NCENTIVE  PAYMENTS 
MEDICARE 
IN  HEALTH  PROFESSIONAL 
SHORTAGE  AREAS 
Do  They  Promote  Access  to  Prima~  Care? 
-4  EXECUTIVE  SUMMARY 
PURPOSE 
To  help  determine  whether  Medicare  incentive  payments  promote  the  Federal  interest 
in improving  access  to  primary  health  care  in Health  Professional  Shortage  Areas. 
BACKGROUND 
Ensuring  access  to  primary  care  physicians  is a national  concern.  The  nation  suffers 
from  a shortage  of primary  care  physicians,  and  some  geographic  areas  are  particularly 
underserved.  Medical  schools,  State  governments,  nonprofit  foundations,  and  the 
Federal  government  have  responded  to  these  shortfalls  by  designing  programs  to 
increase  the  supply  of  primary  care  physicians,  particularly  in  undersexed  areas. 
Since  1989,  physicians  who  treat  Medicare  patients  in Health  Professional  Shortage 
Areas  (HPSAS)  designated  by the  Department  of  Health  and  Human  Services  have 
been  entitled  to  bonus  payments.  Increasing  payments  to  physicians  in  underserved 
areas,  it was  believed,  would  have  improved  access  to  care  in  those  areas.  The  current 
law  makes  physicians  in  all HPSAS  eligible  for  bonuses  of  10 percent  of the  amount 
paid  for  services.  Spending  for  the  Medicare  incentive  payment  program  has  been 
increasing  rapidly  and  reached  $68  million  in  1992. 
In theory,  the  bonus  payments  act  as  incentives  to  attract  new  physicians  to 
underserved  areas  and  to  discourage  physicians  in those  areas  from  leaving.  But 
studies  have  raised  questions  about  whether  the  incentives  have  any  effect  on 
physicians  decisions  to  remain  in or  move  to  an  underserved  area. 
This  study  focuses  on  the  effectiveness  ~f Medicares  HPSA  incentive  payment 
program  as  part  of the  larger  Federal  effort  to  improve  access  to  primary  care.  We 
recognize  that  the  incentive  programs  authorizing  legislation  mandates  payments  to 
both  specialists  and  primary  care  physicians  in HPSAS.  The  widespread  concern  about 
shortages  of primary  care  physicians,  however,  prompted  us  to  examine  how  well  the 
incentive  payment  program  addresses  that  problem. 
Our  findings  are  based  on  a survey  of 497  physicians  who  recently  received  Medicare 
incentive  payments  and  on  a review  of  legislative  history,  regulations,  and  literature. 
FINDINGS 
A substantial  amount  of  the Medicare  incentive  money  has gone  to physicians  who 
provide  little  or no pnmaq  care. 
Forty-jive  percenl  ($31  million)  of [he Medicnre  incentive  money  distributed  in  1992  wenl 
to physicians  who,  according  IO Federal  definitions,  are not prima~  care providers. 
i  According  to  their  own  estimates,  74 percent  of the  specialists  who  received 
bonuses  spend  less  than  half  of their  time  providing  primary  care  sewices,  and 
45 percent  provide  primary  care  services  less  than  10 percent  of  the  time. 
Fourteen  percent  ($10  miliion)  of  the  1992  incentive  money  went  to  urban,  hospital-based 
specialists. 
These  physicians  spend,  on  average,  just  15 percent  of their  time  delivering 
what  they  consider  to  be  primary  care.  Because  urban  hospitals  are  attractive 
to  specialists,  providing  incentives  for  specialists  to  practice  there  seems 
unnecessary  and  inconsistent  with  Federal  priorities. 
Among  primary  care physicians,  Medicare  incentive  payments  rarely have  a significant 
#ect  on practice  location  deckiom. 
l%ma~  care physicians  WIZOreceived  Medicare  incentive  payments  rate  them,  on  average, 
only  sligh[ly  to  moderately  importan~  in  their  [ocarion  decisions. 
Only  30  percent  rated  the  bonus  payments  as extremely  or  very  important. 
Thirty-two  percent  rated  them  not  at  all  important. 
Many  physicians  received  on~  a small  amount  of Medicare  incentive  monq  in  1992. 
The  median  incentive  payment  for  1992  for  primary  care  physicians  in  rural 
HPSAS  was just  $869,  and  for  primary  care  physicians  in  urban  HPSAS,  $1,239. 
Practice  location  determinants  are often  nonmoneta~,  according  COinterviewed  physicians 
and  published  literature. 
Net  income  can  be  less  irdluential  in attracting  physicians  to  communities  than 
factors  such  as  original  hometown,  climate,  cultural  activities,  and  the 
availability  of medical  facilities  and  colleagues. 
ii  RECOMMENDATIONS 
In  our  draft  report,  we  presented  three  options  to  address  our  findings:  1) eliminate 
the  incentive  payment  program,  2)  modify  the  program  to  target  it more  effectively  to 
primary  care,  or  3)  channel  funds  from  the  program  to  new  or  existing  mechanisms  for 
improving  access  to  primary  care.  Since  we  produced  our  draft  report,  the  President 
has  proposed  changing  the  program  to  provide  larger  incentives  and  to  eliminate 
incentives  for  specialty  services  in urban  areas  in his  Health  Security  Act.  That 
proposal  meets  the  objective  laid  out  in our  second  option,  Since  the  Health  Care 
Financing  Administration  (HCFA)  also  concurred  with  this  option  and  spoke  of  the 
Presidents  proposal  as  addressing  the  programs  deficiencies,  we  have  altered  our 
recommendation  to  include  only  the  second  option  from  our  draft  report. 
I?%eHeahh  Care  Financing  Adminirrration  should  seek  to modify  the Medicare  incentive 
payment  program  to  (a~et  it more  effectively  to pnma~  care. 
Modifying  the  Medicare  incentive  payment  program  would  allow  the  payments  to  be 
better  targeted  toward  primary  care  physicians  and  would  create  stronger  incentives. 
COMMENTS  ON  OUR  DRAFT  REPORT 
We  shared  our  draft  report  with  and  solicited  comments  from  the  Health  Care 
Financing  Administration  (HCFA),  the  Public  Health  Service,  the  Assistant  Secretary 
for  Planning  and  Evaluation  (ASPE),  the  Assistant  Secretary  for  Management  and 
Budget,  the  Assistant  Secretary  for  Legislation,  and  the  Physician  Payment  Review 
Commission.  We  received  comments  from  HCFA  and  ASPE.  We  reproduce  these 
comments  and  provide  detailed  responses  to  each  in  appendix  B. 
We  are  pleased  that  HCFA  concurred  with  our  recommendation  and  after  considering 
the  options  we  presented  in our  draft  report  elected  to  seek  to  modify  the  Medicare 
incentive  payment  program  to  target  it more  effectively  to  primary  care.  We  have 
eliminated  the  other  options  we  initially  presented.  We  have  addressed  HCFAS 
technical  comments  as  necessary. 
We  are  pleased  that  ASPE  concurred  with  our  recommendation  and  found  our 
methodology  sound.  We  have  clarified  our  presentation  as  necessary  to  address 
ASPES  concerns.  We  do  not  wish  to  propose  the  option  to  modify  the  HPSA 
designation  as  ASPE  suggests.  The  HPSA  designation  is also  used  for  other  purposes, 
e.g.,  for  placement  of  National  Health  Service  Corps  providers.  Thus  the  ramifications 
of modi~ing  the  HPSA  designation  go  beyond  the  scope  of  this  report. 
... 
111  TABLE  OF  CONTENTS 
PAGE 
EXE~~  S-RY  . . . . . . .  . . . . .  1 
. . ..-.  .
~ODU~ON,,...........  . . . . . . . . . .  . . . . . . ..  4 
. . . . . . ... 
. . . . . . .. 
F~~GS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
  Substantial  payments  tophysicians  who  provide  little  ornoprima~  . .  care.  .. .. .. .. .. 45 
  Minimal  effect  onprimag  care  physicians  practice  locatlondeclslons.  .. .. . . . . .  8 
. . . . . . . . . 
~cO_~A~ONS...  . . . . . . . . . . . . .  9 
~W~oN~D~~REpORT  . . . . . . . . . . . . . 
~PEND1~  A-1 
. . . . . . ... 
. . . . . . . 
. . . . . . . 
B-1 
A.  Methodolo~  . . . . . . . . . . . . . . . . . . . . . . . . .  . . . . . 
B:  Detailed  Comments  andOIG  Response  . . . . . . . . . . . . . . . . . . . ........ . . ...  c-1 
. . . . . . ----
. . . . . .  
. .  . . . .. 
C.  Notes  . . . . . . . . . . . . . . . . . . . . . .  INTRODUCTION

PURPOSE 
To  help  determine  whether  Medicare  incentive  payments  promote  the  Federal  interest 
in improving  access  to  primary  health  care  in  Health  Professional  Shortage  Areas. 
BACKGROUND 
Ensuring  access  to  primary  care  physicians  is a national  concern.  By detecting  and 
treating  problems  early,  and  by making  proper  referrals  to  specialists  when  necessary, 
primary  care  physicians  can  improve  the  health  status  of their  patients  while  reducing 
total  health  care  expenditures.l  (Primary  care  physicians  are  defined  here  and  in 
most  other  discussions  as  doctors  in the  fields  of general  or  family  medicine,  general 
internal  medicine,  pediatrics,  and  obstetrics/gynecology  .2)  Given  the  promise  of  better 
health  at  lower  cost,  primary  care  physicians  naturally  play  prominent  roles  in  plans 
for  State-level  and  national  health  care  reforms 
The  nation  suffers  from  a shortage  of  primary  care  physicians,  however,  and  some 
geographic  areas  are  particularly  underserved.4  Medical  schools,  State  governments, 
and  nonprofit  foundations  have  responded  to  these  shortfalls  by  designing  programs  to 
encourage  more  medical  school  students  and  graduates  to  choose  primary  care  as their 
field  of practice  and  to  locate  their  practices  in traditionally  underserved  areas. 
The  Federal  government,  through  the  Department  of  Health  and  Human  Services 
(HHS),  has  also  signaled  its  desire  to  improve  access  to  primary  care.  The  National 
Health  Service  Corps,  Area  Health  Education  Centers,  Community  and  Migrant 
Health  Centers,  and  Primary  Care  Cooperative  Agreements  are  among  the  major 
programs  operated  with  this  goal  in  mind. 
To  target  support  for  primary  care  where  the  support  is most  needed,  HHS  defined 
and  identified  Health  Professional  Shortage  Areas  (HPSAS).5  These  are  counties, 
census  tracts,  or  other  geographic  areas  where  the  ratio  of  population  to  primary  care 
physicians  is at  least  3,000  to  I.b  The  original  purpose  of defining  HPSAS  was  to 
create  a list  of  possible  placement  sites  for  physicians  obligated  to  serve  in the 
National  Health  Service  Corps.  Since  1989,  however,  HPSAS  have  had  an  additional 
meaning.  Physicians  who  treat  Medicare  patients  in  those  areas  are  now  entitled  to 
bonus  payments.  The  payments  comprise  a  percentage  of what  the  physicians 
otherwise  receive  through  Medicare  Part  B reimbursement  policies. 
The  Medicare  bonus  payments,  as first  conceived,  were  intended  to  address  low 
prevailing  payment  rates  to  primary  care  physicians  in  undersexed,  rural  areas. 
Increasing  the  payments,  it was  believed,  would  have  improved  access  to  care  in those 
areas.  In  its version  of the  Omnibus  Reconciliation  Act  of  1987,  the  House  of 
Representatives  proposed  that  the  bonuses  go  only  to  primary  care  physicians  in  rural 
.  areas  with  the  most  severe  shortages.  It set  the  bonus  rate  at  10 percent.g  But  the

