The Costs and Effectiveness of Nurse

Practitioners

July 1981

NTIS order #PB82-101326
CASE STUDY #16

THE IMPLICATIONS OF

COST-EFFECTIVENESS

ANALYSIS OF

MEDICAL TECHNOLOGY

JULY 1981

BACKGROUND PAPER #2: CASE STUDIES OF

MEDICAL TECHNOLOGIES

CASE STUDY #16: THE COSTS AND EFFECTIVENESS

OF NURSE PRACTITIONERS

Lauren LeRoy, C. Phil.

Senior Research Associate

With the assistance of:

Sharon Solkowitz, B.S.

Health Policy Intern

Health Policy Program, University of California, San Francisco

OTA Background Papers are documents that contain information believed to be

useful to various parties. The information undergird formal OTA assessments or is

an outcome of internal exploratory planning and evaluation. The material is usually

not of immediate policy interest such as is contained in an OTA Report or Technical

Memorandum, nor does it present options for Congress to consider.
Library of Congress Catalog Card Number 80-600161

For sale by the Superintendent of Documents,

U.S. Government Printing Office, Washington, D.C. 20402
Foreword

This case study is one of 17 studies comprising Background Paper #2 for OTA’s

assessment, The Implications of Cost-Effectiveness Analysis of Medical Technology.

That assessment analyzes the feasibility, implications, and value of using cost-effectiveness and cost-benefit analysis (CEA/CBA) in health care decsionmaking. The major, policy-oriented report of the assessment was published in August 1980. In addition

to Background Paper #2, there are four other background papers being published in

conjunction with the assessment: 1) a document which addresses methodological

issues and reviews the CEA/CBA literature, published in September 1980; 2) a case

study of the efficacy and cost-effectiveness of psychotherapy, published in October

1980; 3) a case study of four common diagnostic X-ray procedures, to be published in

summer 1981; and 4) a review of international experience in managing medical technology, published in October 1980. Another related report was published i n

September of 1979: A Review of Selected Federal Vaccine and Immunization Policies.

The case studies in Background Paper #2: Case Studies of Medical Technologies

are being published individually. They were commissioned by OTA both to provide

information on the specific technologies and to gain lessons that could be applied to

the broader policy aspects of the use of CEA/CBA. Several of the studies were specifically requested by the Senate Committee on Finance.

Drafts of each case study were reviewed by OTA staff; by members of the advisory panel to the overall assessment, chaired by Dr. John Hogness; by members of

the Health Program Advisory Committee, chaired by Dr. Frederick Robbins; and by

numerous other experts in clinical medicine, health policy, Government, and economics. We are grateful for their assistance. However, responsibility for the case studies remains with the authors.

JOHN H. GIBBONS

Director

iii
Advisory Panel on The Implications of

Cost-Effectiveness Analysis of Medical Technology

John R. Hogness, Panel Chairman

President, Association of Academic Health Centers

Stuart H. Altman

Dean

Florence Heller School

Brandeis University

James L. Bennington

Chairman

Department of Anatomic Pathology and

Clinical Laboratories

Children Hospital of San Francisco

John D. Chase

Associate Dean for Clinical Affairs

University of Washington School of Medicine

Joseph Fletcher

Visiting Scholar

Medical Ethics

School of Medicine

University of Virginia

Clark C. Havighurst

Professor of Law

School of Law

Duke University

Sheldon Leonard

Manager

Regulatory Affairs

General Electric Co.

Barbara J. McNeil

Department of Radiology

Peter Bent Brigham Hospital

Robert H. Moser

Executive Vice President

American College of Physicians

Frederick Mosteller

Chairman

Department of Biostatistics

Harvard University

Robert M. Sigmond

Advisor on Hospital Affairs

Blue Cross and Blue Shield Associations

Jane Sisk Willems

VA Scholar

Veterans Administration

iv
OTA Staff for Background Paper #2

Joyce C. Lashof, Assistant Director, OTA

Health and Life Sciences Division

H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

Kerry Britten Kemp, * Editor

Virginia Cwalina, Research Assistant

Shirley Ann Gayheart, Secretary

Nancy L. Kenney, Secretary

Martha Finney, * Assistant Editor

Other Contributing Staff

Bryran R. Luce Lawrence Miike Michael A. Riddiough .

Leonard Saxe

OTA Publishing Staff

John C. Holmes,

John Bergling Kathie S. Boss

Chester Strobe] *

Publishing Officer

Debra M. Datcher Joe Henson

● OTA contract personnel
Preface

● examples with sufficient evulable literat ure.

On the basis of these criteria and recommendations by panel members and other experts,

OTA staff selected the other case studies. These

16 plus the respiratory therapy case study requested by the Finance Committee make up the

17 studies in this background paper.

All case studies were commissioned by OTA

and performed under contract by experts in aca -

demia. They are authored studies. OTA subjected each case study to an extensive review

process. Initial drafts of cases were reviewed by

OTA staff and by members of the advisory

panel to the project. Comments were provided

to authors, along with OTA’s suggestions forrevisions. Subsequent drafts were sent by OTA

l numerous experts for review and comment.

Each case was seen by at least 20, and some by

40 or more, outside reviewers. These reviewers

were from relevant Government agencies, professional societies, consumer and public interest

groups, medical practice, and academic medicine. Academicians such as economists and decision analysts also reviewed the cases. In all,

over 400 separate individuals or organizations 

reviewed one or more case studies. Although all

these reviewers cannot be acknowledged indi -

vidually, OTA is very grateful for their comments and advice. In addition, the authors of

the case studies themselves often sent grafts to

reviewers and incorporated their comments.

These case studies are authored works

commissioned by OTA. The authors are responsible for the conclusions of their specific case study. These cases are not statements of official OTA position. OTA does

not make recommendations or endorse particular technologies. During the various

stages of the review and revision process,

therefore, OTA encouraged the authors to

present balanced information and to recognize divergent points of view. In two cases,

OTA decided that in order to more fully

present divergent views on particular technologies a commentary should be added to

the case study. Thusr following the case
authors.

The case studies were selected and designed to

fulfill two functions. The first, and primary,

purpose was to provide OTA with specific information that could be used in formulating

general conclusions regarding the feasibility and

implications of applying CEA/CBA in health

care. By examining the 19 cases as a group and

looking for common problems or strengths in

the techniques of CEA/CBA, OTA was able to

better analyze the potential contribution that

these techniques might make to the management

of medical technologies and health care costs

and quality. The second function of the cases

was to provide useful information on the specific technologies covered. However, this was

care.

Some of the case studies are formal CEAS or

CBAS; most are not, Some are primarily concerned with analysis of costs; others are more

concerned with analysis of efficacy or effectiveness. Some, such as the study on end-stage

renal disease, examine the role that forma]

analysis of costs and benefits can play in policy

formulation. Others, such as the one on breast

cancer surgery, illustrate how influences other

than costs can determine the patterns of use of a

technology. In other words, each looks at evaluation of the costs and the benefits of medical

technologies from a slightly different perspective. The reader is encouraged to read this study

in the context of the overall assessment’s objectives in order to gain a feeling for the potential

role that CEA/CBA can or cannot play in health

care and to better understand the difficulties and

complexities involved in applying CEA/CBA to

specific medical technologies.

The 17 case studies comprising Background

Paper #2 (short titles) and their authors are:

Artificial Heart: Deborah P. Lubeck and John P.

Bunker

Automated Multichannel Chemistry Analyzers:

Milton C. Weinstein and Laurie A. Pearlman

Bone Marrow Transplants: Stuart O. Schweitzer and C. C. Scalzi

Breast Cancer Surgery: Karen Schachter and

Duncan Neuhauser

Cardiac Radionuclide Imaging: William B.

Stason and Eric Fortess

Cervical Cancer Screening: Bryan R. Luce

Cimetidine and Peptic Ulcer Disease: Harvey V.

Fineberg and Laurie A. Pearlman

Colon Cancer Screening: David M. Eddy

CT Scanning: Judith L. Wagner

Elective Hysterectomy: Carol Korenbrot, Ann

B. Flood, Michael Higgins, Noralou Roos,

and John P. Bunker

End-Stage Renal Disease: Richard A. Rettig

Gastrointestinal Endoscopy: Jonathan A. Showstack and Steven A. Schroeder

Neonatal Intensive Care: Peter Budetti, Peggy

McManus, Nancy Barrand, and Lu Ann

Orthopedic Joint Prosthetic Implants: Judith D.

Bentkover and Philip G. Drew

Periodontal Disease Interventions: Richard M.

Scheffler and Sheldon Rovin

Selected Respiratory Therapies: Richard M.

Scheffler and Morgan Delaney

These studies will be available for sale by the

Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402.

Call OTA’s Publishing Office (224-8996) for

availability and ordering information.
Case Study #16

The Costs and Effectiveness

of Nurse Practitioners

Lauren LeRoy, C. Phil.

Senior Research Associate

with the assistance of:

Sharon Solkowitz, B.S.

Health Policy Intern

Health Policy Program

University of California, San Francisco
“>- ”

Appendix: Background Infomation

Physician Extenders, . . . . . . . . . . . . . . . . . . 25

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

 Legislation Supporting Physician Extender

Training. ......, . . . . . . . . . . . . . . .... . 25

Location Patterns . . . . . . . . . . . . . . . . . . . . . . 26

Physician and Consumer Acceptance. . . . . . . . 28

Legal Restrictions . . . . . . . . . . . . . . . . . . . . . . 29

Reimrsement.. . . . . . . . . . . . . . . . . . . . . . . 31

Practice With Physicians v. Independent

. , Practice ......., . . . . . . . . . . . . . . . . . . . . 32

p references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

LIST OF TABLES

Table No. Page

l. Mean Physician andI %actitioner Time

With Patients . . . . . . . . . . . . . . . . . . . . . . . 11

2. First ComparisonofPracticesWithand

. . .

