18.6
    Family practice..............      2,048.0          6.0         25.6
    Internal medicine............      5,054.0         14.9         38.6
    Pediatrics...................         28.0           .1         25.6
    Clinics......................      1,186.0          3.5         34.9
                                  --------------------------------------
      All generalists............      9,430.0         27.8         32.9
                                  ======================================
Nonsurgical specialists:
    Allergy/Immunology...........         95.0           .3         10.6
    Cardiology...................      2,860.0          8.4         58.2
    Dermatology..................        682.0          2.0          1.4
    Gastroenterology.............        950.0          2.8         45.2
    Neurology....................        486.0          1.4         48.7
    Psychiatry...................        664.0          2.0         41.2
    Physical medicine and
     rehabilitation..............        217.0           .6         60.6
    Pulmonary disease............        639.0          1.9         68.3
    Nuclear medicine.............         62.0           .2         27.1
    Geriatric medicine...........         52.0           .2         34.3
    Nephrology...................        539.0          1.6         52.8
    Infectious disease...........        127.0           .4         74.6
    Endocrinology................         94.0           .3         37.4
    Rheumatology.................        132.0           .4         16.2
    Peripheral vascular disease..         22.0           .1         61.8
    Hematology/oncology..........        440.0          1.3         24.3
    Medical oncology.............        117.0           .3        22.1
                                  --------------------------------------
      All nonsurgical specialists      8,176.0         24.1         46.6
                                  ======================================
Surgical specialists:
    General surgery..............      1,870.0          5.5         64.9
    Otolaryngology...............        404.0          1.2         17.1
    Neurosurgery.................        287.0           .8         84.3
    Gynecology/Obstetrics........        261.0           .8         41.7
    Ophthalmology................      3,689.0         10.9          3.6
    Orthopedic surgery...........      1,611.0          4.7         61.1
    Plastic and reconstructive
     surgery.....................        164.0           .5         32.4
    Colorectal surgery...........         69.0           .2         34.0
    Thoracic surgery.............        718.0          2.1         89.3
    Urology......................      1,362.0          4.0         35.9
    Hand surgery.................         21.0           .1         21.4
    Vascular surgery.............        141.0           .4         74.3
    Cardiac surgery..............        164.0           .5         96.4
    Surgical oncology............         13.0  ...........         60.5
                                  --------------------------------------
      All surgical specialists...     10,774.0         31.7         39.3
                                  ======================================
Radiology........................      2,912.0          8.6         29.9
Radiation oncology...............        268.0           .8          5.3
Anesthesiology...................      1,198.0          3.5         71.0
Pathology........................        519.0          1.5         46.0
Osteopathic manipulative therapy.         30.0           .1         15.6
Critical care (Intensivists).....         28.0           .1         76.5
Emergency medicine...............        215.0           .6          6.8
Other Physician specialties......        389.0          1.1         49.3
                                  --------------------------------------
      Total--all physicians......     33,941.0        100.0         39.3
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, National Claims History Procedure Summary.

    Table E-18 shows the distribution of spending for
physicians' services by type of service. About 36.8 percent of
spending was for medical care (nonsurgical) in 1992. About 35.5
percent of spending was for surgical procedures in total,
adding together the amounts for surgeons, assistant surgeons,
and anesthesiologists. About 10.6 percent was for diagnostic
laboratory tests, which would include not only blood chemistry
analysis and urinalysis, but also tests such as EKGs. About
10.3 percent of spending was for radiology, and 4.8 percent was
for consultations.

  TABLE E-18.--ALLOWED AMOUNTS FOR PHYSICIANS' SERVICES, BY TYPE OF
                           SERVICE, 1992
------------------------------------------------------------------------
                                     Allowed
         Type of service             amounts     Percent of    Percent
                                    (millions)     total      inpatient
------------------------------------------------------------------------
Medical care.....................    $12,503.0         36.8         36.1
Surgery..........................     10,490.0         30.9         49.9
Assistance at surgery............        246.0           .7         89.2
Anesthesia.......................      1,319.0          3.9         68.7
Diagnostic laboratory tests......      3,597.0         10.6         18.7
Diagnostic radiology.............      2,775.0          8.2         26.8
Therapeutic radiology............        698.0          2.1          5.0
Consultations\1\.................      1,641.0          4.8         62.0
Other\2\.........................        672.0          2.0          1.5
                                  --------------------------------------
      All services...............     33,941.0        100.0         39.3
------------------------------------------------------------------------
\1\Includes first and second opinions for surgery.
\2\Includes treatment for renal patients, pneumococcal vaccine, and
  medical supplies, among other things.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, National Claims History Procedure Summary.