bill  was  modified  as  it went  through  the  Senate  and  Conference  Committee.  The  final

law  made  both  primary  care  physicians  and  specialists  eligible,  authorized  payments

for  rural  physicians  starting  in  19S9 and  for  urban  physicians  starting  in  1991,  and

reduced  the  bonuses  to  5 percent  of  the  amount  paid  for  services.v  TWO years  later,

the  House  of  Representatives  passed  legislation  that  would  have  restricted  the

payments  to  primary  care  physicians.  1 This.  amendment,  however,  did  not  become

law.  Instead,  Congress  raised  the  bonuses  from  5 to  10 percent  and  conferred

eligibility  on  all  physicians  in all  HPSAs--not  just  those  with  the  most  severe

shortages  .*1

With  these  amendments  and  increasing  awareness  of the  incentive  payment  program,

spending  and  participation  rapidly  expanded.  In calendar  year  (CY)  1989,  the

payments  totaled  $2  million  and  went  to  about  4,000  providers.12  In  CY  1992,  they

totaled  $68  million,  distributed  among  nearly  22,000  providers.1~  The  bonuses  can  be

expected  to  continue  rising  in future  years  along  with  the  rest  of  the  Medicare

program  expenditures.  Because  they  are  tied  to  Medicare  Part  B payments,  they  do

not  need  to  be  reauthorized  and  appropriated  each  year,  and  they  currently  cannot  be

capped.

In  theory,  the  bonus  payments  act  as  incentives  to  attract  new  physicians  to

underserved  areas  and  to  discourage  physicians  in those  areas  from  leaving.14  But

studies  by  the  Physician  Payment  Review  Commission  (PPRC)  and  by  the

Congressional  Office  of Technolo~  Assessment  (OTA)  have  raised  questions  about

the  efficacy  of  the  intent  ive  payment  program.5  In  particular,  both  expressed

uncertainty  about  whether  incentives  have  any  effect  on  physicians  decisions  to  remain

in  or  move  to  an  underserved  area.

This  study  examines  the  efficacy  of  Medicares  HPSA  incentive  payment  program  as

part  of the  larger  Federal  effort  to  improve  access  to  primary  care.  We  recognize  that

the  program  is currently  designed  to  encourage  afl  physicians--primary  care  and

specialty  alike--to  practice  in HPSAS.  It could  be  argued  that  it is also  intended  to

encourage  physicians  in  HPSAS  to  include  more  Medicare  patients  in  their  patient

mixes  than  they  otherwise  would.  Nevertheless,  we  focus  on  the  payments  role  in

improving  access  for  the  general  population  in shortage  areas  to  primary  care

physicians,  and  we  do  so for  three  reasons.

First,  it is clear  that  the  current  administration  plans  to  increase  support  for  primary

care  while  limiting  support  for  specialty  care.14  Second,  the  administrations  efforts

to  reform  the  health  care  system  involve  all Americans,  not  just  Medicare  enrollees.

Third,  although  both  primary  care  and  specialty  physicians  are  eligible  for  incentive

payments,  the  program  is inextricably  linked  to  the  availability  of primary  care.  That

is because  an  areas  status  as  a HPSA  depends  entirely  on  the  representation  of

primary  care  physicians  within  that  area,  and  not  at  all  on  the  representation  of

specialists.

2
 If the  Medicare  incentive  payment  program  is to  be  effective  and  efficient  in 
improving  access  to  primary  care  in undeserved  areas,  it will  have  to  satisfy  two 
conditions.  First,  it must  direct  its  resources  to  physicians  who  provide  primary  care. 
Second,  the  payments  Imust be  an  important  factor  in influencing  these  physicians  to 
establish  or  maintain  practices  in underserved  areas.  To  determine  whether  these 
conditions  are  being  satisfied,  we  surveyed  recent  recipients  of Medicare  incentive 
payments.  We  learned  what  types  of physicians  are  receiving  payments,  where  they 
are  practicing,  and  how  important  the  payments  are  in  their  practice  location 
decisions. 
METHODOLOGY 
We  selected  a random  sample  of  497  physicians  from  the  records  of  10 Medicare 
carriers.  These  physicians,  according  to  carrier  records,  received  Medicare  incentive 
payments  for  the  quarter  ending  December  31,  1992.17  Each  was  mailed  a 
questionnaire,  and  405  (81.5  percent)  responded.  From  the  carriers,  we  obtained 
payment  histories  and  other  information  for  all  497  physicians.  We  also  conducted 
telephone  interviews  with  33  physicians.  To  supplement  the  information  obtained 
through  this  survey,  we  reviewed  literature  on  the  subject  of  access  to  primary  care  in 
undersexed  areas.  Details  of our  methodology  appear  in appendix  A. 
We  conducted  this  inspection  in  accordance  with  the  @ta/ity  S[ondards  for  Inspections 
issued  by  the  Presidents  Council  on  Integrity  and  Efficiency. 
SCOPE 
This  report  focuses  on  Medicare  incentive  payments  for  which  only  physicians  are 
eligible.  Physicians  include  cioctors  of  medicine,  osteopathy,  podiatry,  and  optometry. 
Therefore,  our  discussion  of  primary  care  includes  cn-dy physicians  and  not  providers 
such  as  nurse  practitioners,  physician  assistants,  and  other  nonphysician  providers. 
The  role  that  these  providers  can  play  in  improving  access  to  primary  care  is discussed 
in our  May  1993  inspection  report,  Enhancing  the  Utilization  of  Nonphysician  Health 
Care  Providers  (OEI-01-90-02070). 
3
 FINDINGS

A SUBSTANTIAL  AMOUNT  OF  THE  MEDICARE  INCENTIVE  MONEY  HAS 
GONE  TO  PHYSICIANS  WHO  PROVIDE  LITTLE  OR  NO  PRIMARY  CARE. 
Forty-five  percent  of  the Medicare  incentive  money  didribuled  in  1992  went  to physicians 
who,  according  to Federal  definitions,  are not pnmaty care provkiem 
Half  (50  percent)  of  the  providers  who  received  HPSA  incentive  payments  in late  1992 
are  specialists,  and  they  received  about  half  of the  money  distributed  that  year 
(45  percent),  or  about  $30.5  million.;  The  percentage  of  incentive  money  going  to 
specialists  was  greater  in urban  areas  (54  percent)  than  in  rural  areas  (35  percent)  .18 
Incentive  payments  made  to  specialists  could  still  help  improve  access  to  primary  care 
if the  specialists  were  providing  primary  care,  but  this  is not  generally  the  case. 
According  to  their  own  estimates,  75  percent  of specialists  spend  less  than  half  their 
time  providing  primary  care  services.lv  Forty-five  percent  spend  less  than  10 percent 
of their  time  on  primary  care.  In contrast,  97 percent  of  primary  care  physicians 
spend  half  their  time  or  more  delivering  primary  care,  and  76  percent  spend  at  least 
90 percent  of  their  time  on  prima~  care. 
Physicians  who  spend  less  than  10 percent  of their  time  on  primary  care  received  one 
quarter  (26  percent)  of the  incentive  money  in  1992.  Physicians  who  spend  90  percent 
or  more  received  44  percent. 
Fourteen  percent  of  the  1992  incentive  money  went  10 urban,  hospi~al-based  specialks. 
Although  they  are  designated  as  areas  with  too  few  physicians,  HPSAS  can  contain 
large  and  prestigious  hospitals.  Institutions  such  as Brigham  and  Womens  Hospital  in 
Boston,  Mt.  Sinai  Medical  Center  in Cleveland,  and  Buffalo  General  Hospital  are 
located  in  HPSAS.  This  is because  HPSA  designations  are  made  completely  without 
reference  to  the  presence  of either  health  care  facilities  or  physicians  not  in  primary 
care  fields. 
These  hospitals  facilities,  prestige,  and  large-city  locations  make  them  attractive  to 
specialists  who  practice  primarily  in  hospitals.  For  these  physicians,  Medicare  bonus 
payments  seem  to  be  more  of a windfall  than  an  incentive.  Increasing  payments  to 
physicians  who  provide  specialty  services  in hospitals  alongside  hundreds  of other 
specialists  seems  inconsistent  with  efforts  to  encourage  physicians  to  provide  primary 
care  in areas  with  few  other  doctors. 
*We provide  confidence  intervals  for  our  estimates  in appendix  A. 
4  Furthermore,  urban  hospitals.  because  of  their  reputations  and  convenient  locations, 
attract  patients  from  wide  areas.  Therefore,  many  of  the  people  treated  by physicians 
who  practice  in urban  HPSA  hospitals  probably  do  not  even  live  in  HPSAS  themselves. 
The  law  does  not  require  that  the  patients  of physicians  receiving  Medicare  incentive 
payments  be  residents  of  HPSAS,  or  that  HCFA  record  whether  or  not  these  patients 
live  in HPSAS. 
In  extreme  examples,  neither  the  patients  nor  the  physicians  spend  most  of their  time 
in HPSAS.  One  of  the  physicians  in our  sample  has  a private  practice  in a wealthy 
New  Jersey  suburb.  On  rare  occasions,  when  his  patients  require  services  unavailable 
in the  suburban  hospital,  he  will admit  them  to  Cooper  Hospital  in  nearby  Camden. 
Cooper  Hospital,  a 400-plus  bed,  university-affiliated  institution,  is in  an  urban  HPSA. 
For  the  services  he  provided  to  his  suburban  patients  in Camden,  this  physician 
received,  consistent  with  Federal  law,  $1,500  in incentive  payments  in  1992. 
The  HPSA  incentive  program  paid  approximately  $9.4  million  in  1992  to  specialists 
who  spend  most  of their  time  when  they  are  in HPSAS  providing  services  in hospitals. 
These  physicians  spend,  cm average,  just  15 percent  of their  time  delivering  what  they 
consider  to  be  primary  care.  Thirty-seven  percent  of  them  provide  no  primary  care  at 
all. 
Furthermore,  incentive  payments  to  urban,  hospital-based  specialists  are  higher  on 
average  than  payments  to  other  physicians.  Urban,  hospital-based  specialists  received 
median  payments  for  1992  of $1,425,  compared  to  $656  for  all  incentive  payment 
recipients.  Although  it can  be  argued  that  the  general  lack  of physicians  in rural 
areas20  justifies  paying  bonuses  to  specialists  in rural  hospitals,  paying  higher-than-
average  incentive  payments  to  urban,  hospital-based  specialists  seems  inappropriate. 
AMONG  PRIMARY  CARE  PHYSICIANS,  MEDICARE  INCENTIVE  PAYMENTS 
RARELY  HAVE  A SIGNIFICANT  EFFECT  ON  PRACTICE  LOCATION 
DECISIONS. 
We  established  in  the  previous  section  that  much  of the  Medicare  incentive  money 
goes  to  physicians  who  provide  little  or  no  primary  care.  We  turn  next  to  the  question 
of whether  money  that  does  reach  primary  care  physicians  is effective  in encouraging 
them  to  practice  in  underserved  areas.  Statistics  presented  in  this  section  are  taken 
from  the  responses  of the  262  physicians  in our  sample  who  meet  the  Federal 
definition  of primary  care  physicians  (see  the  Introduction).  Because  we  realize  that 
some  specialists  provide  primary  care,  we  tested  an  alternative  definition  of primary 
care  physicians.  We  conducted  the  same  analyses  for  the  group  of  physicians  in our 
sample  who  say  they  spend  at  least  half  their  time  delivering  primary  care.  The  results 
of those  analyses  were  very  similar  to  the  ones  presented  below. 
5
 I?nrnmycare physicians  who  received  Medicare  incen~ive payments  rate  theq  on  average, 
slight~  to moderately  important  in their iocahon deckion.s. 
We  asked  incentive  payment  recipients,  How  important  are  the  bonus  payments  in 
your  decisions  about  where  to  practice?  They  recorded  their  answers  on  a 5-point 
scale,  as  shown  in figure  1 below.  Only  30 percent  rated  the  bonus  payments  as 
extremely  or  very  important. 
Figure  1 
Importance  of Payments to Primary Care Physicians 
I 
2 (Very)  (18%) 
3 (Moderately)  (21%) 
(Extremely)  (13%) 
4 (Slightly)  17%) 
at All)  (32?40) 
N-208