, Without a PA When SupervisionIs

Considered. . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table No. Page

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Second Comparison of Practices With and

With out a PA When Supervision Is

Considered . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Patient Care Time and Cost of Physician

Extenders and physicians, 1975. . . . . . . . . . 14

Change in Average Expense per Patient

Visit With Reduced physician Effort . . . . . . . 16

Training Expenditures for physicians and

Physician Extendes, Acadmic Year 1975-79 17

Federal Support for physiciaa and

Physician Extender Training, Fiscal Year

1970 . . . . . . ......... . . . . . 17

Average Charge per Patient Visit in

Practices With andWith out a Physician

Extender, 1977 . . . . . . . . . . . . . . . . . . . . . . . 18

Physician Time In put and Income With and

Without Employment of a New Type of

Health Manpower (NTM). . . . . . . . . . . . . . . 19

Impact of Physician Extenders on Prices,

Patient Volume, and Expenditures. .. ... 21

Current and Projected Supply of Active

Physician Extender, 1979 and 1990. . . . . . . . 21

Employed Graduates of NP ProRrams bv

Role and Type of NP Program................ 22

A-l. NP Programs by Specialty and Type of

Program . . . . . . . . . . . . . . . . . . . . . . . . . ● . . 25

A-2. Average Length and Range in Months of

NP Programs by Specialty and Type of

Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 “

A-3. Practice Setting Location of NPs by Type

of NP Program . . . . . . . . . . . . . . . . . . . . .. 27

A-4. NP Programs by Availability of

Inner-City and/orRural Practice Setting

and Type of Program . . . . . . . . . . . . . . . . . . 27

A-5. Practice Setting Location of NPs by

Specialty and Type of Np Program . . . . . . . . 28

A-6. NPs by the one Employment Setting in

Which They Spent Most of Their Time as

NPs and Type of NP Program . . . . . . . . . . . . 30
Case Study #16:

The Costs and Effectiveness

of Nurse Practitioners

Lauren LeRoy, C. Phil.

Senior Research Associate

with the assistance of:

Sharon Solkowitz, B.S.

Health Policy Intern

Health Policy Program

University of California, San Francisco

INTRODUCTION

Definition of Terms

The concept of using nonphysician health

professionals to perform basic medical services

traditionally provided by physicians emerged in

the mid-1960’s amidst widespread concern over

a perceived physician shortage. Variously referred to as new health practitioners, mid-level

practitioners, or physician extenders, they were

seen as a way to increase the availability of

health care services, particularly in primary

care. Although no single term adequately represents the categories of professionals who comprise this group, the term physician extender is

used in this case study when general reference is

being made to them. This term encompasses

nurse practitioners (NPs), physicians’ assistants

(PAs), and Medex, a group of former military

corpsmen who apply their skills in civilian life.

The present analysis highlights data on NPs.

However, the data that exist make it difficult to

focus on NPs exclusively. For that reason, data

on the various types of physician extenders are

incorporated into the analysis where such data

are relevant for comparative purposes or in

cases where similarities in experience merit a

broader discussion. The distinctions among

NPs, PAs, and Medex derive from differences in

legal requirements, training, and functions (see

appendix). In the wide variation of experience

documented for different practice settings, however, these distinctions often break down. As a

result, attempts to distinguish between NPs and

PAs understandably lead to broad definitions of

roles such as those quoted by the Graduate

Medical Education National Advisory Committee (32):

[A physician’s assistant is] a skilled person

qualified by academic and practical on-the-job

training to provide patient services under the

supervision and direction of a licensed physician, who is responsible for the performance of

that assistant.

Today’s nurse, operating in an expanding role

as a professional nurse practitioner, provides direct patient care to individuals, families, and

other groups in a variety of settings . . . . The

nurse practitioner engages in independent decisionmaking about the nursing needs of clients,

and collaborates with other health professionals,

such as the physician, social worker, and nutritionist in making decisions about other health

care needs. The nurse working in an expanded

role practices in primary, acute, and chronic

health care settings. As a member of the health

3
4 ● Backround Paper #.?: Case Studies of Medical Technologies

care team, the nurse practitioner plans and institutes health care programs.

The actual roles of PAs and NPs depend on

their work settings. In some cases, the functions

the two perform are virtually identical; in

others, they are very different. PAs are intended

to operate essentially as physician substitutes

for routine primary care. NPs, while trained to

assume medical tasks, come from a tradition

based on fundamental nursing concepts stressing aspects of patient care not usually provided

by physicians.

The scope of this analysis is limited by inadequacies in the available data. Although there

is a rather extensive body of literature on physician extender practice in a variety of different

practice settings—private physician practice,

prepaid group practice (PPGP), hospitals, and

other organized settings that operate on either a

fixed budget or fee-for-service basis) —some

general problems, as noted by Schweitzer (87),

appear consistently in the available studies: narrowness of site coverage, incomprehensiveness

of variables considered, and weakness of the research design. Studies often focus on a single

site or small nonranciom groups of sites. A number of studies were conducted shortly after the

physician extender entered practice and therefore leave issues regarding maturity unresolved.

Many studies do not adequately identify potential biases influencing the research findings

or later interpretation of those findings: In some

of them, the impact on the research results of

factors unique to the type of practice setting

being examined is not specified; in others, the

COST= EFFECTIVENESS ANALYSIS

Limitations of a CEA of

Physician Extenders

Encouragement of NPs and PAs as an innovation in the delivery of primary care services is

based on their potential to improve access and

to lower costs without compromising quality.

This promise derives from several basic assumptions (18):

● physician extenders can perform basic and

researchers conducting the study may be advocates for the physician extender concept.

Finally, from the perspective of cost-effectiveness analysis (CEA), perhaps the most serious problem is a dearth of information specifically defining what medical care tasks physician extenders are qualified to perform. Without

this information, comparative analysis between

physician extenders and physicians is limited.

supply

Before 1970, there were fewer than 2,OOO formally trained physician extenders. Currently,

there are roughly 22,OOO physician extenders in

active practice: 13,000 NPs and 9,000 PAs (18).

The Congressional Budget Office (CBO) estimates that 2,000 NPs and 1,500 PAs and Medex

graduate annually. Assuming continuation of

Federal funding at the present level, CBO estimates the supply of physician extenders by

1990 will exceed 56,000 (18). While budgetary constraints might preclude a decision to

further increase training opportunities, the demand for training positions, as reflected currently by a high ratio of applicants to available

positions, would not be an obstacle (25,101).

Assuming continuation of current trends, however, physician extenders will continue to represent a very small group of health professionals. For purposes of comparison, it should

be noted that the number of physicians is expected to rise from the present 400,000 to

594,000 by 1990 (18). This increase alone

eral times more than the total number of

cian extenders.

is sevphysiroutine medical care tasks traditionally performed by physicians;

● physicians working in concert with physician extenders will thus be free to focus on

more serious and more complex medical

care problems;

● training costs for physician extenders are

cheaper than training costs for physicians;

● lower costs associated with physician ex-
Case Study #16 The Costs and Effectiveness of Nurse Practitioners 5

tender services will result in lower prices

for the services provided; and

. improved access resulting from the addition of physician extenders to the health

care team will increase the frequency of

early detection of disease and thus reduce

medical care expenditures.

A number of issues concerning appropriate

training, task delegation, performance quality,

physician and consumer acceptance, costs, productivity, and barriers to practice have constrained the realization of physician extenders’

potential. The importance of these concerns is

illustrated by their dominance in published research. Only recently, with several exceptions,

has cost effectiveness provided the framework

for analysis of physician extender practice

(69,71). The most recent contributions to CEA

of physician extenders are a synthesis of related

research and its application to cost-effectiveness

questions published by CBO (18), and an exhaustive review of literature on task delegation,

productivity, and cost by Jane Cassels Record

(70).

The focus on literature review and synthesis

in these studies reflects, in part, the data and

methodological problems associated with conducting a pure CEA in this area. Data from existing studies are insufficient to meet the requirements of a thorough CEA. Moreover,

while the findings of these more narrow studies

may contribute to CEAS, the evidence they have

provided to date is considered “limited but suggestive” and allowing for only “tentative” conclusions (18). CEA seeks to determine which approach accomplishes a given objective at minimum cost. Such a comparison between physicians and physician extenders is difficult, because the approaches being compared, while

overlapping, cannot be substituted for each

other in all instances. Moreover, there does not

exist the same standardization with physician

extenders as with more traditional technological

innovations. Physician extenders differ in background, temperament, training, attitude, ability

to make independent judgments, and desire for

independence. They cannot be considered a

neutral “technology” to be utilized and acted on,

because they themselves exert an influence on

their practice. Moreover, it is not known

whether differences in productivity, quality, independence, cost, and provider acceptance exist

among NPs in different types of specialty practice. These factors raise both data and methodological questions which have yet to be answered in published research.

Physician extenders have been found to be

capable of providing high percentages of

primary care services traditionally provided by

physicians—but it is unclear which services are

included in these percentages; which services are

left out; whether those left out have more impact on the delivery of care, physician attitudes,

productivity, and costs than those provided;

and so on. One way to focus an analysis would

be to select for comparison a set of tasks that

have been noted in the literature to be performed by both physicians and physician extenders (e.g., well-baby care, history and physical, hypertension monitoring). Even then, however, the results of the analysis would be 1imited, because they would not provide a way to

determine what medical care tasks physician extenders do not perform and the value of those

services. It would be difficult to determine

whether a “patient visit” (the usual standard of

measurement) were the same in both instances

in terms of content and outcome. The results

would not provide adequate information for developing staffing configurations that are cost

effective in terms of services for which physician

extenders can substitute for physicians, services

for which physicians are the only providers, and

services provided by physician extenders that

physicians traditionally have not provided.

The objectives of a CEA of physician extenders will depend on the perspective of those

for whom the study is undertaken (e.g., a physician in fee-for-service private practice, a health

maintenance organization (HMO) with a fixed

budget, or Federal policy makers concerned with

reimbursement under Federal health insurance

programs). Consideration of the type of practice

setting, with its different budget and staffing

constraints, will alter the study design. The context within which the analysis is conducted is
6 . Backround Paper #2: Case Studies of Medical Technologies

crucial. Different factors are taken as given; different assumptions underlie the analysis.