    Table E-19 lists the top 20 individual services, ranked by
total allowed amounts on claims submitted by selected
physicians for 1992. The most important exclusion is amounts
for the services of anesthesiologists, since there would
typically be a charge for anesthesiology for the surgical
procedures. The amounts for surgical procedures include claims
by both the primary surgeon and any assistant surgeons, but not
the amounts for anesthesiologists.
    The top 20 services (out of more than 7,000) accounted for
36.9 percent of all spending for all physicians' services in
1992. Cataract extraction with implantation of an intraocular
lens was the highest-ranked surgical procedure, accounting by
itself for 5.7 percent of total allowed amounts for physicians'
services. Other surgical procedures in the top 20 included
total knee replacement and heart catherization and coronary
angiography. Most of the remaining services in the top 20 were
evaluation and management services (that is, visits and
consultations).
    Table E-20 presents total allowed amounts for selected
groups of generic services, and shows the percent of total
allowed amounts for all physicians' services accounted for by
each group. As in table E-19, certain physicians' services--
most notably for anesthesiologists--are not included in the
allowed amounts for each service group. No attempt was made to
define and rank all possible service groups, so that there may
be other important service groups that do not appear in the
table. For example, diagnostic radiology accounts for 8.2
percent of allowed amounts for physicians' services (from table
E-18), but radiological services do not appear in table E-20.

     TABLE E-19.--THE TOP 20 SERVICES BILLED BY PHYSICIANS UNDER
                           MEDICARE, 1992
------------------------------------------------------------------------
                                                   Allowed
                                                   amounts      Percent
        Service code and description           (millions)\1\    of total

------------------------------------------------------------------------
Top 20 services:
    99213--Office/outpatient visit, EST......        $2,103          6.2
    66984--Remove cataract, insert lens......         1,947          5.7
    99232--Subsequent hospital care..........         1,271          3.7
    99214--Office/outpatient visit, EST......         1,087          3.2
    99231--Subsequent hospital care..........         1,027          3.0
    99212--Office/outpatient visit, EST......           675          2.0
    99233--Subsequent hospital care
     comprehensive...........................           514          1.5
    93307--Echo exam of heart................           419          1.2
    99223--Initial hospital care.............           382          1.1
    99215--Office/outpatient visit, EST......           368          1.1
    99254--Initial inpatient consult.........           357          1.1
    66821--After cataract laser surgery......           343          1.0
    90844--Psychotherapy 45-50 Min...........           313           .9
    99222--Initial hospital care.............           272           .8
    92014--Eye exam & treatment..............           264           .8
    27447--Total knee replacement............           262           .8
    99238--Hospital discharge day............           250           .7
    93547--Heart catheter & angiogram........           245           .7
    99244--Office consultation...............           224           .7
    99255--Initial inpatient consult.........           212           .6
    Total....................................        12,536         36.9
------------------------------------------------------------------------
\1\Amounts for surgical procedures include fees for primary and
  assistant surgeons, but not for anesthesiologists.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, National Claims History Procedure Summary.

    The 21 service groups shown in table E-20 accounted for
44.1 percent of all allowed amounts for all physicians'
services in 1992. The single most costly group was office
visits (accounting for 14.4 percent of total allowed amounts
for physicians' services), followed by hospital visits (11.1
percent). Cataract surgery of all types accounted for 5.8
percent of total allowed amounts for physicians' services. It
should also be noted that the amount for hemodialysis includes
only physician services and does not include the much larger
amounts for the facility charges for hemodialysis that were not
billed under the fee-for-service reimbursement system.

   TABLE E-20.--ALLOWED AMOUNTS FOR SELECTED GROUPS OF PHYSICIANS'
                           SERVICES, 1992
------------------------------------------------------------------------
                                                          1991
                                              --------------------------
                Service group                      Allowed
                                                   amounts      Percent
                                                (millions)\1\   of total
------------------------------------------------------------------------
Hospital visits (99221-99238)................        $3,764         11.1
Office visits (99201-99215)..................         4,896         14.4
Cataract surgery (66830-66985)...............         1,985          5.8
EKGs (93000-93018, 93015-26).................           364          1.1
Transurethral surgery (52601)................           159           .5
Coronary artery bypass (33510-33516).........           495          1.5
Hip arthroplasty (27130-27132)...............           144           .4
Cardiac catheterization (93501-93553)........           598          1.8
Colonoscopy (45378-45385, 44388-44393, 45355)           485          1.4
Hemodialysis/CAPD (90935-90947)..............           165           .5
Thromboendarterectomy (35301-35381)..........           100           .3
Knee arthroplasty (27446, 27447, 29881)......           293           .9
Pacemaker implant/removal (33200-33210,
 33232)......................................            89           .3
Vein bypass (35501-35587)....................            71           .2
Emergency room visits (99281-99285)..........           610          1.8
SNF visits (99301-99313).....................           455          1.3
Nursing home visits (99321-99333)............            36           .1
Home visits (99341-99353)....................            56           .2
Prostatectomy (55801-55845)..................            82           .2
EEGs (95816-95827, 95950, 95955).............            33           .1
Pacemaker tests (93731-93736)................            71           .2
                                              --------------------------
      Total..................................        14,951         44.1
------------------------------------------------------------------------
\1\Amounts for surgical procedures include fees for primary and
  assistant surgeons, but not for anesthesiologists.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, National Claims History Procedure Summary.