Sour- OIGSurveyofPhysiciansReceivingMedicareIncentivePayments,Spring1993

Numbersdonotaddto1ob%ortofiguresintexi becauseofroundingerrors.

I 
The  mean  rating  was  3.37,  which  falls  between  slightly  and  moderately  important. 
The  numbers  presented  above  probably  exaggerate  somewhat  the  true  importance  of 
the  incentive  payments.  Several  of the  physicians  who  rated  the  payments  at  least 
slightly  important  also  indicated  that  they  were  unaware,  prior  to  receiving  our 
questionnaire,  that  Medicare  offered  incentive  payments  to  physicians  in HPSAS.21  It 
seems  unlikely  that  these  physicians  could  truly  attach  any  importance  to  the  payments 
without  knowing  of their  existence.  Also,  when  we  intemiewed  physicians  about  the 
written  responses  they  provided  to  us,  they  frequently  indicated  that  they  had 
overstated  the  importance  of the  incentive  payments. 
6
 A  study  commissioned  by HCFA  predicted  that  bonus  payments  would  be  more 
effective  in  retaining  physicians  who  already  practice  in  HPSAS  than  in  attracting  new 
physicians  to  HPSAS.Z2  Yet  primary  care  physicians  who  have  practiced  in  their 
current  locations  since  before  the  incentive  payments  began  found  the  payments  less 
important  (mean  rating  =  3.54)  to  their  decisions  than  did  their  counterparts  who 
arrived  since  the  payments  started  (mean  rating  =  3.05).  Physicians  with  previously 
established  practices  represent  65 percent  of our  primary  care  subsample,  and  the 
average  length  of practice  among  all  primary  care  physicians  is  11 years. 
Many  physicians  received  only  a small  amount  of Medicare  incentive  money  in 1992. 
The  mean  1992  incentive  payment  for  physicians  in our  sample  was  $2,375.  But  the

mean  is inflated  by  a relatively  small  number  of  large  payments.  (For  example,  13

primary  care  physicians  in  our  sample  had  payments  in  1992  of $10,000  or  more.)  The

median  incentive  payments  for  1992  for  primary  care  physicians  in  rural  HPSAS  was

just  $869,  and  for  primary  care  physicians  in urban  HPSAS,  $1,239.  These  payments

seem  insignificant  in  comparison  with  physicians  average  incomeszs  and  therefore

are  unlikely  to  have  major  effects  on  physicians  location  decisions.

The  larger  the  total  annual  incentive  payments,  the  more  important  the  payments  are

rated  24 The  median  amount  paid  to  physicians  who  rated  the  payments  extremely,

very,  or  moderately  important  was  $1,572  (mean  $3,832);  for  physicians  rating  the

payments  slightly  or  not  at  ail  important,  the  median  payment  was  $801  (mean

$1,723).

Higher  payment  amounts  are  also  associated  with  increased  awareness  of  the  program.

Physicians  who  had  been  aware,  before  receiving  our  questionnaire,  that  Medicare

offered  Medicare  incentive  payments  received  a median  payment  of $1,461.

Physicians  who  had  not  been  aware  received  a median  payment  of $410.

Practice  location  determinants  are often  nonmonetary,  according  to  interviewed  physicians 
and publkhed  literature. 
The  apparently  low  importance  attached  to  incentive  payments  by  physicians  in  our 
sample  is consistent  with  prior  research  on  location  decisions.  According  to  research 
reviewed  by  the  HCFA-commissioned  study,  net  income  can  be  less  irdluential  in 
attracting  physicians  to  communities  than  factors  such  as  original  hometown,  climate, 
cultural  activities,  and  the  availability  of medical  facilities  and  colleagues.zs  Such 
factors  are  also  more  important  than  income  in physicians  decisions  to  stay  or  leave 
rural  areas.26 
The  importance  of Sociill  and  cultural  factors  was  reinforced  in  conversations  with  the 
14 primary  care  physicians  in our  telephone  interview  subsample.  The  reasons  they 
mentioned  for  choosing  their  current  practice  location  included  presence  of family,  site 
of training,  and  need  for  physicians  in their  areas.  None  indicated  that  they  would 
stop  practicing  in  their  HPSAS  if the  incentive  payments  were  discontinued. 
7
 RECOMMENDATIONS

In  our  draft  report,  we  presented  three  opticms  to  address  our  findings:  1) eliminate 
the  incentive  payment  program,  2)  modify  the  program  to  target  it more  effectively  to 
primary  care,  or  3)  channel  funds  from  the  program  to  new  or  existing  mechanisms  for 
improving  access  to  primary  care.  Since  we  produced  our  draft  report,  the  President 
has  proposed  the  Health  Security  Act.  As  part  of  that  proposal,  the  Medicare 
incentive  payment  program  would  be  changed  to  provide  twenty  percent  bonuses  to 
physicians  providing  services  in HPSAS  and  would  eliminate  bonuses  for  specialty 
services  in  urban  areas.  The  increase  in the  size  of the  payments  could  make  them 
more  effective  incentives.  The  elimination  of incentives  for  specialty  services  in urban 
areas  could  more  effectively  target  the  program  to  primary  care.  Because  HCFA 
concurred  with  this  option  and  spoke  of the  Presidents  proposal  as  addressing  the 
programs  deficiencies,  we  have  altered  our  recommendation  to  include  only  the 
second  option  from  our  draft  report. 
The HeaUh  Care  Financing  Administration  (HCFA)  shouid  seek  10 modifi  ~he Medicare 
incentive  payment  program  to ta)get  it more  efleclively  10 prima?y  care. 
As we  noted  in the  background  section,  the  current  statute  authorizes  Medicare 
incentive  payments  to  both  specialists  and  primary  care  physicians  in  HPSAS. 
However,  current  Federal  priorities  call  for  budgetary  restraint  and  emphasis  on 
primary  care.  Meanwhile,  Medicares  HPSA  incentive  payment  program  is directing 
millions  of  dollars  to  providers  of specialty  care.  The  money  that  it does  provide  to 
primary  care  physicians  seems  to  have  only  slight  importance  in  their  decisions  to 
practice  in underserved  areas.  Thus,  the  program  appears  inconsistent  with  current 
Federal  interests. 
The  incentive  program  as  currently  designed  has  two  fundamental  flaws  that  limit  its 
effectiveness  in  enhancing  access  to  primary  care.  Bonuses  are  being  given  to  many 
physicians  who  are  not  providing  primary  care,  and  they  are  not  strong  influences  on 
physicians  locations  decisions.  These  flaws  suggest  that  (1)  the  payments  should  be 
targeted  more  specifically,  and  (2)  they  should  be  modified  to  create  stronger 
incentives.  Because  higher  payments  seem  to  have  more  influence  on  physicians,  the 
program  might  be  more  effective  if the  payments  were  increased.  Payments  to  some 
physicians  could  be  increased  without  adding  to  overall  expenditures  if payments  were 
withdrawn  from  other  physicians. 
One  option  for  increasing  payments  is to  raise  the  bonus  percentage.  The  bonus 
could  be  set,  for  example,  to  15 or  20 percent  of  standard  Part  B payments.  There 
are  many  options  for  limiting  payments  in order  to  offset  payment  increases.  one 
would  be  to  confer  eligibility  on  only  those  physicians  in HPSAS  who  were  recognized 
by HCFA  as  primary  care  providers.  Another  would  be  to  make  all  physicians  in 
HPSAS  eligible,  but  to  provide  incentive  payments  only  when  they  provided  what 
HCFA  considered  to  be  primary  care  services.  A  third  would  be  for  HCFA  to  identify 
8  Medicare  enrollees  who  reside  in  HPSAsand  to  allow  incentive  payments  for 
physicians  only  when  they  treat  HPSA  residents. 
9  COMMENTS  ON  THE  DRAFT  REPORT 
We  shared  our  draft  report  with  and  solicited  comments  from  the  Health  Care 
Financing  Administration  (HCFA),  the  Public  Health  Service,  the  Assistant  Secretary 
for  Planning  and  Evaluation  (ASPE),  the  Assistant  Secretary  for  Management  and 
Budget,  the  Assistant  Secretary  for  Legislation,  ,lnd  the  Physician  Payment  Review 
Commission.  We  received  comments  on  our  draft  report  from  the  Health  Care 
Financing  Administration  (HCFA)  and  the  Assistant  Secretary  for  Planning  and 
Evaluation  (ASPE).  We  reproduce  these  comments  and  provide  detailed  responses  to 
each  in Appendix  B. 
We  are  pleased  that  HCFA  concurred  with  our  recommendation  and  after  considering 
the  options  we  presented  in our  draft  report  elected  to  seek  to  modify  the  Medicare 
incentive  payment  program  to  target  it more  effectively  to  primary  care.  Because  they 
selected  this  option  and  because  the  Presidents  Health  Security  Act  includes  a 
proposal  to  make  improvements  to  the  program,  we  have  eliminated  the  other  options 
we  initially  presented.  We  have  addressed  HCFAS  technical  comments  as  necessary. 
We  are  pleased  that  ASPE  concurred  with  our  recommendation  and  found  our 
methodology  sound.  We  have  eliminated  the  option  about  which  ASPE  had  concerns, 
for  the  reasons  noted  above.  We  do  not  wish  to  propose  the  option  to  modify  the 
HPSA  designation  as  ASPE  suggests,  because  the  HPSA  designation  is used  for  other 
purposes.  We  note  that  our  Management  Advisory  Report  Design  Flaws  in  the 
Medicare  Incentive  Payment  Program,  (OEI-01-93-OO05  1), issued  in June  1994, 
discusses  this  issue.  We  have  clarified  our  presentation  as necessary  to  address 
ASPES  other  concerns. 
10
 APPENDIX  A 
METHODOLOGY 
Our  sources  for  this  report  included:  (1)  responses  to  a mail  survey  of  a sample  of 
HPSA  incentive  payment  recipients,  (2)  informaticm  about  those  recipients  supplied  by 
Medicare  carriers,  (3)telephone  inte~iews  with  asubsample  of  incentive  payment 
recipients,  and  (4)  a review  of written  material  including  laws,  committee  reports,
.  ., 
regulations,  HHS  memoranda,  and  periodical  literature.  In  this  appendix  we  describe 
each  of our  data  collection  techniques  and  explain  the  analyses  we  performed. 
MAIL  SURVEY 
To  select  a representative  sample  of  incentive  payment  recipients,  we  obtained  from 
the  Health  Care  Financing  Administration  (HCFA)  a list  showing  the  distribution  of 
incentive  payments  for  the  quarter  ending  September  30,  1992.  The  list  showed,  for 
each  of the  58 Medicare  carriers,  the  total  amount  paid  in Medicare  incentives  for 
that  quarter  and  the  total  number  of  physicians  receiving  incentive  payments.  We 
excluded  from  that  list  the  carrier  for  the  Railroad  Retirement  Board  (RRB),  to  avoid 
duplicate  counting  of  physicians  who  submit  claims  to  both  that  carrier  and  the  carrier 
in their  home  State. 
Subsequently,  we  employed  a two-stage  Rao-Hartly-Cochran  sampling  technique27  to 
randomly  select  ten  carriers  and  approximately  50  physicians*  within  each  carrier  for 
a total  of about  500  physicians.  At  the  first  stage,  we  used  the  software  Rats/Stats 
from  the  DHHS  Office  of  Inspector  General,  Office  of Audit  Semites,  to  randomly 
assign  the  57  carriers  into  10 groups.  This  produced  three  groups  of five  carriers  and 
seven  groups  of  six carriers  from  which  the  software  selected  a carrier  with  probability 
proportional  to  size.  Size  was  measured  by the  number  of  HPSA  physicians  in the 
carrier  according  to  the  list  provided  by  HCFA.  The  ten  carriers  and  their  probability 
of selection  appear  in the  table  below. 
*When  we  selected  our  sample  from  the  carriers,  we  did  not  know  whether  the 
sample  would  consist  entirely  of physicians,  even  though  only  providers  of physicians 
services  are  eligible  for  incentive  payments.  When  reviewing  a sample  of  1991 
Medicare  claims  associated  with  HPSA  bonus  payments,  we  discovered  a number  of 
claims  which  used  provider  specialty  codes  resemed  for  nonphysicians,  such  as 
laboratories  and  medical  equipment  suppliers.  As  it turned  out,  however,  all  but  one 
of the  providers  in  our  sample  were  either  physicians  --doctors  of  medicine,  osteopathy, 
podiatry,  and  optomet~--or  facilities  employing  physicians.  The  one  exception  was  a 
physician  assistant.  For  claritys  sake,  we  refer  to  all sampled  providers  as physicians. 
A-1  r  1 
1State  (Carrier)  ~  Number  of  Number  of  ,~  Probability  of  ~ Probability  ~ 
I  Bcmus- Bonus- Selection  ~  of  ; 
i  Receiving  Receiving  ~  Within  Group  i  Selection  I 
~ Physicians  in  Physicians  in  t  Overall  I 
,  I 
Group  Carrier  ~ 
1 Alabama  (Blue  2,796  834  i  2+-+ 
Shield)  I 
,  \ I 
Georgia  (Aetna)  I  4,061  1,340  i  33.0%  6.4%  \ 
 