Moreover, structural characteristics of the

health care system have a profound impact on

the way an innovation is used. This is clearly

evident in the case of physician extenders and

raises questions as to whether a CEA should restrict its focus to current conditions or whether

its assessment should consider changes in relation to a variety of policy alternatives to modify

the existing structure. This is a key question in

the case of physician extenders. Unlike the introduction of most new technologies, the introduction of physician extenders into health

services delivery was not accompanied by reimbursement. Unlike many new technologies

which enhance the position of the physician, the

physician extender is potential competition.

Physicians legally maintain a substantial

amount of control over physician extender practice; however, the structure of reimbursement

reinforces that control by making it virtually

impossible for a physician extender to practice

independently, Any analysis that is based on

what physician extenders can do by virtue of

their training, rather than what they actually do

by virtue of the structural characteristics of the

health care system, therefore has serious methodological limitations.

Yet developing a broad study based on actual

experience to make up for those limitations is

much more difficult. The data base specifying

what physician extenders do and costs associated with their practice is incomplete. Most

existing studies confine themselves to very small

samples. The emphasis has been on ambulatory

care, leaving a dearth of information on the

roles of physician extenders in hospital settings,

including their potential substitution for house

staff. Expanding the sample size and composition would entail the identification and survey

of physician extenders in a variety of practice

settings, itself a lengthy and expensive task.

Moreover, it is difficult to disentangle physician

extender performance and cost characteristics

from the characteristics of the practice setting.

In a CEA, which should be the focus? Is it possible to control for those factors associated with

the practice setting that determine utilization of

health personnel?

Given the data that are available, it is not

possible to conduct a CEA of sufficient precision

to calculate cost-effectiveness ratios. To reiterate key constraints on such an analysis, it is not

known exactly what medical tasks physician extenders perform, nor what tasks they cannot

perform, nor the importance of either to those

employing physician extenders (i. e., do employers seek to cover the average case or the

variance: routine versus emergency care?). It is

unclear what occurs during the “patient visits”

reported throughout the literature. Are there

qualitative differences in the services provided

by a physician extender and those provided by a

physician? The relationship between practice

setting characteristics and physician extender

cost and performance factors is not fully

understood or described in available research.

Cost information, when available, is not sufficiently broken down to compare the full costs of

a given service provided by a physician extender

to the service provided by a physician. Costs of

physician extenders are generally presented as

an add-on to an existing physician practice.

While calculations often account for overhead,

they also reflect a fully operational practice,

thus minimizing startup costs and assuming different degrees of practice independence for

physicians and physician extenders. Moreover,

charges cannot be used to determine costs, because existing evidence indicates little relation

between the two.

Because the methodological problems and

lack of data preclude a full CEA of physician extenders at this time, no effort is made in the

analysis presented in this case study to develop

cost-effectiveness ratios. The purpose of the

analysis is to elaborate on the factors essential

to determining cost effectiveness and to testing

assumptions regarding the cost-effectiveness potential of NPs against existing data and research

findings. Even without data of sufficient precision, quality, and quantity for a full CEA, one

can see trends and draw conclusions. From a

policy perspective, there emerge in this case

clear indications of areas in which alternative
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 7

poIicies would have significant impact. Given

the expense in time and dollars of going beyond

synthesis and analysis of available information

within a cost-effectiveness framework, it is

questionable how much more could be gained

that would significantly alter the findings and

conclusions suggested by existing studies

through fulfilling the requirements of a more

elaborate cost-effectiveness methodology.

Studies focusing on the removal of serious

deficiencies in the data base most likely would

be more useful in clarifying still outstanding

issues. Assessment of the cost effectiveness of

NPs must at a minimum consider the specific

services NPs are qualified to provide, performance quality, productivity, task delegation experience, changes in physician practice behavior

after the introduction of NPs, employment

costs, impact on average expenses per patient

visit, training costs, price effects, and revenue

generation ability. The discussion that follows

examines each of these factors. The difficulty in

reaching definitive conclusions in this area results in part from the sensitivity of the analysis

to modest changes in many of the variables and

from the need to consider the combinations in

which these variables are found as additional

factors influencing the outcome.

On the basis of available data, it appears that

NPs do alter the production of medical services

in a manner that can improve access to such

services and reduce production costs. That the

introduction of NPs will result in a reduction in

the price of medical care services or in overall

medical expenditures appears less likely. Without a reduction in price that reflects lower costs,

the financial benefits derived from the costeffective attributes of NPs accrue primarily to

the physician or to the employing institution.

This situation with NPs is similar to the experience with many new medical technologies that

are cost saving. Benefits to consumers come

when the introduction of NPs results in improved access.

Services Provided by Physician

Extenders

In order to determine the cost effectiveness of

physician extenders, it is necessary to know

what services they are qualified to provide and

whether those services are substitutive or complementary to those provided by physicians.

This key question is one on which available data

are clearly inadequate. Most studies refer to

services provided by or delegated to physician

extenders in terms of office visits rather than

definitive tasks. They describe services physician extenders are producing rather than those

they are qualified to produce (70). Instead of

categorizing services by specific tasks, studies

are more likely to categorize services generally

into those physician services that physician extenders either can or cannot safely provide.

There are some studies that have attempted to

define areas of medical practice or diagnoses

managed by physician extenders. Although the

study samples are often very small, the findings

of these studies, accompanied by more general

conclusions drawn from the bulk of available

research, suggest several patterns:

●

●

●

physicians and physician extenders have

both a complementary and substitutive relationship. NPs provide additive services

and PAs serve as an extension of the physician (70);

physician extenders are capable of safely

providing a high percentage of primary

medical care services (70); and

studies that document current performance

reveal that the practice setting is the major

determinant of services provided by physician extenders (29,50).

In general, PAs work more closely with physicians than do NPs and also provide care which

is more oriented toward acute or emergency situations. NPs often assume a large degree of independence and responsibility and tend to be involved in a broader spectrum of patient care, including counseling, education, and general consultation on a continuing basis.

Among the studies that begin to define services performed by NPs is that of Coulehan and

Sheedy (20). The medical practice of an NP

trained in diagnosis and treatment of general

medical conditions included the following:

wellness care; stable chronic disease (hyperten-
8 . Background Paper #2: Case Studies of Medical Technologies

sion, diabetes, obesity, arteriosclerotic heart

disease, arthritis, chronic depression, psychophysiologic reactions); and acute self-limited

conditions (colds, sore throats, acute viral syndrome, minor trauma, rashes, skin infection).

Of the 15 most common diagnoses for the

Coulehan and Sheedy study sample, the NP

handled so percent or more of the following

conditions: upper respiratory infections, otitis

media, otitis externa, soft tissue trauma, and

gonorrhea. The NP managed one-third to onehalf of patients presenting the following: muscle

or back strain, dermatitis or eczema, hypertension, diabetes, obesity, and urinary tract infection. Again, it must be noted that these services

reflect services the NP provided within the constraints of the practice setting, not necessarily

the range of services the NP was qualified to

provide. Moreover, it should be noted that the

Coulehan and Sheedy study was conducted in

1973, and therefore reflects early experience

with NPs, Subsequent studies reveal even higher

percentages of patients presenting the same conditions being treated by NPs.

In terms of specific tasks, the limited data that

are available indicate that physician extenders

can perform medical functions basic to primary

care such as taking medical histories, performing routine physical examinations, carrying out simple diagnostic procedures, ordering

routine lab tests and interpreting their results.

Physician extenders commonly administer injections, apply dressings, casts and splints, and can

perform life-preserving measures in emergency

situations. Some are qualified to perform minor

surgical procedures such as removing a foreign

object from the eye 01 routine suturing (10).

Physician extenders generally are restricted

from prescribing drugs except under certain

conditions (e. g., having prescriptions countersigned by a supervising physician or prescribing

within a limited “scope of practice”). Eight

States prohibit physician extenders from writing

drug prescriptions. The issue of whether or not

physician extenders are qualified to prescribe

drugs is one that a number of States are currently reviewing. Some States are experimenting

with the extension of prescribing privileges

(e.g., California has a project which allows prescribing by NPs, PAs, and pharmacists in five

geographic areas of the State). The constraints

on drug prescription represent the most sensitive unresolved issue in terms of tasks allowed

to be performed by physician extenders, both

because of the integral role of prescribing in

medical care and because of the implications of

such constraints for professional independence

(18).

Performance Quality

The quality of services provided by NPs is

crucial to their acceptance by both physicians

and patients. Indeed, this issue has been studied

more than any other. Like most research in this

area, the studies on quality generally use small

samples, assess quality from a variety of different perspectives and focus more on shortterm results than on long-term outcomes of patient care. These evaluations of physician extender services repeatedly confirm their high

quality (10,14,24,41,42,44,51,52,79). The quality of medical care services provided by physician extenders is at least comparable to the quality of services provided by physicians themselves. Furthermore, in some cases, physician

extenders have shown performance superior to

physicians in symptom relief, diagnostic accuracy, and patient satisfaction (33,70). Summarizing the findings of the numerous studies of

physician extender performance in a variety of

practice settings, CBO concludes: “Physician

extenders have performed as well as physicians,

with respect to patient outcomes, proper diagnoses, management of ‘indicator’l medical conditions, frequency of patient hospitalization,

manner of drug prescription, documentation of

medical findings and patient satisfaction” (18).

In its study of the Federal physician extender

reimbursement experiment (102), System Sciences, Inc., used nationally recognized disease

treatment protocols to evaluate the quality of

care provided to patients by physician/physician extender teams and by physicians only.

The results favored physician/physician ex-
Case Study #16. The Costs and Effectiveness of Nurse Practitioners ● 9

tender teams and revealed

for physician/NP teams

group.

Productivity

higher quality ratings

than for any other

It is difficult to measure productivity in strict

economic terms when applied to health manpower. The inputs and outputs of the medical

care production process are difficult to define

and measure. Some people define the output of

the medical care industry as an intermediate

good to be combined with other inputs in the

production of good health. However, most focus on this intermediate product and try to develop proxy measures for what actually occurs

when patient and health professional come together.