    In recent years, there have been many changes in the
delivery of health care services. Some of the more significant
changes affecting Medicare services have been in the delivery
of surgical services. First, there has been significant growth
in the amount of surgical care provided by some specialties.
Second, there has been a dramatic shift in the place of
surgical care; that is, surgical care is now frequently
provided in outpatient settings, whereas previously, most
surgical care was provided in inpatient settings.
    As shown in table E-21, the most significant shift in site
of surgical care between 1980 and 1992 was out of inpatient
settings and into other settings. Outpatient hospital settings
benefited most from this shift, growing from only 3.3 percent
of all surgical charges in 1980 to 25.5 percent in 1992. The
proportions of surgery taking place in a physician's office and
in other nonhospital settings also grew somewhat. In 1992 the
proportion of all surgical care provided in inpatient settings
had dropped to 47.9 percent.

    TABLE E-21.--CHARGES SUBMITTED TO MEDICARE FOR ALL PHYSICIAN
       SURGICAL SERVICES, BY PLACE OF SERVICE, 1980, 1990-92
------------------------------------------------------------------------
                                              Surgical charges\1\
                                      ----------------------------------
                                                              As percent
           Place of service            Amount in  Percent of   of total
                                        millions   surgical    settings
                                                    charges     charges
------------------------------------------------------------------------
1980:
      Total..........................     $3,828       100.0        31.8
                                      ----------------------------------
Office...............................        445        11.6        12.2
Outpatient hospital..................        129         3.3        29.5
Inpatient hospital...................      3,231        84.4        44.1
Other\2\.............................         23          .6         3.7
                                      ==================================
1990:
      Total..........................     11,048       100.0        33.3
                                      ----------------------------------
Office...............................      2,004        18.1        16.2
Outpatient hospital\1\...............      2,867        26.0        54.3
Inpatient hospital...................      5,563        50.4        40.6
Ambulatory surgical center...........        488         4.4        51.2
Other\2\.............................        127         1.1        14.5
                                      ==================================
1991:
      Total..........................     11,773       100.0        32.9
                                      ----------------------------------
Office...............................      2,230        18.9        16.1
Outpatient hospital\1\...............      2,993        25.4        52.5
Inpatient hospital...................      5,834        49.6        41.1
Ambulatory surgical center...........        514         4.4        54.2
Other\2\.............................        201         1.7        18.9
                                      ==================================
1992:
      Total..........................     10,958       100.0        31.3
                                      ----------------------------------
Office...............................      2,103        19.2        14.8
Outpatient hospital\1\...............      2,791        25.5        50.3
Inpatient hospital...................      5,249        47.9        39.2
Ambulatory surgical center...........        622         5.7        90.3
Other\2\.............................        193         1.8        16.6
------------------------------------------------------------------------
\1\May include some services rendered in an ambulatory surgical center.
\2\Includes homes, nursing homes, and other places of service.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, Part B Extract Summary System.

    Table E-22 shows the percent of total surgical charges by
specialty in 1980 and 1992. In 1980, three specialties
(ophthalmology, general surgery, and orthopedic surgery)
accounted for nearly half of all Medicare surgical care. These
same three specialties accounted for close to the same
proportion of total surgical care in 1992, but the shares among
these specialties changed. While ophthalmologists accounted for
only 13.6 percent in 1980, by 1991 their share had increased to
22.7 percent due primarily to the substantial growth incataract
surgery during the 1980s. For two specialties, gastroenterology and
otology, laryngology and rhinology (or ENT), surgical care represented
much larger proportions of their total Medicare practice in 1992 than
in 1980. On the other hand, surgical charges for urologists represented
much smaller proportions of their total Medicare practice in 1992 than
in 1980.