Idaho  (Equitable)  !  799  71  8.9%  0.3~G 
A

Indiana  2,581  317  12.390  1.5%  I

(AdminaStar

Federal) 
1

New  Jersey  (Penn.  ~  1,584  987  ,  62.3%  4.770  1 
Blue  Shield) 
  1I \ f 
Western  New  York  ~  1,921  895  t  46.6%  4.376  , 
(Blue  Shield)  1  I 
) 
Ohio  (Nationwide)  2,011  1,007  1  50.0%	 ~  4.8YG  ~ 
I 
Puerto  Rico  (SSS)  I  1,259    706  56.1%  I  3.4%  1 
I

Texas  (Blue  Shield)  2,246  ~  1,145  51.0%  ~  5.570 
[ West  Virginia  1,727    436  25.2%  i  2.17G

~ (Nationwide-Ohio) 
I

For  quarter  ending  September  30,  1992.

Within  each  sampled  carrier,  we  used  simple  random  sampling  to  select  physicians.

Each  carrier  provided  a hard  copy  computer  listing  of every  provider  number  for

which  it issued  a HPSA  bonus  check  for  the  quarter  ending  December  31,  1992.  (We

used  fourth  quarter  records  to  select  physicians  even  though  we  use  third  quarter

records  to  select  carriers,  because  we  wanted  the  most  recent  information  on

physicians  available,  and  that  data  was  not  available  when  we  selected  carriers.  We  do

not  believe  that  this  switch  adversely  affects  our  ability  to  generalize.)  We  used

systematic  sampling  to  obtain  the  sample  manually.  Beginning  with  a random  start,  we

selected  every  nth  provider  number  (n  depended  on  the  number  of  physicians  for  each

carrier)  to  obtain  approximately  50  provider  numbers  within  a carrier.  We  did  not  get

exactly  50 in  each  carrier  due  to  rounding  of the  skip  interval  calculated  to  sample  the

physicians  and  because  some  physicians  had  multiple  provider  numbers.  The  table

below  shows,  by  carrier,  the  universe,  sample  sizes,  and  response  rate  of  physicians.

A-2
 ~ 
~i  Useable  \  Respons] 
I  ~ Universe  I ~~~~e  \  (%)  ~ 
\  Responses 
carrier  1  81 
34  i 
735  ;  42  \ 
Alabama  :7  74 
I  37  ~ 
l,~~s  \  50 
Georgia  \ , 94 
44 
I  73  I  47  ~ 
Idaho  \  83 
44 
I  320  ; 53  \ 
Indiana  1  88 
45  ! 
917  ; 51 
New  Jersey  90 
46 
51 
863 
Western  New  \  I 
York  I  72 
36  ~ 
954  !  50  \ 
ohio  {  65 
I  33 
458  \  51 
puerto  Rico  ,  S8 
44  i 
~,066  i  50  ; 
Texas  I  :  I  81  ! 
I  \  42 
414  \  52 
West  Virginia  I  82 
405  ~ 
497   
6,908  1 
Total 
aForquarter  ending  December  31,  1992. 
bUniverse  and  sample  sizes  reflect  adjustments  to  exclude  11 physicians 
originally  selected  but  later  determineSde venbyo fth eth ecsaer ripehrsy sictoia nbse   iwneelrieg ibilne  Afloabr amthae, 
incentive  payments  they  received.  Idaho,  New  York,  and  West  Virginia. 
and  there  was  one  each  in Georgia, 
Most  of the  provider  numbers  selected  corresponcdleindi c,  thoo sipnidtailv,i duoarl   otphheyr sicmiaunlst.iple-When 
they  corresponded  instead  to  a group  practice, 
physician  setting,  we  telephoned  the  provider  and  obtained  the  names  of physicians 
within  the  group  or  institution  at  random. 
We  mailed  a questionnaire  and  cover  letter  to  each  selected  physician  between  March
We  sent  a follow-up  letter  and  replacement  questionnaire  to 
16 and  April  6,  1993. 
The  questionnaire  is reproduced  at  the  end  of this 
nonrespondents  on  April  16. 
appendti,  along  with  unweighed  response  frequencies. 
We  accepted  replies  to  our  survey  until  June  11,  1993.  The  response  rates  we 
achieved  are  displayed  in the  table  above. 
INFO~TION  FROM  CARR~RS 
From  each  of the  10 carriers  in our  sample,  we  requested sptehceia ltfyo,l lowtoitnagl   ainmfoourmnta tiopnaid 
for  each  of the  physicians  selected  by  random  sampling: 
by Medicare  excl~tding HPSA  incentive  payments  for  CYS  198S-1992,  total  urban 
HPSA  incentive  payments  for  calendar  years  1991-1992,  total  rural  HPSA  incentive 
A-3  payments  for  CYS  1989-1992.  and  whether  the  carrier  had  information  indicating  that

the  physician  was  determined  ineligible  to  receive  HPSA  payments  claimed  for  the

fourth  quarter  of CY  1992  (the  quarter  from  which  our  sample  was  drawn;  if the

carrier  did  have  such  information.  the  physician  was  excluded  from  our  sample).

We  received  only  partial  information  from  each  of the  carriers.  We  did  not  receive

sufficient  information  to  analyze  total  payments  or  bonuses  to  physicians  prior  to  1992.

For  timelinesss  sake,  we  did  not  conduct  tests  to  determine  the  validity  of this

computer-based  data.  We  believe,  however,  that  the  data  are  adequate  for  the

analyses  necessaty  for  the  objectives  of this  study.

TELEPHONE  INTERVIEWS

The  purposes  of  our  telephone  interviews  were  to  achieve  a better  understanding  of

physicians  experiences  with  the  incentive  payment  program  and  to  compare

respondents  to  nonrespondents.  We  selected  two  groups  of  physicians  for  interviews.

The  first  was  a sample  of  38  physicians  selected  at  random  from  the  group  of

respondents  as  of  April  20,  1993.  The  second  was  a sample  of  32 physicians  selected

at  random  from  the  group  of nonrespondents  as  of May  10,  1993.  We  were  able  to

complete  interviews  with  25  physicians  in the  first  group  and  8 physicians  in the

second  group.  (We  excluded  Puerto  Rican  physicians  from  both  groups  before

sampling  because  we  did  not  want  potential  language  problems  to  confound  our

interpretations  of  physicians  responses.)