The output most commonly associated with

health professional services is defined in terms

of patient visits. Productivity of physicians and

physician extenders usually is measured by the

number of patient visits per unit of time.

Holmes, et al. (39) noted the inability of this

measure to reflect either the complexity or the

volume of services provided during a patient

visit. These investigators also noted the difficulty of determining the relative contributions

made to patient care when more than one professional is involved. To overcome these inadequacies, they suggested the use of a relative

value scale to assign values to the specific activities performed by physicians, NPs, and

nurses. This and other attempts are being made

to develop more refined measures of productivity, but the use of patient visits is most

prevalent in the literature.

Although there is little doubt that the efficient

use of NPs can improve the productivity of the

delivery of medical services, it is essential to distinguish between potential impact and actual experience. As Reinhardt (74) points out, determination of physician productivity must account for both technical feasibility in the production process and the probable economic behavior of the physician. One needs to know not

only what is technically feasible but also what

configuration of inputs physicians are likely to

choose and to what extent physicians will attempt to maximize the output that is technically

attainable with that combination of inputs (75).

The physician, perhaps in collaboration with

the administrator in an organized setting, determines how the physician extender will be used

as an input in the production of medical services. While the debate continues regarding the

independence of NPs, reality shows them to be

functionally dependent on the physician. Berki

(37) defines this relationship as one of “constrained substitutability” with the physician

determining most of the constraints.

The extent to which tasks are delegated from

physician to NP, the amount of time it takes a

physician or NP to perform the same task, and

the impact of the introduction of NPs on physician behavior are key productivity-related variables in the cost-effectiveness calculation. In a

review of 15 studies that used physician office

visits as a measure of delegability, Record (70)

concluded that between 75 and 80 percent of

adult primary care services and up to 90 percent

of pediatric primary care services could be delegated to physician extenders. The purpose of

the Record study was to estimate different combinations of physicians and physician extenders

that could produce given levels of primary care

services. Cost estimates associated with the various configurations revealed potential cost savings of $0.5 billion to over $1 billion in cases

with higher physician extender participation.

This amounted to 19 to 49 percent of total primary care provider costs.

Steinwachs, et al. (94) reported on the experience of the Columbia Medical Plan, an

HMO, in expanding the use of physician extenders over a 3-year period. As the involvement of physician extenders increased, dramatic

changes occurred in the distribution of patient

encounters between physician extenders and

physicians. In 1971-72, 79 percent of patient encounters in adult medicine were managed initially by physicians. By 1973 -74, that figure had

dropped to 38 percent. In 1971-72, physician extenders managed 10 percent of initial encounters

for illness and injury and conducted no health

reviews. By 1973-74, physician extenders managed 50 percent of illness and 75 percent of in-
10 ● Backround Paper #2: Case Studies of Medical Technologies

jury initial encounters and conducted 50 percent

of adult health reviews. The delegation of responsibility for initial encounters in pediatrics

was even higher, with all but 16 percent of pediatric health reviews being conducted by physician extenders.

The changes in distribution of patient encounters among physician extenders and physicians resulted in a major change in staffing patterns as the Columbia Medical Plan evolved

(94). During the study period, enrollment nearly

doubled. In response to this growth, the number

of full-time equivalent (FTE) internists increased

less than 10 percent, while the number of physician extender FTEs increased 260 percent. The

result was a change in staffing patterns from the

early study period when physicians represented

60 percent of the total number of FTE providers

to the final months of the study when their representation decreased to 38 percent of total FTE

providers. Pediatrics experienced a similar but

less pronounced staffing change, with physician

FTEs increasing by one-third and physician extender FTEs nearly doubling.

In the Northern California Kaiser-Permanente Medical Care Program, also an HMO,

NPs conducted a Health Evaluation Service

(H E S) consisting of automated multiphasic

health testing followed by a physical examination and health appraisal (22). Of the patients

who entered the Kaiser system through HES, 74

percent were managed without physician referral. Of those referred to a physician, two-thirds

went to a specialty clinic, thus having the NPs’

HES visit substitute for an initial primary care

physician visit. Moreover, pelvic exams conducted through HES replaced 5,207 visits to the

gynecology clinic during the study period.

Similar experience is reported for two NPs

working in the offices of two family physicians

in the Burlington Randomized Trial (79,93). Patients were divided randomly into two groups:

one receiving first-contact, primary care services from a family physician working with a

nurse (“conventional” care); and the other receiving such care services from NPs. The study

found that NPs were able to provide primary

care services as safely and effectively as physicians. In 67 percent of patient visits, care was

provided with no physician consultation.

More specifically, in settings with both NPs

and physicians, NPs assume primary responsibility for the diagnosis and treatment of acute

self-limited conditions and acute conditions

with limited uncertainty in the diagnosis and responsiveness to a defined therapy. Adult health

reviews are shared by physicians and NPs,

while the majority of well-baby care can be provided by pediatric NPs, Physicians retain primary responsibility for diagnosis and treatment

of more complex and serious acute conditions

and for chronic conditions (89,94,109).

It is obvious from the aforementioned and

other studies (19,85, 105) that NPs can assume a

high proportion of primary medical care tasks.

Existing studies also reveal substantial variation

among practices, making more difficult the

translation of specific expectations for task

delegation to widespread experience. Record

(70) outlines a number of factors accounting for

that variation, including type of practice setting, structure and age of practice, provider role

strain, legal and reimbursement constraints, and

level of demand.

The time spent by NPs in managing a patient

visit is significantly higher than that spent by

physicians. Table 1 shows the experience of

physician extenders in the Southern California

Kaiser-Permanente Health Facility.

For given presenting complaints, physician

extenders averaged 4 to 9 minutes longer than

physicians. Recent research has shown that NPs

spend up to 65 percent more time per patient

visit and see 60 percent as many patients per

hour as do physicians (18,103). NPs see fewer

patients per day because of their longer time per

visit, a shorter workday, and more time devoted to patient telephone consultation and administrative activities. The number of patient

visits reported for NPs ranges from 5 to 14 per

day (101). Consideration of the number and

duration of patient visits to NPs must account

for the possibility that the content of the NP patient visit differs from that of a physician visit.

If NPs do, in fact, provide more patient education and counseling than physicians, they
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 11

298307, 1978

may be improving access and the patient’s experience during the encounter. Since such services generally are not reimbursable, and reimbursement is used as a measure of value, it is difficult to determine the value of these services.

An NP who substitutes for a physician in providing specified medical services allows the physician to increase productivity. As Reinhardt

points out, this is true even if the NP spends

more time providing the same service (75s):

Because of the need for supervision of physician extenders, the delegation of a task normally

requiring 10 minutes of physician time to a physician extender may actually free only 8 minutes

of physician time (and may require 20 minutes

of the physician extender’s time). Even so, as

long as some physician time is freed at all, task

delegation will enable the physician to treat

more cases per unit of time and hence increase . . . hourly productivity.

Physicians working with NPs noted an additional increase in their efficiency due to the need

to be more rigorous and clear in communicating

their thoughts to the NPs (93).

Estimates of increases in the productivity of

physician practices that include NPs range from

20 to 90 percent (31,36,38,39,43,70,82,104). In

some cases, these estimates reflect actual experiences; in others, they are the resuIt of computer simulation models that determine productivity increases based on optimal staffing configurations for performing medical care tasks.

Given that the computer simulation models

measure potential rather than actual experience,

these generally yield higher estimates. The

greatest productivity increases come when the

NP has primary responsibility for a subset of

patients and when triage is performed by the

NPs’ referring complicated cases “up” to the

physician rather than by the physician’s delegating routine medical problems “down” to the

NP (90).

The amount of physician time freed by NPs is

reflected in physician/NP substitution rates. In

a mathematical model for HMO staffing patterns, Schneider and Foley (82) estimated that

the substitution of one physician extender

would decrease physician requirements by 53 to

60 percent depending on departments. After the

expanded use of physician extenders in the Columbia Medical Plan, the workload (number of

encounters per FTE) remained constant for the

physician extenders but declined for physicians,

in part because physicians were freed from routine medical procedures to concentrate on patients with more time-consuming complex problems (94). Although physicians still must be

available for consultation with the NP, Greenfield, et al. (33) found that the physician time required for consultation was 92 percent less than

the time that physicians would spend treating

the same clinical problem.

In addition to the numerous studies that define productivity in terms of patient visits,

Holmes, et al. (39) used a relative value scale to

determine productivity differences between tra-
12 ● Backround Paper #2: Case Studies of Medical Technolologies

ditional physician/nurse practices and physician/NP practices. They found productivity

levels in practices incorporating NPs to be an

average of 25.8 percent higher (39).

Productivity increases that result from the use

of NPs vary widely, depending on the practice

setting, the responsibilities delegated to the NP,

the severity and stability of illness in the patients served by the practice, and how the physician chooses to use the free time resulting from

task delegation. As will be discussed below, the

potential for productivity increases is not necessarily realized. Moreover, Hershey and Kropp

(36) point out the negative impact that maximum task delegation and resulting productivity

increases can have on the practice environment.

Considering such factors as office hours, waiting room congestion, and supervision time, they

conclude that an operating environment resembling that of a conventional physician practice cannot be achieved with more than a 50-percent increase in procductivity. If physician hours

remain constant, supervision time has a marked

impact on how much of an increase in productivity a practice environment can absorb.

Tables 2 and 3 compare practice environments

with and without PAs under varying supervision times.

Employment Costs

To determine the cost effectiveness of NPs,

both the amount of time they spend to perform

a given service and the cost per unit of time for

NPs must be compared with the figures for physicians. However, available cost data are

limited, and what data exist often come from

studies of small samples that are not comparable. An additional difficulty in comparing

costs arises because most physicians are selfemployed and compensated for their services on

a fee-for-service basis, while virtually all NPs

are salaried.