TABLE E-22.--SUBMITTED SURGICAL CHARGES UNDER MEDICARE AS A SHARE OF
  TOTAL SURGICAL CHARGES AND AS A PERCENT OF TOTAL PRACTICE CHARGES, BY
                  MEDICAL SPECIALTY, 1980 AND 1992
------------------------------------------------------------------------
                                        Percent        Surgical charges
                                    distribution of     as a percent of
                                   surgical charges     total practice
            Specialty            --------------------       charges
                                                     -------------------
                                    1980      1992      1980      1992
------------------------------------------------------------------------
      All physicians............     100.0     100.0      31.8      31.3
                                 ---------------------------------------
Ophthalmology...................      13.6      22.7      62.1      67.5
General surgery.................      22.1      11.9      71.6      70.0
Orthopedic surgery..............      13.0      10.6      73.6      71.9
Urology.........................      10.7       6.5      75.6      52.6
Thoracic surgery................       8.0       5.4      82.2      81.9
Clinic and other group practice.       4.7       2.4      25.8      22.5
Internal medicine...............       4.2       3.3       6.9       7.1
Cardiovascular disease..........       2.7       7.3      22.4      28.0
Podiatry........................       3.0       4.0      53.5      61.4
Gastroenterology................       1.7       5.6      45.9      65.2
Dermatology.....................       2.4       4.3      60.9      69.3
Neurological surgery............       2.9       2.0      70.2      78.2
Othology, laryngology, rhinology       1.9        .0      49.7      66.0
Plastic surgery.................       1.3       1.3      88.1      85.8
Other...........................       8.4      12.6  ........       9.9
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, Part B Extract Summary System.

    As shown in table E-23, many different medical specialties
participated in the shift to outpatient surgery. In 1980, only
two specialties (dermatology and podiatry) performed the
majority of their surgical services in outpatient settings; in
these cases, the care was generally provided in the physician's
office. In 1992, seven specialties provided a majority of their
surgical care in outpatient settings: ophthalmology, podiatry,
gastroenterology, dermatology, ENT, internal medicine, and
plastic surgery. Podiatrists and dermatologists continued
primarily to work in their offices; internist split their non-
inpatient work between office and outpatient settings, while
the other specialties provided their surgical services in
outpatient hospital and ambulatory surgical facilities. Most
surgical specialties, such as general, orthopedic,
cardiovascular, neurological and thoracic surgeons, remained
closely tied to inpatient hospital settings.

                TABLE E-23.--SUBMITTED SURGICAL CHARGES UNDER MEDICARE, BY MEDICAL SPECIALTY AND PLACE OF SERVICE, 1980 AND 1992
                                                                      [In percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              1980                                                      1992
                                      ------------------------------------------------------------------------------------------------------------------
              Specialty                   All            Inpatient  Outpatient                All            Inpatient   Outpatient
                                       settings  Office   hospital   hospital    Other\1\  settings  Office   hospital   hospital\2\   ASC\3\   Other\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
      All physicians.................    100.0     11.6      84.4        3.3         0.5     100.0     19.2      47.9        25.5         5.7       1.8
                                      ------------------------------------------------------------------------------------------------------------------
General surgery......................    100.0      4.4      92.6        2.9          .1     100.0      6.0      73.7        18.8         1.0       0.5
Cardiovascular disease...............    100.0      1.7      97.9         .4       (\4\)     100.0      2.6      86.4        10.3         0.1       0.6
Dermatology..........................    100.0     94.6       4.0         .9          .6     100.0     97.5       0.5         1.3         0.4       0.3
Gastroenterology.....................    100.0     12.0      75.6       12.3          .1     100.0      9.5      38.9        46.9         4.3       0.5
Internal medicine....................    100.0     17.5      76.6        5.7          .2     100.0     25.4      44.5        28.2         1.5       0.5
Neurological surgery.................    100.0      1.1      98.5         .5       (\4\)     100.0      1.6      94.8         3.2         0.1       0.3
Obstetrics/Gynecology................    100.0   ......  .........  ..........  .........    100.0     14.3      72.5        12.1          .8       0.3
Otology, Laryngology, Rhinology......    100.0     12.6      83.7        3.7       (\4\)     100.0     14.0       4.0        55.2        25.4       1.4
Ophthalmology........................    100.0      7.9      87.1        5.0          .1     100.0     18.8       4.7        53.3        20.7       2.5
Orthopedic Surgery...................    100.0      6.3      90.2        3.4          .1     100.0      7.7      78.0        12.9         1.0       0.4
Plastic Surgery......................    100.0     13.0      67.2       19.7          .1     100.0     22.0      33.8        37.3         5.8       1.0
Thoracic surgery.....................    100.0       .8      98.7         .5       (\4\)     100.0      1.3      95.8         2.6         0.1       0.2
Urology..............................    100.0      8.0      90.6        1.4          .1     100.0     23.5      57.5        17.6         1.0       0.3
Podiatry.............................    100.0     71.3      13.5         .9        14.3     100.0     70.4       1.6         5.3         1.3      21.4
Clinic and other group practice......    100.0     10.1      85.3        4.5          .1     100.0     14.1      57.8        25.7         1.9       0.5
Other................................    100.0   ......  .........  ..........  .........    100.0     21.0      54.7        22.2         1.5       0.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Includes homes, nursing homes, and other places of service.
\2\May include some services rendered in an ASC.
\3\Ambulatory surgical center.
\4\Less than .05.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, Part B Extract Summary System.