DOCUMENT  AND  LITERATURE  REVIEW

The  written  materials  we  reviewed  included  the  following: 
  Bills  introduced  during  the  100th  through  103rd  Congresses; 
  Regulations  published  by the  Health  Care  Financing  Administration  (HCFA) 
and  Public  Health  Service  (PHS); 
  Memoranda  from  HCFA  and  the  Office  of  Inspector  Generals  Office  of 
Investigations  and  Office  of  Audit  Services; 
  Articles  on  access  to  primary  care  and  physician  reimbursement  published  in 
medical  journals  and  weekly  newspapers. 
ANALYSIS  OF  QUESTIONNAIRE  AND  CARRIER  DATA 
Weighting  of  resporwes 
The  responses  were  weighted  in accordance  with  the  Rao-Hartley-Cochran  sampling 
method.  This  allowed  us  to  make  projections  to  the  universe  from  which  the  sample 
was  drawn,  i.e.,  recipients  of  incentive  payments  nationwide. 
A-4
 Categorization  of  incentive  payment  recipien~r into  specialir~r  and prima~  care physicians 
The  generally  accepted  definition  of  primary  care  physicians  includes  general  and 
family  practitioners,  internists,  pediatricians,  and  obstetriciardgy  necnlogists.  But  not  all 
physicians  in  these  specialties  deliver  primary  care , and  physicians  in  other  specialties 
may  deliver  a good  deal  of  primary  care.  Furthermore,  physicians  specialties  can  be 
self-designated  and  may  change  over  time.  The  Medicare  carriers  records  of 
physicians  specialties  are  not  always  accurate. 
With  these  difficulties  in mind,  we  did  our  best  to  sort  the  physicians  in  our  sample 
into  primary  care  physicians  and  specialists.  We  categorized  a physician  as  a primary 
care  physician  if both  of the  following  conditions  were  met:  (1)  either  the  carriers 
records  or  the  physicians  questionnaire  response  showed  the  physicians  field  as  one 
of the  five  mentioned  in the  preceding  paragraph;  and  (2)  the  physician  did  not 
answer  No to  the  question,  DO you  consider  yourself  to  be  a  primary  care 
physician? 
By allowing  either  the  carriers  records  or  the  physicians  responses  to  identify  primary 
care  physicians,  we  avoided  mischaracterizing  physicians  as  specialists.  For  example, 
carrier  records  might  show  internal  medicine  for  a physician  who  considered  herself 
to  practice  geriatrics,  or  carrier  records  might  show  clinic when  the  physician  we 
chose  within  the  clinic  might  be  a family  practitioner.  In both  of these  cases,  our 
method  would  include  the  physicians  as  primary  care  physicians  unless  the  physicians 
indicated  that  they  were  not  so. 
As  a check  on  this  assignment  procedure,  we  also  divided  physicians  in our  sample 
into  primary  care  physicians  and  specialists  based  on  the  amount  of  time  they  reported 
spending  on  what  they  considered  to  be  primary  care  services.  We  arbitrarily  selected 
so  percent  of the  physici~ns  time  as  the  dividing  line  between  the  two  groups.  The 
analyses  we  conducted  using  this  definition  showed  essentially  the  same  results  as 
those  using  the  definition  explained  in the  two  preceding  paragraphs. 
Calculation  of  individual  bonuses 
The  amounts  paid  to  physicians  in  our  sample  as  incentives  come  from  carriers 
records.  We  had  to  make  adjustments  to  some  of the  figures  provided  by carriers 
because  they  represented  payments  made  to  groups  of  physicians,  such  as group 
practices  or  clinics,  rather  than  to  individual  physicians. 
To  compensate,  we  divided  the  total  incentive  amount  paid  by the  number  of 
physicians  per  provider  number,  as  reported  by  respondents.  So  if the  carrier  showed 
an  incentive  payment  of $20,000  to  a group  practice  and  the  physician  we  chose  from 
within  that  group  indicated  that  the  group  contained  20  physicians,  we  set  the  amount 
paid  equal  to  $1,000.  If the  provider  number  did  not  correspond  to  an  individual 
physician  and  the  physician  we  selected  from  that  provider  did  not  indicate  the 
A-5
 number  of physicians  using  that  provider  number,  we  considered  the  incentive  amount 
to  be  missing  and  excluded  it from  analysis. 
Sample  sues  for  statistics  presented 
Some  of  the  statistics  presented  in the  report  apply  to  our  entire  sample  of 497

physicians,  whereas  others  apply  only  to  the  set  of  physicians  who  responded  to  our

mail  survey  and  answered  a particular  question.  Statistics  involving  only  the

physicians  incentive  payment  amounts,  specialties,  and  urban  or  rural  location  apply

to  the  entire  sample;  we  were  able  to  get  complete  data  on  these  information

categories  from  the  carriers.  Statistics  involving  other  information,  such  as  amount  of

time  spent  delivering  primary  care,  practice  setting  within  a HPSA,  length  of stay  in a

HPSA,  and  importance  assigned  to  incentive  payments,  apply  to  the  set  of physicians

providing  the  information  in question.

ESTIMATES  AND  CONFIDENCE  INTERVALS

The  statistics  presented  in  the  report  represent  our  best  estimates.  For  each  statktic-

other  than  median  payment  amounts  and  proportions  of respondents  choosing

individual  importance  scale  points--we  also  computed  90 percent  confidence  intervals,

as  shown  in  the  table  below:

statistic 
I

Point Estimate  9070Cmfidencx?interval

( 
Proportion  of incentive  recipients  who are specialists 
! 
49.8%  44.7% -54.9%0 
Proportion  of incentive  money  that went  to specialists
1 
45.4%  34.190- 56.77c> 
I 
Proportion  of incentive  money  that went  to specialists  in urban  areas 
1  53.570  35.2%  - 71.89Z0 
Proportion  of incentive  money  that went  to specialists  in rural  areas 
I  35.2T0  22.0% -48.4% 
Proportion  of specialists  who spend  less than  half their  time on primary  care 
I 
74.1%  67.l%  - 81.l~o 
I 
Proportion  of specialists  who spend  less than  10% of their  time  on primary  care 
I 
44.5%  33.2%  - 55.8% 
I 
Proportion  of prima~  care physicians  who spend  at least half their  time on primary  care 
I  97.070  94.9%  -99.170 
(continued) 
A-6
 Statistic 
 
~ 
Point Estimate  ~  90% Cmtfidencz Internal 
Proportion  of primary  care  physicians  who spend  at least 90% of their  time on primary  care 
I 
77.5%  71.9%  - 83.1% 
I 
Proportion  of incentive  money  that went  to physicians  spending  less than  10% of their  time  on 
primary  care 
I 
25.7%  ~  9.6%  - 41.8% 
Proportion  of incentive  money  that went  to physicians  spending  at least 90% of their  time on 
primary  care 
) 
43.s70  32.3%  - 55.3% 
Proportion  of incentive  money  that went  to urban,  hospital-based  specialists 
13.8%  3.8% - 23.8% 
Ii
Proportion  of time  spent  on primary  care  by urban,  hospital-based  sp,e cialists  I
II 
15.3%  6.4%  - 24.2% 
Proportion  of urban,  hospital-based  specialists  who provide  no primary  care 
, 
37. 1%.  1  26.7%  - 47.55% 
Mean	 importance  rating  of primary  care  physicians  (PCPS) 
3.37  3.23-3.54 
1 
Mean  importance  rating  for PCPS with  previously  established  practices 
1  3.54  3.35-3.73 
I 
Mean  importance  rating  for PCPS with  new practices 
3.05  I  2.82-3.28 
Proportion  of PCPS with  previously  established  practices 
64.7%  !  56.8+%-72.670 
Mean  length  of practice  in current  location  for PCPS (in years) 
10.5  8.8- 12.2 
Mean  incentive  payment  to PCPS 
) 
S2,375  $1,777-$2,973 
I 
I 
Mean  incentive  payment  to PCPS with  high importance  ratings 
\  $3,832  $2,610-$5,054 
Mean  incentive  payment  to PCPS with low importance  ratings 
$1.723  $1,102-$2,344 
A-7
 QUESTIONNAIRE 
Following  are  the  questions  asked  of  physicians  in our  survey,  along  with  unweighed 
frequencies  and  means  of their  responses: 
W$ich of the following  best describes you?  (If you bill A4edicore using nlore than one provider number, 
answer with respect to the provider nun[her printed  on the /ques(ionnoircj.  ) 
~  Percentage 
Physician  (SO1OPractice)  ~~()  55.6 
,
Physician  (Group  Practice)  136  34.3 
I 
Supplier  11  2.8 
Institution  I  5  1.3 
Laboratory  I  1  0.3 
1 
Other  13  5.8 
1  [  I 
Total  396  100.0 
J 
If you circkd  group practice, how muny physicians  ore in your group? 
N  Mean  Standard  Minimum  Maximum 
~  Deviation  ~ 
352  3.5  ] 8.4  1  85 
-.  . .. 
Note:  We assigned  the  number  1 to physicians who circled  Physician  (Solo  Practice). 
A-8
 W%at is your principal  speciidly? 
Frequen~y 
Family  Practice 
11  -
Internal  Medicine  62 
General  Practice  I  47  I  11.6 
I 
General  Surgexy  31  1  7.7 
, 
I 
Diagnostic  Radiology  I  19  I  4.7 
~ 
Podiatry  18  4.4 
I 
Cardiology  16  4.0 
I 
,
I 
Optometry  I  14  3.5 
Ophthalmology  I  10  2.5 
( 
Orthopedic  Surgery  9  2.2 
1 
Obstetrics/Gynecology  8  1  2.0 
Anesthesiology  1.7 
7 
I 
I  I 
Urology  7  1.7 
I      _  --
Psychiatry  6  I  1.5 
I 
I 
Chiropractic  6  ,  1.5 
I  I 
Emergeney  Medicine  5  1.2 
Otolaryngology  4  1.0 
I 
Gastroenterology  4 
1.0
I 
Pathology  4  I  1.0
I 
Physical Medicine  1  4  1.0 
1 
Neurology  I 3  0.7
I  (
( 
Dermatology,  Pulmonary  ~  2 each  3.0 total 
1 
Disease,  Nephrolo~,  I 
Rheumatology,  1 
Hematology/Oncology,  and 
Medical  Oncology  I 
Neurosurgery,  Plastic  Surgery,  1 each  1  2.0 total 
Geriatrics,  Vascular  Surgery,  1 
Hematology,  Radiation 
i 
Oncology,  Physician  Assistant, 
and Other  I 
Total  1  405  100 
A-9
 Are you boord eligbleor board c[]rti/7cdin thor speci[tlly? 
I 
Frequency  Percentage 
) 
( 
Yes  329  S2.7 
A 
1
I 
No  69  17.3 
r !  I 
Total  1  39s  !  100.0  11 
Do you consider yourself to he o primmy  care phy.sicion? 
Frequen~y  Percentage 
! 
I 
Yes  2s1  70.6 
I  I 
No  I  117  29.4 
I
Total  !  398  I  100.0 
About  what percentage  of your po[ien!-care ho[ws do you spend delivering what you consider to be prirnaiy 
care? 
In what year were you born? 
N  Mean  Standard  Minimum  I  Maximum 
Deviation  \ 
[ 
I 
392  ;  1946  10.5  1915  1966 
1 
Have you ever been a menlber  of the Notional  Health  Service Corps? 
Frequen~y  Percentage 
1 
Yes  I  21  I  5.4 
1 
No  367  94.6 
I 
Total  388  100.0 
L  I 
About  what percentage  of your pmients  ore insured by Medicare? 
A-10
 Do you accept pntienrs on Medicaid?  (Note:  excludes  physicians  from  Puerto  Rico, which  has an unusual 
Medicaid  program.) 
I ( 
1  I  Frequency  I Percentage  I 
1 
( I