The basic costs of employing an NP include

salary, fringe benefits, and physician supervision. The average salary of NPs was estimated

in 1978 to be about $13,800 (105). Using 1975

data, CBO (18) determined that the median

hourly wage for physician extenders was about

$6 as compared with $24 for physicians. Record

(70) found salary (or income) differentials between physicians and physician extenders to be

close to $36,000 per provider per year. Several

studies stress the importance of such differentials in the physician’s decision to employ an NP

(33,82). In their systems analysis of the use of

physician extenders, Schneider and Foley (82)

Table 2.—First Comparison of Practices With and Without

a PA When Supervision Is Considered

Assumptions

With PA/4 minutes supervision

Without PA 242 patients 264 patients 286 patients 308 patients

220 patients per week per week per week per week

Measures per week (10%-gain) (20%-gain) (30%-gain) (40%-gain) —

Average physician-patient contact time per

day, Including supervision (hours) 5.93 4 34’ 5.24b 5.55 6.15

Average time last patient leaves office

(minutes past 4 p m ) . 30 25b 27 37b 66a

Average total wait per patient (minutes) 17 16 18 23b 39a

Average percent of patients who wait for

admission to examination roo m 39 52b 54b 62b 81a

Maximum number of patients in waiting room

on average da y 3 3 5 10a

Average annual net Income before taxes $34,735 $31,970 $35,102 $38,250 $41 ,615b
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 13

Table 3.—Second Comparison of Practices With and Without

a PA When Supevision is Considered

Assumptions

With PA

4 minutes 2 minutes 1 minute

supervision supervision supervision No supervision

Without PA 264 patients 286 patients 308 patients 330 patients

220 patients per week per week per week per week

Measures per week (20%-gain) (30%-gain) (40%-gain) (50%-gain)

Average physician-patient contact time per

day, including supervision (hours ) 5.93 5.24’ 4.75b 4.84b 4.75b

Average time last patient leaves office

(minutes past 4 p.m.) . . . . . . . . . . . . . . . . . . . . 30 27 27 26a 31

Average total wait per patient (minutes) . . . . . . 17 18 17 20 18

Average percent of patients who wait for

admission to examination room . . 39 53a 53a 72zb 7 l b

Maximum number of patients in waiting room

on average day . . . . . . . . . . . . . . . . . . . 5

$343735

6a 7b

Average annual net income before taxes. . . . . . $35:102 $37,567 $42,291’ $46,855b

SOURCE J C Hershey and D H Kropp, ‘A Re-Appratsal of the Productlvlty Potential and Economic Benefits of Physiclan’s Assistant s,” Med. Care 17602, 1979

found physician extenders’ use to be unaffected

when their salaries remained below 47 percent

of physician salaries. Once the physician extender’s salary reached 62 percent of the physician’s salary, however, physician extenders

rapidly lost their cost effectiveness in the model.

The amount of time reported for physician

supervision and consultation varies considerably among practices. Supervision time varies

with the type of practitioner involved. Legal requirements also determine the time devoted to

supervision. Forty-three States require direct

supervision of PAs and Medex; only 11 States

have similar requirements for NPs (18). Within

a given practice, variation in consulting time is a

function of the reason for the consultation,

whether the physician sees the patient or only

confers with the NP, and the practice experience

of the NP. The actual time per consultation

ranges from less than a minute to approximately

8 minutes. Consultation on initial visits requires

about half as much time as consultation on continuing visits (105). Record, et al. (72) found

that in the 12 percent of cases where the PAs

under study requested physician consultation,

the physicians were likely to spend as much time

with the patient as if they had been the initial

provider. In such cases, the extra cost to the

practice is represented by the cost of the PA and

not that of the physician. Because of the cost implications, direct referral to the physician would

be optimal but usually is not possible in such

cases.

In its review of available studies, CBO determined that supervision and consultation with

physician extenders require between 10 and 20

percent of physician time (18). With CBO estimates of hourly earnings, this adds between $3

and $5 to the physician extender’s hourly salary

cost. CBO further determined that direct compensation accounted for 54 to 72 percent of the

total cost of a physician extender, while supervision costs made up the remainder (18). Table 4

compares the time and costs of physicians and

physician extenders, according to patient visits.

If both salary and supervisory costs are considered, the hourly costs of NPs range from onethird to one-half of physician costs ($9 to $12/

hour as compared to $24/hour).

It should be recognized that the salary level of

NPs is in part a function of the demand for their

services. As Berki (7) points out, with some

caveats, demand for physician primary care

services can be considered a direct demand expressed by the patient. The demand for NPs is
14 ● Background Paper #2: Case Studies of Medical Technologies

Table 4.—Patient Care Time and Cost of Physician Extenders

and Physicians, 1975 a

Physician extender

PA -

NP and Medex Physician

Minutes per patient visit. . . . . . . . . . . . 19.4 13.2 11. 7

Cost per hour . . . . . . . . . . . . . . . . . . . . $9.43-$12.22 $8.36-$10.73 $23.90

Direct compensation. . . . . . . . . . . . . . $6.63b $5.98b $23.90’

Supervision. . . . . . . . . . . . . . . . . . . . . . $2.80-$ 5.60d

$2.38-$4.75d N.A.

Cost per patient visit . . . . . . . . . . . . . . $3.04-$3.94 $1.84-$2.36 $4.66

one that the physician must “initiate,” “express, ” and “legitimate,” making this demand a

derived one (7). Goldfarb (30) notes that the

market for physician extenders is not sufficiently competitive to raise the relatively low

wages of physician extenders to the wage level

that would prevail if more physicians expressed

demand for their services. She finds that the factors that depress wages are stronger than those

that raise them, resulting in a prevailing wage

level that bears little relationship to productivity and, on average, leaves them underpaid. Obviously, an increase in demand for NPs

resulting from such systemwide changes as enactment of national health insurance or expansion of HMOS, or a decrease in demand resulting from changes in physician distribution

through the National Health Service Corps or

the potential oversupply of physicians would require a reassessment of salary costs.

The costs associated with NP practice go beyond direct compensation and supervision. The

need for additional staff support, space, and

equipment may accompany the decision to hire

an NP. Moreover, the style of NP practice has

cost implications. A number of studies have

found that physician extenders perform more

diagnostic tests than physicians and have different patterns of medication use (18,26,43,71).

One recent study (60) found that NPs performed

53 percent more diagnostic tests per patient than

the physicians for whom they worked and 46

percent more than the physicians who did not

work with any physician extenders at all. In

some cases, these increased lab tests result in

identification of additional pathology (43). Although the benefit to the patient in such instances may counter the additional cost, patient

discomfort and time plus the cost of false positives or negatives must be considered. Available
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 15

evidence also suggests that the use of protocols

can diminish the tendency toward excess use of

diagnostic tests (33,34).

In addition to spending more time per patient,

NPs may log more visits per patient in a given

time period. Since the salary and supervision

costs of NPs are significantly lower than the

salaries of physicians, the increased return visits

are not necessarily a financial problem from the

practice’s perspective, although they do consume the patient’s time. However, as Spector, et

al. (92) discovered, a disproportionate increase

in visits can raise the overall cost per patient

beyond the point where the use of NPs is cost effective for the practice. Others stress that in

terms of overall medical expenditures such practice patterns may be cost effective if they reduce

hospitalizations (78).

When all of these cost factors have been considered, NPs have been found to perform comparable medical care tasks at a lower total cost

than physicians. Lewis and Resnik (51) found

this to be true for inpatient and ambulatory

services for all patients. In the Kaiser-Permanente Medical Care Program, which instituted a Health Evaluation Service (HES) operated by NPs, entry costs (health appraisal,

followup, and referral) for the HES group were

$43.09 as compared to $61.41 for patients using

physicians as the point of entry. Costs of overall

medical resources used over 12 months by cohorts of patients with comparable health status

were $98.63 for the HES group and $131.18 for

the physician group (22). In another KaiserPermanente facility, overall combined. costs of

NPs were 20 percent lower than physician costs

(33). Studies on private physician practices,

while not specifically addressing the cost issue,

indicate similar experiences (66,86).

Average Expenses per Patient Visit

Even if one allows for supervision costs, NPs

can provide selected services at less cost than

physicians. This lesser cost does not necessarily

translate into lower average expenses per patient visit, the latter of which are a function of

total practice expenses and patient volume (18).

A number of Studies have documented increases

in patient visits which occurred in practices

using physician extenders (38,65). Annual patient visits in the University of Southern California survey (103) were 50 to 60 percent higher in

practices with physician extenders. System Sciences, Inc. (102) found that practices incorporating physician extenders provided 12

more patient visits per $1,000 of cost than practices without them. CBO reports that the System Sciences study showed practice expenses for

physicians with physician extenders to be 74

percent higher than for solo physicians (18). At

the same time, patient volume in the physician/physician extender practices was 146 percent higher, resulting in an average expense per

patient visit 29 percent lower than that for solo

physicians.

While experience has shown that NPs and

other physician extenders can lower average expenses per patient visit by as much as one-third,

the manner in which the physician or institution

uses them and the way in which time freed

through task delegation is used will determine

whether the potential saving is realized. If NPs

are used to provide services complementary to

those of the physician rather than services substituting for the physician’s, the potential reduction in average per-visit expenses may be

diminished or lost. In such cases, however, the

complementary services often imply quality enhancement, a different (and implicitly better)

visit for the same cost.

With the addition of NPs to a practice, physicians may choose to maintain, increase, or decrease their level of effort. Komaroff, et al.,

caution (43):

Over and above any efficiencies introduced

by this or any other system, the time a physician

averages with patients on a given day is powerfully influenced by two additional factors: the

volume of patients to be seen and the “style” and

interests of the individual physician. It is

therefore unwise to expect too much from, or to

attribute too much to, organizational changes of

this kind in the absence of strong pressures to

optimize efficiency.

In order to achieve the saving that comes from

such efficiency, the practice employing an NP
must either expand its volume of patient visits

or maintain its volume and reduce its physician

input. The latter option is obviously more feasible in an institutional setting where physicians

are hired as salaried employees than in physician office practices where physicians are selfemployed (and also) would be less likely to hire

an NP).