 TABLE E-24.--PERCENT DISTRIBUTION OF ALLOWED SURGICAL CHARGES UNDER
    MEDI- CARE, BY MEDICAL SPECIALTY AND PLACE OF SERVICE, 1992
------------------------------------------------------------------------
                      Place of service                         Percent
------------------------------------------------------------------------
Inpatient hospital:
    General surgery........................................         18.4
    Orthopedic surgery.....................................         17.2
    Thoracic surgery.......................................         10.7
    Urology................................................          7.9
    Cardiovascular disease.................................         13.2
    Clinic and other group practice........................          2.9
    Gastroenterology.......................................          4.6
    Internal medicine......................................          3.0
    Ophthalmology..........................................          2.2
    Neurological surgery...................................          4.1
    Other medical and surgical specialties.................         15.8
                                                            ------------
      Total................................................        100.0
                                                            ============
Office:
    Ophthalmology..........................................         22.2
    Dermatology............................................         21.9
    Podiatry...............................................         14.7
    Urology................................................          8.0
    Internal medicine......................................          4.3
    General surgery........................................          3.7
    Orthopedic surgery.....................................          4.3
    Gastroenterology.......................................          2.8
    Family practice........................................          1.4
    Clinic and other group practice........................          1.8
    Other medical and surgical specialties.................         14.9
                                                            ------------
      Total................................................        100.0
                                                            ============
Outpatient hospital:
    Ophthalmology..........................................         47.6
    Gastroenterology.......................................         10.4
    General surgery........................................          8.8
    Orthopedic surgery.....................................          5.4
    Internal medicine......................................          3.8
    Urology................................................          4.5
    Clinic and other group practice........................          2.5
    Otology, larynology, rhinology.........................          0.9
    Plastic surgery........................................          1.9
    Other medical and surgical specialties.................         14.3
                                                            ------------
      Total................................................        100.0
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy, Part B Extract Summary System.


    In 1992, ophthalmologists provided most (47.6 percent) of
the surgery done in outpatient hospital settings (see table E-
24). The predominance of ophthalmologists in this setting is
due to cataract surgery. Ophthalmologists also accounted for
the largest proportion of office surgical charges, 22.2
percent. However, dermatologists and podiatrists also
represented significant percentages of office surgical charges,
21.9 and 14.7 percent respectively. In inpatient settings, the
traditional surgical specialties--general surgery, orthopedic
surgery, cardiovascular surgery, thoracic surgery and urology
accounted for 67.4 percent of all surgical charges.