Yes  349  I  94.1  I

\ 
I  Total  I  371  100.0  ~ 
i 
If yes, about  what percentage of your potients  ore insured by Medicaid?  (See  note  to previous  question.) 
I  I  T 
N  Mean  ~  Standard  ~  Minimum  Maximum  ~ 
Deviation  ~ 
v 
327  19.4  16.7  ~ o  90 
Do you accept patients  without heollh insurance? 
I 
Frequency  Percentage 
1 
Yes  393  97.5 
No  10  2.5 
Total  403  100.0 
If yes, about  what percentage  of your patients  are uninsured? 
, 
r, -y---
Mean  Standard  ~  Minimum  Maximum 
Deviation  ! 
I 
346  13.7  12.4 
I  0  I  75 
Were you aware, before receiving this xurvq,  that Medicnre ojjlered incentive payments  for selected services 
provided  within HPSAS? 
r 
!!  Frequency  Percentage 
~ 
1  Yes  305  75.9 
I 
No  97  24.1 
, 
Total  402  100.0 
A-II  Were you aware, before receiving (his sunwy, thar you recmt[y received an incentive payment  fkorn 
Medicare? 
Frcq ucncy  Percentage 
~ 
Yes  236  I  71.9 
, 
No  112  I  28.1 
1 
I 
Total  398  I  100.0 
I 
How many years have you practiced  within the bound flries oJa HPSA ?  (If you practiced  {here before the 
area was designated as a HPSA,  include fhose years.  If you practice in more than  one HPSA,  answer with 
respecr to the HPSA  in which you have prncticed the longest. ) 
1  I  I 
N  Mean  Standard  ~  Minimum  ~  Maximum 
~  I  Deviation  ! 
-~  ~ 
I  I 
376  10.6  ~  9.4  o  42 
\ 
In 1992, about  what percentage of your working hours did you spend wifhin a HPSA ? 
r  I  1 
N  Mean  Standard	 Minimum  Maximum 
I
I  Deviation 
I
1 
362  70.7  i  37.4  0  100 
Within the HPSA(S]  where you practice, in which of the following  settings do you spend nzos[ of your 
working hours ? 
I 
Frequency  1  Percentage 
I 
Private  Office  215  54.7 
I 
Hospital  87  22.1 
I  , 
Nursing  Facility  I  4  1.0 
1 
I 1 
IIOther  13  3.3  II 
More  Than  One  Response  34  8.7 
1 
Total  393  I  100.0 
About  what percentage of your total  1992 revenues (Medicare and non-Medicare)  did the HPSA-related 
incentive pflyntents  constitute? 
We discarded  this question,  because  a large number  of respondents  either  did not  know or gave figures 
higher  than  10 percent.  Ten  percent  is the maximum  possible  response  to this question,  and that 
number  would  only apply  to physicians  whose  income  came entirely  from Medicare. 
A-12
 How important  ore the bonux paynzcn[s in your decisions about  where[o practice? 
, 
Frequency  I  Percentage
.     
+  
Extremely  (1)  ?)9  10.0 
-----1 
Very (2)  63  16.1 
Moderately  (3)  78  19.9 
) 
Slightly  (4)  77  19.7 
1 
Not  at All (5)  134  ~  34.3 
Total  391  I  100.0 
N~  I Mean  1~   Standard  ~  Minimum  ~  Maximum 
I  Deviation 
II 
391  ??.5  1.4  1  5 
A-13
 MAIL  SURVEY  INSTRUMENT 
A-14  -~g  *U  1 &ou@  7 ~~e  ~oe  ~  de  prfldi%i.f2a,llfOCti~  d  & p-.

Which of the following best describti  you? (Circle one.  If you.bill  Medicare USUQ? 
more than one providernumber,answerwithrespectto theprovder numberP~t~  on 
Laboratory 
he revuse side of the page)  Institution 
Supplier 
?hysician (Solo Practiu) 
~ther(~pec~fi~ 
Physician (Group Practice) 
If you circld  group practice, how many physicians are in your group? 
~  NO 
What is your principal specialty? 
YES  NO 
Are you board eligible or board certified in that specialty? 
Do you consider yourSelf to be a primary care physician? 
About what per~nmge  of your patient-are  hours do you spend delivering what you 
consider to be primaq  care? 
In what year were you born? 
Have vou ever been a member oi the Nationai Health Service Corps? 
WS  No 
About what percen~ge  of your patiens  are insurd  by Mediare? 
Do you aapt  patien~  on Mediaid? 
ws  NO 
IF  YES, about what Perantage  f our  ~di=id? 
Do you accept patienu  without health insuranw? 
IF YES, about what percentage of your patien~  are uninsured? 
~ering  ens  8 through 14, please direti your en  lo the workyou have&m  b  a H& 
YES  NO 
Were you aware, before receiving this survey, that Medimre offered inWntive 
payrnenw for selected setim  provided within I-IPSAS? 
ws  NC 
Were you aware, before receiving this survey, that you rewntly received an incentive 
)  HOWmany yearn have you practiced within the boundarie  of a HPSA?  (~fyou 
practied  there before the area was designated as a HPSA, include those years. If you 
practice in more than one HPSA, answer with respect to the HPM  in which you have 
~-==-I-n- 1992, about what perw*tage of your wor~ng hours did YOUsPend ithin  a PSAT  ~ 
.2  Within the I-IPSA(S)where you practi~,  in which]f  oyfo uth ne of olollnogweirnpgr asectttiicneg isn  dao HYPOSUA,  
spend most of your worting hours? (Circfe one. 
answerwith respectto the HPSA whereyou most recentfypracOtitcheedr) (spe.ifi~~
Clinic 
Hospi@ 
.  Nursing Facility 
13  ;b~;~h~t~erunmge  of your total 1992 revenu~  (Mediare  and non-Medimre) did 
the HPSA-relatd  incentive payments constitute? 
5 
14  How important are the bonus paymen~  in your9decisions about where4to practiw?  (Circfe one.) 
3
2  Not at all 
1  slightly
Moderately  important 
Very  important 
Wremely  important 
important 
important 
I
I 
wyoU  Ptietiptiwae*@~f_fo4~~r~ 
r  TELEPHONE  INTERVIEW  DISCUSSION  GUIDE  -
A-16  Health  Professional  Shortage  Area  Study

Telephone  Intetiew  Questions  for  Physicians  who  Responded  to  Mail  Survey

Name  of ReqxmdenC

Control  Number  of Respondent  (State  and  Number):

Telephone  Numben

Date  of Intervicx

Name  of Interviewe~

years,  is that  right? 
Youve  been  practicing  in your  current  location  for  _ 
NO  (If no, give correct  answer:  ) 
/Me you in a rural  or an urban  setting?  (An  area  ir rural  if it k  NOT in a Metropolitan 
Statistical  Area) 
RURAL  URMN  DONT  KNOW 
Where  did you practice  before  moved  to your  current  location?  (If nol a familiar 
locatioq prvbe  to find  out if it was a rural or urban  setting.) 
What  brought  you  to your  current  location? 
Do you have  any plans  to move  to another  location  in the  near  future?  If SO,where, 
and why will you be  moving? 
A-17
 How would  you describe  the  availability  of  primary  health  care  services  in Your  area? 
How would  you describe  the  availability  of specialty  health  care  sexvices  in Your area? 
How  far is the  nearest  (respondentti specialy)  from  your  office? 
How  did you hear  about  the  Medicare  incentive  payment  program?  (If lhv  were 
recently  in another  location,  were  they  receiving  incentive  payments  there?) 
(Ask next 2 questions  only  ij theyve  been  practicing  in the  HPLL44  years or 1=)  TO 
what  extent  were  the  incentive  payments  a factor  in encouraging  to  you  practice  in an 
undersexed  area? 
If the  payments  had  not  been  offered,  would  you still have  chosen  to practice  there? 
A-18
 To what  extent  arc  the  payments  a factor  in your  decision  to  keep  practicing  in your 
area? 
If the  payments  were  no longer  offered,  would you move? 
Are  there  approaches  other  than  bonus  payments  that  the  Federal  Government  could 
take  to increase  access  to needed  medical  care  for residents  of underserved  areas? 
&obe  for  both  rnonetq  and  nonmonetaty  approaches.) 
Do you have  anything  else to add? 
A-19
 APPENDIX  B 
DETAILED  COMMENTS  ON THE  DRAFT  REPORT  AND 
OIG  RESPONSE  TO  THE  COMMENTS 
In this  appendix,  we  present  in full  the  comments  on  the  draft  report  offered  by the 
Health  Care  Financing  Administration  (HCFA)  and  the  Assistant  Secretary  for 
Planning  and  Evaluation  (ASPE).  We  also  present  our  response  to  each  set  of 
comments. 
B-1
 *
,,,VU,,  ,.  Health  Care 
.-+>  &-.   DEPARThlENT  OF HEALTH  & HUI$IAN SERVICES  Financing  Admmmtratlon
*f +J>*2,.>*  Memorandum 
,kt4R  71994 
Date 
Bruce  C.  Vladec,  --- A 
From  Administrator 
% 
Office  of Inspector  General  (OIG)  Draft  Reports:  Medicare  Incentive  Payments  in 
Subject	
Health  Professional  Shortage  Areas,  (OEI-01-93-00050)  and  Design  Flaws  in the 
Medicare  Incentive  Payment  Program  (OEI-01-93-00051) 
To 
June  Gibbs  13rown 
Inspector  General 
We  reviewed  the  above-referenced  final  reports  in which  OIG provided  the  results  of 
its review  on payments  being  made  to physicians  under  the  Medicare  Incentive 
Payments  program. 
The  Health  Care  Financing  Administration  (HCFA)  concurs  with  the  second 
recommendation.  However,  we do not  concur  with  the  first recommendation  and  are 
not  able  to comment  on the  third  recommendation  because  of a lack  of specificity  in 
the  OIG  proposals  and  because  of the  potential  impact  of proposed  changes  in the 
Health  Security  Act..  Our  specific  comments  are  attached. 
Thank  you for the  opportunity  to review  and  comment  on this report.  Our  detailed 
comments  on the  findings  and recommendations  contained  in the  report  are  attached 
for your  consideration.  P1ease advise  us if you would  like  to discuss  our  comments  at 
your  earliest  convenience. 
Attachment 
.  .  _ _.  . 
. 
 