If physicians continue to see the same number

of patients, NPs may reduce average per-visit

expenses by increasing patient volume sufficiently to more than cover costs accompanying their introduction into the practice.

Reduction in physician effort in terms of patient

visits, however, may occur for several reasons:

1) physicians may be seeing patients with more

complex problems that demand more time per

visit; 2) they may devote more time to hospitalized patients; and 3) the presence of NPs may

allow physicians to take more leisure time. Furthermore, some physician time is required for

supervision and consultation with the NP. For

whatever reason, if physicians reduce their patient load, the average expense per patient visit

increases, as illustrated in table 5. However, it

should be recognized that if the number of patients seen by the physician per day decreases

because of more time spent per patient or the delivery of more complex services, the “patient

visit” produced becomes a different product that

may justify a higher cost.

Contrary to what had been hoped for, the reductions in average expense per patient visit

achieved by solo practices have not been realized in many group practices. Using System Sciences, Inc., data, CBO reports average per-visit

expenses in group practices employing physician extenders to be only 1 percent lower than

those in group practices without them, although

solo practices with physician extenders have experienced as much as a 30-percent reduction in

average practice expenses (18). CBO speculates

that the differential may be due less to practice

organization than to the type of physician attracted to each practice arrangement, with physicians in group practice more highly valuing

leisure time and using physician extenders to reduce their workload.

Training Costs

Training costs indirectly affect employment

costs and the costs to society of NPs. These costs

are important because much of them are publicly subsidized and they may have some influence on salary expectations. NPs obviously

benefit from public subsidies for their training,

just as do other health professionals. They enter

the job market with a lower personal investment

in training than would have existed without

subsidization. This, in turn, means that they are

seeking a return on an investment that does not

reflect the full costs of their training, thus benefiting their employers through lower salary

costs (30).

Total training expenditures for physician extenders are substantially lower than those for

Table 5.--Change in Average Expense per Patient Visit With Reduced Physician Effort

Number of

Hours per day Hourly cost Total cost patients Cost per patient visit

Physician . . . . . . .

— .—

8 x $24 = $192 - 10 = $19.20

NP . . . . . . . . . . . . . 8 x $12 = $96 - 6 = $16.00

$288 - 16 = $18.00

(average expense per

patient visit)

Physician . . . . . . . 8 x $24 = $192 - 7 = $27.40

NP . . . . . . . . . . . . . 8 x $12 = $96 - 6 = $16.00

$288 - 13 = $22.10

(average expense per

patient visit)
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 17

physicians, as shown in table 6. Total expenditures for the segment of training that qualifies

one to practice as a physician extender are lower

for NPs than for PAs (18). In the case of NPs,

the figures in table 6 do not account for the costs

of education required to obtain an RN license as

a prerequisite to NP training. Depending on the

type of initial nursing education program (see

appendix) and the duration of the NP training

program, the costs of NP training could equal or

exceed the costs of PA training. Estimates of the

average annual costs of nursing education in

1979 are $5,901 for baccalaureate programs (4

years), $4,974 for diploma programs (3 years),

and $4,912 for associate degree programs (2

years) (47). Developing comparable full training

cost figures for NPs, PAs, and physicians is

complicated by the different education reTable 6.-Training Expenditures” for Physicians and

Physician Extenders, Academic Year 1978-79

Cost per student

Annual costb Total costc

Physician

Mean . . . . . . . . . . . . . . . . . . . $14,200 $60,700

Median . . . . . . . . . . . . . . . . . N A d N A d

Range . . . . . . . . . . . . . . . . . . $7,600-

$ 20,800$30,200-$83,000

Physician extendere

PA and Medex

Mean $6,800 $11,900

Median $7.400 $9,900

Range $4400-$9.900 $7,100-$17,200

NP

Mean $12,900 $10,300

Median $10,100 $8,000

Range $5,300-$31.000 $3,000-$32,000

quirements for entry into NP, PA, or medical

training programs. Since a baccalaureate degree

is a prerequisite for medical school, comparable

figures for physician training must include the

costs of baccalaureate education if the costs of

obtaining the RN license are included for NPs.

Program requirements for PAs do not necessarily include postsecondary education, although most PAs have had at least 3 years of

college. Whether any of these education costs

should be accounted for (as a reflection of reality rather than formal entrance requirements) is

unclear.

Looking solely at the expenditures for the NP

or PA phase of training (see table 6), higher

average annual expenditures for NPs are in part

explained by the fact that PA training occurs in

medical schools, using their faculty and resources. Thus, there is an indirect subsidy of PA

training in medical schools that is met more directly in NP training programs. Moreover,

while the average annual cost of NP training is

higher than for PAs, the shorter length of NP

training results in lower average total costs for

NPs.

The total Federal contribution to basic health

professions education and training is highest for

medical education. This reflects both the costs

of that training and the fact that virtually all

medical schools receive Federal funds. The

amount of Federal support per student and its

relation to average annual training costs, as

shown in table 7, is significantly higher for

physician extender training.

Table 7.—Federal Support for Physician and

Physician Extender Training, Fiscal Year 1978

Percent of

average

Total annual

Federal Amount per training

support student cost s

Physician. ... ... .$190 million $3,000 20%

Physician

extender. . . . . . . . . $22 million $4,000- 50-700/0

$5,000
18 ● Backround Paper #2: Case Studies of Medical Technologies

The public cost of producing each additional

physician and physician extender who would

not have been trained in the absence of Federal

support has been estimated by CBO (18). Including both construction and operating support, the Federal cost of each additional physician trained between 1969 and 1978 was estimated to range from $40,000 to $60,000. The

Federal cost for each physician extender during

the same time period ranged from $10,000 to

$20,000. 2 A significant factor in the differential

between medical education and physician extender training, CBO noted, is the Federal strategy of providing seed money but not operating

subsidies to physician extender programs.

NP programs are less dependent on Federal

subsidies than PA programs. In fiscal year 1978,

only 40 percent of NP programs received Federal support, as opposed to 90 percent of PA

programs. Because they are less dependent of

Federal subsidies, NP programs are potentially

less vulnerable to changes in Federal training

support, although it can be assumed that many

NP programs do receive public subsidies at the

State level that also might diminish if Federal

policy no longer encouraged the training and

use of new health professionals.

Annual training expenditures for physician

extenders are significantly lower than those for

physicians. As Scheffler (80) argues, however,

even if the cost of training physician extenders

were the same as that for physicians, physician

extenders would still be a good investment because of their shorter training period. Scheffler

estimated that three PAs can be trained for the

cost of training one physician and together can

produce 1.8 times more visits than one physician. Although analyses like Scheffler’s begin to

grapple with the issue of differences in training

costs between physician extenders and physicians, their findings do not define the costs

associated with the specific services that either

group can provide. Detailed cost data on training for specific sets of primary care services are

nonexistent. There is no agreement on a uniform set of services that any type of physician

extender can provide. Some consensus is a prerequisite to refining currently available data.

Without it, only gross comparisons of total

training costs are possible.

Medical Care Prices

Lower costs associated with NPs do not necessarily translate into lower prices for their services. Moreover, productivity gains for physicians who employ NPs may not lead to a reduction in physician fees. Therefore, consumers

cannot necessarily expect to benefit from a reduction in average charges in practices with

NPs. Because the market for medical care services does not conform to the competitive model,

a reduction in expenses need not be followed by

a decline in prices (7,18,74,90). As seen in table

8, a System Sciences, Inc., survey (102) did reveal lower average per-visit charges of about 21

percent in practices with physician extenders.

Similar experience has been documented elsewhere (66). However, the note accompanying

the table suggests that the location of many of

the physician/physician extender practices in

Table 8.—Average Charge per Patient Visit in

Practices With and Without a Physician

Extender, 1977

Average charge

per patient visitb

Type of practlcea and provider (in dollars)

Phystcian with physician extender ., .. .$13.00

NP ., . . . . . 8.13

PA or Medex 12.02

Physician ., ., . . . . . . . . . . . 15.06

PhysicIan without physician extender 16.48
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 19

lower income areas with fewer available health

resources could account for the charge differential.

Few physicians surveyed by the General Accounting Office reported any reduction in fees

for physician extender services (27). Moreover,

CBO cautions that use of NPs to provide complementary services rather than to increase

volume could lead to even higher average pervisit charges (18). Existing data lead to the conclusion that where prices for patient services do

decline after introduction of a physician extenders, the change is insufficient to lead to

more than a modest reduction in average

charges per patient visit. The tendency for physician extenders to order more diagnostic tests

can further increase practice revenues if the tests

are performed in the physician’s office (84). In

addition, if the physician extender assumes

some of the nonreimbursable physician services

(e.g., telephone consultation, prescription refills), that frees physician time to provide reimbursable services. Therefore, in the majority of

cases (no price change or modest price change),

the physician extender’s income generation potential is enhanced by the fact that additional

reimbursable services are being provided and

that prices may be excessive in relation to the

costs of physician/physician extenders practices. Whether the introduction of physician extenders might cause fees to increase less rapidly,

thus leading to a relative decline in prices, has

not been examined.

There is little reason to expect physicians to

charge a lower price for physician extender services or to reduce their fees if the use of physician

extenders leads to a reduction in physician time

required per patient visit. There is no incentive

for physicians to do so. Bicknell, et al., write

(9):

On grounds that they bear ultimate responsibility, most U.S. physicians employing assistants expect to continue receiving their customary fees from all patients, including those examined and treated by the assistant. The result

betrays the promise of primary care assistants.

Instead of bringing a reasonable dimension to

primary care costs, inadvertently the assistants

may maximize the worst in the fee-for-service

system . . . .

Berki (7) argues that current fee levels do not reflect physician time inputs, citing a study by

Schonfeld, et al. (83) that found office visit fees

to be significantly higher than could be justified

by the value of physician time devoted to such

visits. Berki also describes the possible dilemmas of fee differentiation. While physicians

could achieve financial benefits from the employment of NPs, even if they received a lower

fee for NP services, the incentive to incorporate

this innovation into their practices diminishes

with any reductions in NP revenue-generating

potential. Such fee differentiation also might

engender resistance among patients who view

the lower price of NP services as a signal that

care provided by NPs is of lower quality than

that rendered by physicians.