 TABLE E-25.--GEOGRAPHIC PRACTICE COST INDICES, BY MEDICARE CARRIER
                              LOCALITY
------------------------------------------------------------------------
Carrier  Locality                                  Practice
number    number       Locality name       Work    expense   Malpractice
------------------------------------------------------------------------
510....         5  Birmingham, AL.......    0.981     0.913      0.824
510....         4  Mobile, AL...........     .964      .911       .824
510....         2  North Central Alabama     .970      .867       .824
510....         1  Northwest Alabama....     .985      .869       .824
510....         6  Rest of Alabama......     .975      .851       .824
510....         3  Southeast Alabama....     .972      .869       .824
1020...         1  Alaska...............    1.106     1.255      1.042
1030...         5  Flagstaff (City), AZ.     .983      .911      1.255
1030...         1  Phoenix, AZ..........    1.003     1.016      1.255
1030...         7  Prescott (City), AZ..     .983      .911      1.255
1030...        99  Rest of Arizona......     .987      .943      1.255
1030...         2  Tucson (City), AZ....     .987      .989      1.255
1030...         8  Yuma (City), AZ......     .983      .911      1.255
520....        13  Arkansas.............     .960      .856       .302
2050...        26  Anaheim-Santa Ana, CA    1.046     1.220      1.370
542....        14  Bakersfield, CA......    1.028     1.050      1.370
542....        11  Fresno/Madera, CA....    1.006     1.009      1.370
542....        13  Kings/Tulare, CA.....     .999     1.001      1.370
2050...        18  Los Angeles, CA (1st
                    of 8)...............    1.060     1.196      1.370
2050...        19  Los Angeles, CA (2d
                    of 8)...............    1.060     1.196      1.370
2050...        20  Los Angeles, CA (3d
                    of 8)...............    1.060     1.196      1.370
2050...        21  Los Angeles, CA (4th
                    of 8)...............    1.060     1.196      1.370
2050...        22  Los Angeles, CA (5th
                    of 8)...............    1.060     1.196      1.370
2050...        23  Los Angeles, CA (6th
                    of 8)...............    1.060     1.196      1.370
2050...        24  Los Angeles, CA (7th
                    of 8)...............    1.060     1.196      1.370
2050...        25  Los Angeles, CA (8th
                    of 8)...............    1.060     1.196      1.370
542....         3  Marin/Napa/Solano, CA    1.012     1.198      1.370
542....        10  Merced/Surrounding
                    Counties, CA........    1.018     1.009      1.370
542....        12  Monterey/Santa Cruz,
                    CA..................    1.023     1.108      1.370
542....         1  North Coastal
                    Counties, CA........    1.003     1.072      1.370
542....         2  Northeast Rural
                    California..........    1.001      .990      1.370
542....         7  Oakland-Berkeley, CA.    1.028     1.258      1.370
542....        27  Riverside, CA........    1.026     1.080      1.370
542....         4  Sacramento/Surroundin
                    g Counties, CA......    1.026     1.088      1.370
542....        15  San Bernardino/East
                    Central, CA.........    1.025     1.077      1.370
2050...        28  San Diego/Imperial,
                    CA..................    1.026     1.090      1.370
542....         5  San Francisco, CA....    1.038     1.303      1.370
542....         6  San Mateo, CA........    1.038     1.303      1.370
2050...        16  Santa Barbara, CA....    1.012     1.073      1.370
542....         9  Santa Clara, CA......    1.048     1.286      1.370
542....         8  Stockton/Surrounding
                    Counties, CA........    1.019     1.027      1.370
2050...        17  Ventura, CA..........    1.034     1.132      1.370
550....         1  Colorado.............     .999      .988       .683
10230..         4  Eastern Connecticut..     .999     1.053      1.036
10230..         1  Northwest and North
                    Central Connecticut.    1.002     1.071      1.025
10230..         3  South Central
                    Connecticut.........    1.018     1.103      1.188
10230..         2  Southwest Connecticut    1.053     1.139      1.231
570....         1  Delaware.............    1.026     1.018       .664
580....         1  D.C.+MD/VA suburbs...    1.059     1.168       .947
590....         3  Fort Lauderdale, FL..     .993      .981      1.376
590....         4  Miami, FL............    1.034     1.025      1.641
590....         2  North/North central
                    Florida cities......     .975      .932      1.108
590....         1  Rest of Florida......     .966      .871      1.108
1040...         1  Atlanta, GA..........     .975     1.022       .752
1040...         4  Rest of Georgia......     .956      .841       .752
1040...         2  Small Georgia cities
                    02..................     .962      .895       .752
1040...         3  Small Georgia cities
                    03..................     .961      .869       .752
1120...         1  Hawaii...............    1.003     1.094      1.025
5130...        12  North Idaho..........     .965      .917       .889
5130...        11  South Idaho..........     .967      .936       .889
621....        10  Champaign-Urbana, IL.     .965      .920      1.137
621....        16  Chicago, IL..........    1.044     1.114      1.773
621....         3  De Kalb, IL..........     .978      .925      1.137
621....        11  Decatur, IL..........     .981      .927      1.137
621....        12  East St. Louis, IL...     .989      .958      1.579
621....         6  Kankakee, IL.........     .972      .925      1.137
621....         8  Normal, IL...........     .997      .968      1.137
621....         1  Northwest, IL........     .974      .896      1.137
621....         5  Peoria, IL...........    1.009     1.031      1.137
621....         7  Quincy, IL...........     .974      .896      1.137
621....         4  Rock Island, IL......     .995      .958      1.137