B-2
 Health  Care  Financinq  Administrations  (HCFA)  Comments 
on  Office  of Inspector  General  (OIG)  Draft  Re~orts: 
Medicare  Incentive  Pavments  in Health  Professional  Short.mze  Areas 
(OEI-01-93-00050)  and  Design  Flaws  in  the  Medicare 
Incentive  Pavment  ProPram  (OEI-01-93-00051] 
Recommendation  1 
HCFA  should  seek  to eliminate  the  Medicare  incentive  payments  entirely. 
HCFA  Response 
We  do not concur.  OIG  stated  in their  report  that  two-thirds  of primary  care 
physicians  indicated  that  the  payments  range  from  slightly  to  extremely  important. 
One-third  of primary  care  physicians  indicated  that  the  payments  are  very important 
to their  practice  location  decisions.  In light  of these  findings  and  absent  a definitive 
evaluation  of how  important  the  payments  are  to physicians  in their  practice  location 
decisions  HCFA  believes  it is premature  to recommend  eliminating  the  program. 
We believe  that  elimination  of the  program  would  cast  aside  this useful  mechanism 
for providing  better  access  to medical  care  for beneficiaries  in underserved  areas. 
Recommendation  2 
HCFA  should  modify  the  Medicare  incentive  payment  program  to  target  it more 
effectively  to primary  care. 
HCFA  Res~onse 
We  concur.  However,  the  OIG  study  appears  to be  based  on  the  premise  that  the 
intent  of the  incentive  payment  program  is to improve  beneficia~  access  to primary 
care  services.  While  we would  agree  that  legislative  histoxy points  to the  House  of 
Representatives  intent  to limit  the  bonus  to primary  care  services,  this restriction 
was not  adopted  by the  Senate  or the  Conferees.  In addition,  there  may be  access-
to-care  problems  for specialist  services  in rural  health  professional  shortages  areas 
(HPSAS).  Therefore,  we do not want  to target  the  bonus  payment  exclusively  to 
primary  care. 
We  believe  that  Congress  clearly  intended  to increase  beneficiary  access  to health 
care  in HPSAS.  We  also recognize  that  since  the  overwhelming  percentage  of 
specialists  practice  in urban  areas,  an access-to-care  problem  does  not  likely exist for 
access  to specialists  in urban  areas.  For  example,  although  a number  of prestigious 
hospitals  are  located  in urban  HPSAS, many  patients  who  are  treated  at such 
hospitals  tire affluent  and  travel  to those  facilities  seeking  the  finest  specialty  care. 
These  patients  do  not  have  access  problems.  As a result  a very  large  share  of 
incentive  payments  made  to specialists  affiliated  with  those  hospitals  reflects  services 
B-3
 Page  2 
furnished  to beneficiaries  who Jive outside  the  HPSA.  We  believe  that  making 
incentive  payments  to  specialists  in  urban  HPSAS  is an  unnecessary  expenditure  for 
the  trust  fund. 
The  Presidents  Health  Security  Act  contains  a proposal  to limit  bonus  payments  in 
urban  HPSAS to primary  care  setices.  The  savings would  be  used  to increase  the 
incentive  payments  for primary  care  sclvices  in both  urban  and  rural  HPSAS from  10 
to 20 percent  The  expectation  is that  a 20 percent  bonus  wouId  be more  significant 
in encouraging  the  provision  of primary  care  services. 
Recommendation  3 
HCFA  should  channel  funds  from  the  Medicare  incentive  program  for new or 
existing  mechanisms  for improving  access  to primary  care. 
HCFA  Res~onse 
We  believe  that  OIGS proposals  to rechannel  savings from  shrinking  the  incentive 
payment  program  to Medicaid  or a fixed  bonus  program  are  not  sufficiently 
developed  for us to comment  on at this  time.  We  agree  with  OIG  noted  in its 
repo~  it is too  early  in the  history  of this program  for an evaluation  of its 
effectiveness.  If the  two fundamental  flaws identified  by OIG  were  allowed  to 
continue,  we would  agree  that  alternative  approaches  could  be  considered  for the 
long  term.  However,  we believe  that  the  aforementioned  legislative  proposal,  which 
will limit  incentive  payments  in urban  areas  to primary  care  services  and  raise 
incentive  payments  in both  urban  and  rural  areas  will correct  those  deficiencies. 
TECHNICAL  COMMENTS 
OIG  should  include  a copy of both  the  written  survey  and  telephone  intelview 
instruments  in its report.  There  was a reference  to contradictions  between  responses 
gathered  in interviews  and  the  survey  questionnaires.  The  opportunity  to review  both 
instruments  might  be  helpful  to our  understanding  of the  mixed  responses. 
We  question  whether  the sample  of 497 physicians  out  of the  2~000  physicians 
receiving  HPSA  payments  is representative  of the  nation.  It appears  that  a s~p-
interval  random  sampling  method  was used  to select  the  physicians  for the  survey. 
This  method  is satisfactory  if a representative  sample  is drawn.  However,  if the 
sample  is not  representative,  a stratified  sample  would  produce  a more  representative 
population.  OIG  should  include  more  data  on the  soci~economic  characteristics  of 
the  physician  population  selected  for review.  Suggested  additional  descriptive 
characteristics  include  the proportion  of urban  to rural  physician  responses  and the 
volume  of services  the  physicians  provide  for which  incentive  payments  were  made. 
B-4  OIG  RESPONSE  TO  HCFA  COMMENTS 
We  are  pleased  that  HCFA  concurs  with  our  second  option  to  modify  the  incentive 
payment  program  to  target  it more  effectively  to  primary  care.  The  Presidents  Health 
Security  Act  proposal  to  alter  the  program  could,  by increasing  the  size  of the 
incentive  payment,  make  it a more  effective  incentive.  Also  by eliminating  incentive 
payments  made  for  specialty  services  in  urban  areas,  some  of  the  least  well-targeted 
payments  could  be  eliminated.  While  we  acknowledge  that  shortages  of specialists 
likely  are  occurring  in  rural  areas,  we  note  our  concern  that  the  criteria  for  designating 
HPSAS  do  not  include  shortages  of specialty  sewices.  Furthermore,  given limited 
resources  and  the  well-articulated  priorities  of the  current  Administration  to  increase 
access  to  primary  care,  targeting  the  program  more  towards  primary  care  may  be 
more  crucial  than  targeting  specialty  care  set-vices.  Nonetheless,  we  consider  the 
proposal  to  be  meeting  the  objective  laid  out  by the  option. 
We  have  eliminated  from  our  recommendation  the  first  option  (elimination  of  the 
program)  and  the  third  option  (rechanneling  funds  ti-om  the  program).  We  note  that

our  initial  intention  was  to  present  them  as  options;  we  are  pleased  that  HCFA

considered  them  and  commented  on  them.

We  agree  that  including  the  written  survey  instrument  and  the  telephone  interview

instrument  could  be  instructive  to  readers.  We  have  included  them  in appendix  A.

We  do  not  share  HCFAS  concern  with  our  sample  selection.  As  noted  in appendix  A,

we  used  a well-accepted  method  (Rao-Hartley-Cochran)  for  sampling  in  the  first  stage

carrier  selection;  we  used  skip-interwal  random  sampling  to  select  physicians  within

each  carrier.  No  unexpected  bias  was  introduced  by  using  this  method  in combination

with  the  appropriate  weighting  methods.  Furthermore,  we  present  confidence

intervals  for  each  statistic  we  used.  This  allows  the  reader  to  determine  the  precision

of our  estimates  based  on  the  sample.

B-5
 $9 
/  ~EPARTMENT  OF HEALTH & HUMAN  SERVICES  QfuceofU16Secmw 
  WaMnQl~. OX. 2U201 
2. -
EWan  -B.  X$tchell 
principal13eputyIn
spector  General 
A68is&i.nt  Secretary  for   
Planning  and Evaluation 
~.epo~~ ~~ .ysd~c~r~~~
 cc~.t~~epa~~nt  ~~c?~li~

._

concurrencewith Coxnent ,

This  pair  of repofisexanzinea  the  MedicareIncantiVt3  Pa~entS 
Program,whichprovidesbonuspayments  to  bothprimarycam  and 
specialtycarephysicianswho work in HealthProcessionalshort
age Areas (HPSAS). The firstreportevaluate9  the  f3uccess  of 
this  program  in  improving  accesa  to  primary  care  physician,  and 
the  second  seeks  to identity  design  flaws  inherent  to  the  pXo
gram.  Our  comments  relate  exclusively  to  the  fizst  report. 
From a methodologicalstandpoint,we found study sound. 
this 
Still,We believethat at tties  both its presentation  and  its 
conclusions  are  hadvertently  rnisleatling.  rox  exampLe: 
.  A  B@O*  finding,highlightedon  pags 4  and  in  the  Execu~iVe 
Summary,  k!  that  about  half  of the  $68  million  of  bonuses 
paid in  1992  went to specialists  rather  than  prtiarycare 
physicians. Ihisstatementgivesthe Impressionthis entire

amountwas spent for  r3peaialtY  care  servicef3.  Within  the 
text  at  the  report,  however,  it is stated  that  specialists 
in  HPSAS provide  a  aignifi.cant  amount  of primary  care ser
vices; therefore,  the percentage  OZI funds  spent  for  spe
c~alty  servicesis substantially18s5. We feelthis  fact  is 
crucial  to  an  evaluation  of  the  prograzu$s  Uupact  on  pztiam 
cam  accees.  Ther@fOre,we suggestthatOXG calculatethe 
percentageof fundspaid for specialtycare senfices~~d 
that it presentthis figure  as prominently  as  the  percentage
paid to specialists.

.	 When askedhow importantMedicarebonuspaymentswere in 
their  locationaldecision,52  percent  of  prinary  care  phY~*
cian8  rated  them  as  moderately  to  extremely  tipotiant~ 
while  Otdy  32  percentof  them  ratedthe paymentsas notat 
alll~Important. Easedon thesefigures,OIG  concludesthat 
lt~edicar~~c
 entive pa~~nts  apparently  have  little  effect 
B-6
 FagO
 2 -,Bryan  Mitchell

on practice  locationdecisions.m Considering  mat  ~er  half 
Of physicians  mmmyed  ratedthepa~e~ts  as  a~  least  XnOder
ately  important,  the wording  Of Oxcfa  Conclusion  r3Q611U3 
misleading,perhapseven inaccurate.

.