With current physician pricing behavior, NPs

are not only a cost-effective addition to their

practices, but often a profitable investment for

the physician. NPs’ income-generation potential

gives the physicians more flexibility in maximizing their combined income and leisure objectives. Table 9 illustrates the physician’s ability to work less time after employing a physician

extender while suffering no loss in income.

Rather than working less time and maintaining

their incomes, physicians could choose to increase their incomes by maintaining their previous level of effort and by generating even

more revenue from an increased volume of patients. This alternative appears to be much more

prevalent (103). Most studies of revenue generation and profitability found higher expenses

Table 9.—Physician Time Input and Income

With and Without Employment of a New Type

of Health Manpower (NTM)

One NTM

No NTM—-—— employed

Physician practice hours/week . . . 60 60

Weeks/year . . . . . . . . . . . . . . . . . . . 50 46.7

Office vists/week . . . . . . . . . . . . . . 120 150

Visits/year . . . . . . . . . . . . . . . . 6,000 7,000

Fee/visit. . . . . . . . . . . . . . . . . . . . . . $10 $10

Fee/volume/year . . . . . . . . . . . . . . . $60,000 $70,000

Market cost/NTM ... . . . . . . . . $10,000

Income/year. . . . . . . . . . . . . . . . . . . $60,000 $60,000
20 ● Background Paper #2: Case Studies of Medical Technologies

for practices incorporating physician extenders

than for physician-only practices, but also

found physician/physician extenders’ revenues

to be sufficiently higher to show greater profits

(21,4O,65,66,8O,81,86,1O8).

The amount of profit realized through the employment of NPs varies considerably among

practices. In a separate study of 26 NPs in

pediatric practices reported in 1972 by

Yankauer, et al. (108), average annual gross

revenues generated by the NPs exceeded their

expenses by an average of $2,500. In a study of

pediatric NPs in 1969, Schiff, et al. (81) found

that the NP generates net revenues of about

$6,000 after 1 year of practice. Schwartz (86) examined the revenue-generating experiences of

three different types of practices employing NPs

in California. He found that the average annual

net revenue of an NP in a rural solo private

practice in 1974 was $18,653, resulting in an increase by more than one-third in the employing

physician’s income. Kane, et al. (40) found that

the higher profits earned by physician/Medex

practices were in part due to the physician’s

being relieved by the Medex to spend time on

more highly remunerative activities, such as

specialized procedures and inpatient care. Even

with limited third-party reimbursement for physician extender services, only one major study

cited this as a financial problem for physicians

employing NPs (93).

From the physician’s perspective, the NP is a

cost-effective addition to the practice. The fact

that the financial benefits gained from the use of

NPs are not passed on to consumers is well documented. As noted earlier, the potential increase in income afforded the physician by the

NP is a major incentive for NP employment.

Given that income increases are usually the result of expansion in the volume of patient visits,

consumers may benefit from improved access to

services. While this has been the experience of

practices in areas with few available health resources, it is unwise to assume that increased

volume, regardless of its character, generally

leads to improved access.

Finally, the price effects of physician extender

employment in organized systems with capitation should be treated separately. The productivity gains from physician extender employment are likely to result in cost savings in

such systems. Given that they provide specified

services in return for monthly cavitation payments, such organizations may choose to expand their scope of benefits or increase physician salaries or leisure rather than to pass the

savings to the consumer in the form of reduced

premiums. Which action such organizations

choose depends on how they assess their competitive advantage over similar practices in the

area and standard insurance carriers (7).

Medical Care Expenditures

Practices employing physician extenders generally see more patients than those without physician extenders, increasing volume by as much

as 50 to 60 percent (18). Prices charged for services in physician/physician extender practices

do not differ significantly from physician-only

practices even though average per-visit practice

expenses tend to be lower. Given current employment and pricing patterns, NPs and PAs do

increase medical expenditures beyond the expenditures that would have occurred without

them. Because of their small numbers (physicians outnumber physician extenders by 18 to

1), physician extenders’ current impact on total

expenditures is marginal. If physician extenders

were slated to play a substantially larger role,

with no other changes, in the current health

services delivery system, their impact on overall

medical expenditures would grow.

CBO estimated that in 1977 medical expenditures for practices employing physician extenders were 19 to 24 percent higher than those

for practices without physician extenders (see

table 10). If 50 percent of physician practices

employed physician extenders, extrapolation of

current trends for both pricing and patient

volume increases would result in at least a 10-

percent increase in total expenditures related to

physician practices, Given the expanding supply

of physicians, it is uncertain whether the increase in volume of patient visits required to

support this higher number of physician/physician extender practices is possible.
Total expenditures associated with physician

extenders must include training expenditures,

much of which are subsidized with public funds.

The costs of physician extender training are substantially lower than those for physician training. To the extent that physician extenders substitute for physicians, and that substitution is

reflected in the respective numbers of physician

extenders and physicians trained, the lower

physician extender training costs could reduce

total training expenditures. For now, the extension of public support for physician extender

programs means an increase in public expenditures for health professions training. Since the

potential savings from this public investment

are not passed on to the consumer, medical care

expenditures also are inflated by the introduction of physician extenders.

The increase in medical care expenditures

associated with physician extenders may be outweighed by the benefits their presence brings

through increased access. In a recently reported

survey, 57 percent of physicians who employ

NPs cited the extension of services to more people as the NP’s major contribution to medical

services delivery (55). Improved access occurs

not only as the result of the general increase in

volume of patient visits in practices with NPs,

but also because NPs tend to serve more lowincome and nonmetropolitan patients who traditionally have had diminished access to physicians (61,98). NPs in underserved areas can free

overextended physicians to focus on complex

medical problems and consultant services (104).

Furthermore, with the NP to provide followup,

such physicians can discharge hospital patients

sooner (91). Improved access to primary care

services may reduce expenditures for costly specialized services and hospitalization. To the extent that NPs contribute to the expansion of primary care services, the increase in expenditures

accompanying their use could be offset by such

savings.

Cost Effectiveness:

Actual or Potential?

That individual NPs can be cost effective is

documented in numerous studies. Generalizing

that experience to the total NP or physician extender population or basing future projections

on individual experiences is more difficult.

Although the number of physician extenders is

expected to more than double in the next decade

(see table 11), physicians will still outnumber

physician extenders by 10 to 1.
Given the nature of the U.S. health care system and realistic expectations for future structural change, it is uncertain how many NPs and

PAs will find employment commensurate with

their training and whether society will benefit

from their cost-effectiveness potential. In their

longitudinal study of NPs, Sultz, et al. (99)

found that only 50 percent of employed NPs

functioned purely as NPs (see table 12). Others

were either performing mixed functions or providing only traditional nursing services. It must

be noted that this study was based on 1974 data,

thus reflecting the early experience of NPs.

Many master’s students at that time were faculty in schools of nursing preparing to teach in NP

programs. This, in part, may explain the seemingly low percentage of NPs functioning full

time in the NP role. Data on more recent experience are essential in order to more accurately estimate the education costs of one fully functional NP, the increased availability of NP services resulting from additions to the supply in the

field, and the prospects for future employment.

Given their small numbers and current employment experience, the total impact of physician

extenders, even if beneficial, will be modest.

The structure of the U.S. health care system is

often cited as the major factor inhibiting the

achievement by NPs of their full potential. According to Bicknell, et al. (9), the “hospitalbased, specialist-intensive, resource-rich” system is incompatible with primary care practice

and resistant to innovations that augment primary care capacity. Patterns of financing that

cover the costs of an inefficient delivery process,

medical education that discourages delegation

of patient responsibility, and the prominent role

of physicians in defining the boundaries of practice for other health professionals inhibit the

growth and efficient utilization of a profession

that may invade territory traditionally confined

to physicians.

Within the existing structure, incentives to

employ NPs vary according to practice arrangement, physician payment mechanisms, and

budget constraints. In general, the financial incentive for physicians in private practice to hire

an NP or PA is diminished, because physicians

earn high incomes and are not constrained by

competitive market forces to produce services in

the most cost-effective manner. On the other

hand, employment of physician extenders can

offer attractive benefits to physicians. Physician

extenders allow physicians to expand their practices to improve patient access and increase income. They provide the physician an opportunity for more leisure time or a more leisurely work

pace. Finally, many physicians who emplo y

physician extenders stress their contribution to

upgrading the quality and comprehensiveness of

care provided by their practices (90).

Multiple considerations enter into the decision to hire a physician extender. The physician must be convinced that sufficient demand

exists for the planned expansion in patient

volume. Smith (90) cautions, “If the present hindrances of access to medical care are, as some

have suggested, merely geographical, we might

have the ironical situation of there being no

physician to hire the practititioners where they

are needed and no need for them where there is a

physician to hire them. ” Legal and reimbursement policies must not constrain physician extenders’ potential to meet the physician’s expectable 12. —Employed Graduates of NP Programs by Role and Type of NP Program

Type of program

Certificate Master’s Total

Role Number Percent Number Percent Number Percent

. 

NP role only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—..—. — —.— —

257 55.2°10 67 35.8%. 324 49.70/0

Traditional nursing role only, . . . . . . . . . . . . . . . . . . 51 11.0 71 38.0 122 18.7

NP role and traditional nursing role, . . . . . . . . . . . 157 33.8 49 26.2 206 31.6

Totala. . . . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . 465 100.0 ”/0 187 ‘- - 100.0% 652 100.0%
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 23

tations. Physicians with minimal experience in

task delegation may not feel comfortable using

physician extenders in the manner required to

benefit fully from their employment. Some initial investment for salary and perhaps additional overhead accompanies the introduction

of the physician extender into the practice.

Sultz, et al. (98) reported that 92 percent of

physicians employing NPs thought the benefits

of their employment outweighed the costs. For

the physician contemplating whether to hire, the

incentives also must seem to outweigh the risks.