621....         2  Rockford, IL.........    1.010     1.018      1.137
621....        13  Southeast Illinois...     .974      .896      1.137
621....        14  Southern Illinois....     .974      .896      1.137
621....         9  Springfield, IL......     .996      .966      1.137
621....        15  Suburban Chicago, IL.    1.020     1.097      1.137
630....         1  Metropolitan Indiana.     .998      .963       .547
630....         3  Rest of Indiana......     .979      .896       .516
630....         2  Urban Indiana........     .980      .905       .516
640....         5  Des Moines (Polk/
                    Warren), IA.........     .997      .966       .666
640....         3  North central Iowa...     .971      .916       .666
640....         2  Northeast Iowa.......     .972      .918       .666
640....         6  Northwest Iowa.......     .969      .890       .666
640....         4  South central Iowa
                    (excludes Des
                    Moines).............     .962      .881       .666
640....         1  Southeast Iowa
                    (includes Iowa City)     .976      .933       .666
640....         7  Southwest Iowa.......     .968      .900       .666
740....         5  Kansas City, KS......     .978      .964      1.134
650....         1  Rest of Kansas.......     .953      .893      1.134
740....         4  Suburban Kansas City,
                    KS..................     .978      .964      1.134
660....         1  Lexington and
                    Louisville, KY......     .984      .917       .667
660....         3  Rest of Kentucky.....     .974      .875       .667
660....         2  Small cities (city
                    limits) KY..........     .976      .898       .667
528....         7  Alexandria, LA.......     .985      .889       .808
528....         3  Baton Rouge, LA......     .991      .966       .808
528....         6  Lafayette, LA........     .982      .928       .808
528....         4  Lake Charles, LA.....     .975      .907       .808
528....         5  Monroe, LA...........     .979      .880       .808
528....         1  New Orleans, LA......     .994     1.003      1.185
528....        50  Rest of Louisiana....     .972      .880       .824
528....         2  Shreveport, LA.......    1.003      .940       .808
21200..         2  Central Maine........     .942      .903       .716
21200..         1  Northern Maine.......     .947      .912       .716
21200..         3  Southern Maine.......     .956      .980       .716
690....         1  Baltimore/Surrounding
                    Counties, MD........    1.027     1.040       .927
690....         3  South+Eastern Shore,
                    MD..................    1.011     1.010       .820
690....         2  Western Maryland.....    1.006     1.013       .843
700....         2  Massachusetts suburbs/
                    rural (cities)......     .997     1.072       .855
700....         1  Massachusetts Urban..    1.002     1.131       .855
710....         1  Detroit, MI..........    1.059     1.091      1.736
710....         2  Michigan, not Detroit    1.010      .971      1.196
720....        00  Minnesota (Blue
                    Shield).............     .999      .971       .748
10240..        00  Minnesota (Travelers)     .999      .971       .748
10250..         1  Rest of Mississippi..     .960      .838       .650
10250..         2  Urban Mississippi
                    (city limits).......     .966      .902       .650
740....         3  Kansas City (Jackson
                    County), MO.........     .978      .964      1.179
740....         2  North Kansas City
                    (Clay/Platte), MO...     .978      .964      1.179
11260..         3  Rest of Missouri.....     .950      .847      1.179
740....         6  Rural Northwest
                    counties, Missouri..     .953      .866      1.179
11260..         2  Small Eastern Cities,
                    MO..................     .954      .838      1.179
740....         1  St. Joseph, MO.......     .950      .867      1.179
11260..         1  St. Louis/Large
                    Eastern Cities, MO..     .988      .964      1.352
751....         1  Montana..............     .967      .926       .718
655....        00  Nebraska.............     .960      .883       .435
1290...         3  Elko and Ely
                    (Cities), NV........     .984     1.026      1.144
1290...         1  Las Vegas, et al
                    (cities), NV........    1.036     1.082      1.144
1290...         2  Reno, et al (cities),
                    NV..................    1.008     1.141      1.144
1290...        99  Rest of Nevada.......    1.020     1.079      1.144
780....        40  New Hampshire........     .962     1.011       .602
860....         2  Middle New Jersey....    1.034     1.070      1.153
860....         1  Northern New Jersey..    1.040     1.131      1.153
860....         3  Southern New Jersey..    1.016     1.030      1.153
1360...         5  New Mexico...........     .981      .925       .767
801....         1  Buffalo/Surrounding
                    Counties, NY........    1.006      .942       .963
803....         1  Manhattan, NY........    1.059     1.255      1.647
801....         3  North central cities,
                    New York............     .997      .952       .963
803....         2  New York City suburbs/
                    Long Island, NY.....    1.060     1.229      1.929
803....         3  Poughkpsie/N. New
                    York City suburbs...    1.004     1.018      1.325
14330..         4  Queens, NY...........    1.059     1.255      1.861
801....         2  Rochester/Surrounding
                    Counties, NY........    1.021     1.017       .963
801....         4  Rest of New York.....     .988      .935       .963
5535...        00  North Carolina.......     .968      .902       .378
820....         1  North Dakota.........     .965      .895       .688
16360..        00  Ohio.................     .993      .951       .920
1370...        00  Oklahoma.............     .969      .911       .516
1380...         2  Eugene, et al
                    (cities), OR........     .968     1.008       .951