TM  Zi?X3t of the renoti~s  two  recommendations  iE tO elM
nate the  incentive  ~aymerat  program  entirely.  we  are  not 
certain  that  the  evidence  justifiesGO strong  a 
recommendation,  for  two  reasons: 
*  Firstras discussedabove,We feal  the evid-ce 
againstthe program  is less  compelling  than  f30m9 of tha 
highlighted  findings  suggesk 
- Second,  tha report  evaluatesthe pro=am agafista

standarddifferentfrom  the one it was deaigxledt
o

achieve. The origlna~l~gislationexplicitlymade bo

p%ti~  caredoctorsandsp
 ecialistsel~gtile  fO~ 
bonuses; th6 OIG study,tWWZVer,  focuses  on  oXIIY 
prh=y  care,  and criticizesthe  progrm  for pr=idtig 
bonuses  for  8peeLalty  care. 
OXG does acknowledgethis difference  in  goals  at  me  be@n
ning of the zeport.  Howevez,  given  the  important  perspec
tive  which  this  information  gives  on the  zeport8reca
Theze-
mendations?we feelit shouldbe further emphasized-
fOr6, i.fOXG continues  to recommendthat the iMentiVe 
p%ogran  h  eliminated,we suggestthat the diffewmce  in 
goalsbe axpllcitlynoted  both  in  the  ~xeouti~e  S-am  and 
iamdiately  before  the  recommendations.  ~Sor r@9a~dles~  f 
what recommendationsare offered,OZG shouldexplicitly 
statethat it viewsthe original  legislativegoal to be 
inappropriate,and describethe reasons  why it feels  change
is warranted. 
Finally,  we  SU~eSt  that OIG include an additionaloptionin its 
list of recommendations.The reportindicatesthat 14 percentof 
bonuses  currentlygo to specialistsin za~ge,prestigious 
hospitalsIoaatedin innercities. ThesephysiciansXeCeive 
bonusesbecauseHPSAdesignationsare based  only  oxa  the  numbe=  of 
Pzisn=y  Cars  physicians  in  an  area,  not  the  number  of  health  caxe 
facilitiesor f3pecialif3tzT3O. 
ensurethatbonusesare targeted
to thosa areasmost in need, OIG shouldrecommend  that  PHS  modify

i~s  method  for designatingHPSAa  to cansider  all types of

providersin  an area.
 wa==
~avicl  T.  Ellwood 
prepared W:  C. Prentice  690-7994 
B-7
 OIG  RESPONSE  TO  ASPE  COMMENTS 
The  ASPEconcurred  with  our  recommendation,  but  expressed  concern  about  the  first

option  to  eliminate  the  program  and  suggested  a fourth  option  to  modify  the  methods

by which  HPSAS  are  designated.  We  have  eliminated  the  first  option  (as  well  as  the

third  option)  as  a result  of HCFAS  response  and  the  Health  Security  Act  proposal.

As  far  as  the  methods  of  designating  HPSAS  are  concerned,  we  discuss  problems  with

using  HPSA  designations  for  incentives  on  specialty  services  in  a separate  report  on

this  issue  (Design  Flaws  in  the  Medicare  Incentive  Payments  Program  0EI-Ol-93-

00051).  We  believe  it would  not  be  prudent  to  change  the  HPSA  designations  for  the

purposes  of this  program  since  it is not  the  only  program  that  uses  HPSA  designations.

The  National  Health  Service  Corps  program,  for  example,  also  uses  them.  Thus,  the

ramifications  of  modifying  the  HPSA  designation  are  beyond  the  scope  of  this  report.

We  are  pleased  that  ASPE  found  our  study  methodologically  sound.  The  ASPE  raised

concerns  about  presentation  and  conclusions.  We  made  some  clarifications  in

response  to  these  concerns.  In  response  to  ASPES  proposal  that  we  include

information  about  specialty  care  services  and  display  it prominently,  we  have  included

information  we  have  from  the  Physician  Payment  Review  Commission  on  the  subject.

We  have  not,  however,  displayed  it prominently  for  the  following  reasons:  1) we

already  give  prominence  to  analysis  that  clarifies  that  not  all  money  going  to  specialists

is spent  on  specialty  services  and  2) since  specialty  services  are  much  more  expensive

on  average  than  primary  care  services,  the  percentage  of incentive  payments  spent  on

specialty  services  will  be  much  higher  than  the  actual  percentage  of time  spend

providing  specialty  services  (and  therefore  is not  an  accurate  indicator  of  relative

availability  of specialty  services  in comparison  to  primary  care  services).

We  agree  that  our  statement  that  incentive  payments  apparently  have  little  effect  on

practice  location  decisions  may  have  been  too  strongly  stated.  We  have  clarified  the

statement.  We  have  also  clarified  our  discussion  about  what  we  learned  from  our

intemiews  with  physicians  about  the  importance  ratings.  We  do  note,  however,  that

the  importance  ratings  were  only  one  of three  pieces  of evidence  we  cited  to  make  the

finding  statement.

B-8
 APPENDIX  C

NOTES

1.  Barbara  Starfield  and  Lisa  Simpson,  primary  Care  as  Part  of  US  Health 
Services  Reform,  Journal  of  [he American  Medical  Association  269  [June  23/30, 
1993)  24:  pp.  3136-39;  W.  Pete  Welch  et  al.,  Geographic  Variation  in 
Expenditures  for  Physicians  Services  in  the  United  States,  New  ErZgla12d 
Journal  of Medicine  328  (March  4,  1993)  9:  pp.  621-27. 
2.  42 C.F.R.  5 (Appendix  A),  Sec.  1.B.3.(a). 
3.  State-level:  State  of the  States,  1993:  Reform  of  the  Health  Care  System 
Remains  an  Imperative,  Stole  Hewltil  Notes  - Special  Issue,  March  15,  1993, 
pp.  6-8. 
National:  Bill  Clinton,  The  Clinton  Health  Care  Plan,  New  England  Journal  of 
Medicine  327  (September  10,  1992)  11: pp.  S04-7. 
4.  Robert  M.  Politzer  et  al.,  Primary  Care  Physician  Supply  and  the  Medically 
Underserved:  A Status  Report  and  Recommendations,  JoulTlal  of  t}le America~t 
Medical  Association  266  (July  3,  1991)  1: pp.  104-109;  Steven  A.  Schroeder  and 
Lewis  G.  Sandy,  Specialty  Distribution  of  U.S.  Physicians--The  Invisible  Driver 
of Health  Care  Costs,  New  Engkmd  ]ournal  of Medicine  (April  1, 1993)  13: pp. 
961-963. 
5.  Health  Professional  Shortage  Areas  (HPSAS)  were  originally  known  as  Health 
Manpower  Shortage  Areas  (HMSAS). 
6.  The  criteria  for  HPSA  designation  are  contained  in 42  C.F.R.  5.  There  are  also 
areas  designated  as  HPSAS  for  dentists,  psychiatrists,  and  other  caregivers 
rather  than  for  primary  care  physicians,  but  this  report  does  not  address  those 
HPSAS.  Medicare  incentive  payments  apply  only  to  HPSAS  designated  with 
respect  to  primary  care  physicians. 
7.  Health  Policy  Research  Consortium,  Medicare  Bonus  Payments  to  Physicians  in 
Health  Manpower  Silortage  Areas:  Final  Report,  Cooperative  Agreement  No. 
18-C-98526/l-05,  report  prepared  for  Health  Care  Financing  Administration, 
April  1989,  pp.  1:2-4. 
8.  H.R.  Rep.  No.  391(1),  100th  Cong.,  pp.  3S9-90.  See  also  H.R.  3188,  100th 
Congress. 
9.  Omnibus  Budget  Reconciliation  Act  of  1987  (P.L.  100-203),  Sec.  4043. 
c-1  10.  H.  R.  Conf.  Rep.  No.  386,  10lst  Cong.,  p.  754.

11.  Omnibus  Budget  Reconciliation  Act  of  1989  (P.L.  101-239),  Sec.  6102(c).

Current  law  regarding  the  extra  payments  is contained  in Section  1833  of the

Social  Security  Act  (42  U. S.C.A.  13951(m)).

12.  Physician  Payment  Review  Commission,  Annunl  Report  1992,  p.  129.

13.  Memorandum  and  attachments  from  Edward  A.  King,  Health  Care  Financing

Administration,  to  Stewart  Streimer,  Health  Care  Financing  Administration,

February  22,  1993.  The  22,000  figure  excludes  physicians  reported  by  the

Railroad  Retirement  Board  carrier,  because  most  if not  all  of those  physicians

are  also  reported  by the  carriers  in the  physicians  own  States.

14.  Health  Policy  Research  Consortium,  p.  1:1.

15.  Physician  Payment  Review  Commission,  Annual  Report  1992,  pp.  127-132  and

Congress  of the  United  States,  Office  of Technology  Assessment,  Heath  Care  in

Rural  America,  September  1990,  pp.  350-351.

16.  U.S.  Department  of  Health  and  Human  Services,  The Fiscal  Year  1994  Budget,

April  8,  1993,  pp.  3,  15, 41;  and  Statement  of Donna  E.  Shalala,  Secretary  of

Health  and  Human  Services,  Before  the  Committee  on  Finance,  United  States

Senate,  April  1, 1993,  pp.  2, 4.

17.  HPSA  bonus  payments  are  made  quarterly,  but  need  not  correspond  exactly  to

services  provided  in the  preceding  quarter.  In other  words,  retroactive  claims

for  bonuses  are  permitted.

18.  The  Physician  Payment  Review  Commission  did  an  analysis  of incentive

payments  for  its  1994  annual  report  to  Congress.  It found  that  in the  first  two

quarters  of  1992,  66 percent  of incentive  payments  were  made  for  specialty

semice  payments.  Because  specialty  services  generally  are  more  expensive  than

primary  care  services,  this  supports  our  finding  that  half  of the  physicians

receiving  incentive  payments  were  specialists.

19.  This  statistic  and  several  others  are  based  on  the  responses  of  physicians  who

answered  our  questionnaire,  not  the  total  sample  of 497  physicians.  See

appendix  A  for  a discussion  of which  statistics  are  based  on  data  about

respondents  rather  than  the  entire  sample.

20.  Office  of Technology  Assessment,  1990,  p. 8.

21,  Fifty-three  (25  percent)  of  the  213  primary  care  physicians  responding  to  the

question  said  they  were  unaware  before  receiving  our  questionnaire  that

Medicare  offered  incentive  payments.  Thirty-two  (60  percent)  of these  53 rated

the  payments  at  least  slightly  important,  and  6 rated  them  extremely  important.

c-2  22.  Health  Policy  Research  Consortium,  p. 3:14. 
23.  The  median  net  income  for  physicians,  after  expenses  and  before  taxes,  was 
$139,000  in  1991,  according  to  the  American  Medical  Association

Socioeconomic  Monitoring  System  1992  core  survey  of nonfederal  patient  care

physicians  excluding  residents,  December  1992.  The  median  income  for  general

and  family  practitioners  was  $98,000;  for  internists,  $125,000;  and  for

obstetricians/gynecologists,  $200,000.

24.	 The  weighted  correlation  coefficient  is -0.25  (p e  .001),  indicating  a significant 
relationship  between  high  incentive  payments  and  low  numbers  on  ratings. 
25.  Health  Policy  Research  Consortium,  pp.  3:5-9. 
26.  Health  Policy  Research  Consortium,  pp.  3:11 
27.	 William  G.  Cochran,  Sampling  Tecimiques  (3rd  Ed.),  New  York:  John  Wiley  & 
Sons,  1977,  p. 266. 
c-3