1380...         1  Portland, et al
                    (cities), OR........     .993     1.033       .951
1380...        99  Rest of Oregon.......     .979      .997       .951
1380...         3  Salem, et al
                    (cities), OR........     .974      .990       .951
1380...        12  Southwest Oregon
                    cities (city limits)     .974      .988       .951
865....         2  Large Pennsylvania
                    cities..............    1.008     1.001      1.440
865....         1  Philly/Pitt Medium
                    Schools/Hospitals...    1.014     1.014      1.552
865....         4  Rest of Pennsylvania.     .975      .929       .986
865....         3  Small Pennsylvania
                    cities..............     .984      .945       .986
973....        20  Puerto Rico..........     .882      .763       .466
870....         1  Rhode Island.........    1.009      .998       .734
880....         1  South Carolina.......     .971      .874       .448
820....         2  South Dakota.........     .951      .857       .688
5440...        35  Tennessee............     .969      .896       .407
900....        29  Abilene, TX..........     .971      .888       .504
900....        26  Amarillo, TX.........     .972      .900       .504
900....        31  Austin, TX...........     .969      .968       .504
900....        20  Beaumont, TX.........     .998      .955       .504
900....         9  Brazoria, TX.........    1.025      .955       .504
900....        10  Brownsville, TX......     .980      .888       .504
900....        24  Corpus Christi, TX...     .976      .944       .504
900....        11  Dallas, TX...........     .996      .971       .504
900....        12  Denton, TX...........     .996      .971       .504
900....        14  El Paso, TX..........     .995      .894       .504
900....        28  Fort Worth, TX.......     .973      .936       .504
900....        15  Galveston, TX........     .982      .968       .504
900....        16  Grayson, TX..........     .964      .903       .504
900....        18  Houston, TX..........    1.014      .982       .656
900....        33  Laredo, TX...........     .968      .856       .504
900....        17  Longview, TX.........     .968      .929       .504
900....        21  Lubbock, TX..........     .950      .881       .504
900....        19  Mc Allen, TX.........     .945      .873       .504
900....        23  Midland, TX..........    1.023      .998       .504
900....         2  Northeast rural Texas     .968      .883       .504
900....        13  Odessa, TX...........    1.008      .971       .504
900....        25  Orange, TX...........     .998      .955       .504
900....        30  San Angelo, TX.......     .954      .902       .504
900....         7  San Antonio, TX......     .973      .929       .504
900....         3  Southeast rural Texas     .973      .895       .504
900....         6  Temple, TX...........     .969      .886       .504
900....         8  Texarkana, TX........     .953      .883       .504
900....        27  Tyler, TX............     .984      .931       .504
900....        32  Victoria, TX.........     .976      .973       .504
900....        22  Waco, TX.............     .981      .871       .504
900....         4  Western rural Texas..     .961      .852       .504
900....        34  Wichita Falls, TX....     .969      .896       .504
910....         9  Utah.................     .993      .952       .739
780....        50  Vermont..............     .942      .941       .533
10490..         1  Richmond+Charlottesvi
                    lle, VA.............     .975      .953       .462
10490..         4  Rest of Virginia.....     .967      .888       .522
10490..         3  Small town/Industrial
                    Virginia............     .971      .892       .531
10490..         2  Tidewater+North
                    Virginia Counties...     .989      .994       .703
973....        50  Virgin Islands.......    1.000     1.000      1.000
932....         4  East
                    central+Northeast
                    Washington (excludes
                    Spokane)............     .991      .979      1.064
932....         2  Seattle (King
                    County), WA.........    1.019     1.049      1.064
932....         3  Spokane+Richland
                    (cities), WA........     .996      .995      1.064
932....         1  West+Southeast
                    Washington (excludes
                    Seattle)............    1.008      .992      1.064
16510..        16  Charleston, WV.......     .987      .962       .688
16510..        18  Eastern Valley, WV...     .962      .881       .688
16510..        19  Ohio River Valley, WV     .962      .881       .688
16510..        20  Southern Valley, WV..     .960      .876       .688
16510..        17  Wheeling, WV.........     .975      .900       .688
951....        13  Central Wisconsin....     .960      .888       .762
951....        40  Green Bay, WI
                    (Northeast).........     .979      .913       .762
951....        54  Janesville, WI (South-
                    Central)............     .970      .905       .762
951....        19  La Crosse, WI (West-
                    Central)............     .976      .919       .762
951....        15  Madison, WI (Dane
                    County).............     .977      .979       .762
951....        46  Milwaukee suburbs, WI
                    (SE)................    1.010     1.008       .762
951....         4  Milwaukee, WI........    1.008     1.009       .762
951....        12  Northwest Wisconsin..     .966      .898       .762
951....        60  Oshkosh, WI (East-
                    Central)............     .974      .911       .762
951....        14  Southwest Wisconsin..     .960      .888       .762
951....        36  Wausau, WI (North-
                    Central)............     .971      .898       .762
825....        21  Wyoming..............     .988      .938       .641
------------------------------------------------------------------------
Note: Work GPCI is the \1/4\ work GPCI required by Pub. L. 101-239.

Source: Federal Register, Vol. 58, No. 230, December 2, 1993; 63848-
  63851.