The rapid expansion in medical school enrollments and projected increases in physician supply add a new dimension that may overshadow

other factors influencing physician extenders’

employment opportunities. Physician supply is

growing and there are thousands more in the

educational pipeline who must be absorbed into

the system. The effects of this increase in physicians are now only being contemplated, but

they could be profound. Among them could be

a restriction in employment opportunities for

NPs and PAs. Some argue that NPs will fare

better because of their nursing background and

scope of practice (18). Regardless, there are

already signs that physicians, particularly

specialists, are redefining the scope of their

practices in response to diminished numbers of

patients requiring their specialized skills. Aiken,

et al. (3) recentl y concluded, “Despite the current shortage of generalist-physician services,

continuing specialist participation in primary

care will lead to sufficient generalist medical

services by the mid-1980’ s.” Physicians may be

recapturing primary care responsibilities that

not so long ago they considered delegating.

Moreover, it has been suggested that practicing

physicians who perceive this oversupply may

hire young physicians to perform the tasks that

physician extenders can handle (64).

Organized settings that operate on fixed

budgets (prepaid group practices and some clinics) have a much greater incentive to employ

NPs and PAs. It is to their financial advantage

to produce services with the most efficient combination of inputs, substituting lower priced

physician extenders for higher priced physicians

whenever possible. Such organizations will display more efficient staffing patterns unless they

are able to pass through the costs of more inefficient personnel configurations to third-party

payers who reimburse on a cost basis. The value

such organizations place on physician extenders

is reflected in the fact that half of all PAs and 80

percent of all NPs are employed in organized

settings (18). Future changes in practice arrangements and the preferences of new physicians toward entering organized practice settings or private practice, therefore, will have an

impact on future opportunities for physician extenders.

Prepaid group practices (PPGPs) have

perhaps the strongest incentive to employ physician extenders. Operating revenues derive from

fixed cavitation payments for plan enrollees.

The PPGPs seek to minimize expenses in relation to revenues by using more cost-effective

means of achieving comparable outcomes. This

includes the substitution of NPs and PAs for

physicians wherever possible. While they have

yet to follow their own maximum substitution

models, HMOS, the prototype PPGP, are leaders in employing physician extenders and conducting research on their actual and potential

utilization (33,69, 71,94). CBO reported that in

1977 HMOS provided care to their members

with an FTE of 0.44 physician extenders for each

physician, as opposed to 0.07 physician extenders for each office-based physician in the

United States (18).

HMOS have the advantage of greater flexibility in modifying personnel arrangements to

gain the benefits from substitution. Physicians

in private practice, beyond fulfilling their objectives for leisure time, are unlikely to reduce their

time inputs to achieve a more efficient operation. Where physicians are salaried employees,

however, the efficiency objectives of the employing organization may lead to a reduction in

their time, numbers, or income. In line with the

HMOS’ incentive to minimize total salaries,

Greenfield, et al. (33) report on the effects of an

experimental physician extender protocol system introduced at the Southern California

Kaiser-Permanente Facility and the adaptation

of the organization to a more cost-effective

model. Before the study, 10 physicians and 3
physician extenders saw 2,700 patients per

month, 70 percent of whom had acute illness.

Two years after the study, 6.5 physicians and 6

physician extenders saw 2,900 patients per

month, 70 percent of whom had acute illnesses.

The use of NPs and PAs results in productivity gains and cost reductions. Yet, their

future participation in medical care delivery is

uncertain. Available evidence indicates that

physician extenders’ incorporation into organized settings, particularly HMOS, has contributed to more cost-effective service delivery.

However, the experience in private physician

practices is less promising. Demand for physician extenders in that setting has been limited.

Although the public benefits from increased

availability of services, the cost effectiveness of

physician extenders in such settings has not reduced prices. Moreover, since most physician

extenders are employed in organized settings,

employment opportunities are limited by the

fact that the majority of physicians are in the

private practice, fee-for-service sector.

Government subsicly of NP and PA training

has not been accompanied by policies to ensure

the promise of these health professionals once

they are in practice. Moreover, policies that

may inhibit the use of physician extenders, such

as those supporting expansion in physician supply, have been enacted simultaneously with

policies encouraging their development.

Changes could be made-short of a national

health insurance scheme with incentives to

restructure health services delivery—that would

facilitate the efficient use of physician extenders.

Modifying current reimbursement policies to

compensate for physician extender services in a

manner that reflects their lower costs would affect prices, although it might also reduce opportunities for physician extender placement in

physician private practices. Opportunities for

NPs to practice more independently through removal of legal and reimbursement constraints

could provide consumers with a lower cost alternative for receiving the primary care services

that both physician extenders and physicians

can provide. The expansion of PPGPs and other

medical care organizations that operate on fixed

budgets would provide more employment opportunities for physician extenders in settings

that use them more efficiently, As Berki argues

(7):

Where medical care is provided by hierarchical organizations on a cavitation basis, both

service expansion and price reduction are likely.

Thus, not only is effective use of new types of

health manpower enhanced by the structural

characteristics of hierarchical organizations, but

also the gains flowing from their employment

are less likely to accrue to the providers, and the

more likely it is that consumers will benefit by

increased availability of services at lower prices.

In evaluating the role of physician extenders,

it is insufficient to assess their cost effectiveness

without also looking at who gains from the savings. Are the financial benefits of lower training

and employment costs to be shared with the

public or reaped only by providers? Under the

current fee-for-service system, are the modest

salaries of physician extenders exploitative,

given their income-generation capacity? The

organization and financing of health services in

the United States encourage inefficiency in the

delivery of medical care. Reforms that would

optimize the efficient use of physician extenders

have implications for the cost effectiveness of

other components of the system. Physician extenders can be integrated into the existing

system, as they have for the past decade, with

perpetuation of existing inefficiencies. From a

public policy perspective, it must be asked

whether improved access, resulting from employment of physician extenders, but unaccompanied by 1ower prices, is worth the further inflation in medical care expenditures. This is the

choice as the system currently functions. Given

the overriding concern for containing health

care costs, an assessment of NPs and PAs

should consider not only their performance

within the constraints of the current system, but

also their potential role in an integrated strategy

of reform to meet public policy objectives.
Case Study #16. The Costs and Effectiveness of Nurse Practitioners ● 25

APPENDIX: BACKGROUND INFORMATION ON

PHYSICIAN EXTENDERS

Training

Although physician extender training existed on a

very limited scale as early as the 1930’s, the major

thrust in training both NPs and PAs in the United

States began in 1965 (5). Duke University established

the first primary care PA training program. PAs generally receive 2 years of academic and clinical training in a medical school setting. Although postsecondary education or previous experience in a health

profession is not specifically required, most PAs have

had 3 or more years of college-level education or

several years’ experience in a related health field such

as medical technology, physical therapy, or vocational nursing. While the initial intention of PA programs was to provide training in primary care, about

half of all PAs now specialize in other fields such as

ophthalmology, urology, orthopedics, internal medicine, and other medical and surgical subspecialties

(46).

Medex often are considered in the same category as

PAs because they practice under the same legal authority and receive similar preparation. Medex training was conceived as a way to allow former military

corpsmen to apply their skills to rural medical practice. The first training program was established in

1969 at the University of Washington. Medex receive

15 months of training, including preceptorship,

often with rural physicians. Unlike PAs, Medex are

trained almost exclusively in primary care.

The concept of expanded function nursing grew

out of a program to train nurses to become pediatric

NPs at the University of Colorado in 1965 (49). Also

referred to as nurse clinicians, nurse associates,

clinical nurse specialists, or nurse generalists, these

Specialty

Pediatric. . .

Midwifery.

Maternit y

Family. . . . .

Adult . . . . . .

Psychiatric.

Total .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

individuals all belong to the general category known

as NPs, The NP receives additional training beyond

that required for an RN license3 in a particular specialty such as pediatrics, family practice, maternity,

adult practice, or psychiatry. There are two types of

training programs: those that offer an NP certificate

and those that award a master’s degree. Table A-1

shows the distribution of different NP training programs by both specialty and type of degree offered.

Until standardization of the length of NP certificate programs to 1 year in the Nurse Training Act

of 1976, NP training varied between master’s and certificate programs as well as among specialties. Master’s degree programs require a previous baccalaureate RN license and, on average, require more than a

year of training; certificate programs are now 1 year

in length. Table A-2 shows the average length of different NP training programs.

Legislation Supporting Physician

Extender Training

Federal support for physician extender training

was limited before 1970. Some early NP training programs received assistance through special project

grants provided under the Nurse Training Act of

1964 (Public Law 88-581) and, later, title 11 of the

Health Manpower Act of 1968 (public Law 90-490)

(103). The National Center for Health Services Research funded the first Medex training program at the

Table A-1 .—NP Programs by Specialty and Type of Program

Type of program “

-

Certificate Master’s Total

Number Percent Number Percent Number Percent

. 42 48.8 ”/0 ‘8 17.8°\o 50 38.2-0/0

. 5 5.8 6 13.3 11 8.4

. 7 8.1 7 15.5 14 10.7

17 19.8 12 26.7 29 22.1

. . 15 17.5 8 17.8 23 17.6

. . — — 4 8.9 4 3.0

86 1OO.OO

. . /O 45 100.OYO 131 1OO.OO

/O
26 ● Background Paper #2: Case Studies of Medical Technologies

University of Washington. By the late 1960’s, PA

training programs were receiving funding from a

variety of Federal sources, including the Office of

Economic Opportunity, the Model Cities Program,

the Veterans’ Administration, the Public Health

Service, the Department of Defense, and the Department of Labor (52). However, most physician extender training programs during this period depended on institutional or private resources.

In the early 1970’s, the Federal Government became more interested in the potential of physician extenders to address health manpower problems. Increasing concern over rising costs and the continued

shortage of physicians in primary care was reflected

in two major pieces of legislation aimed specifically

at increasing the number of NPs and PAs. The Comprehensive Health Manpower Act of 1971 (Public

Law 92-157) provided the first large Federal provision for NP and PA training programs (35). The

Nurse Training Act of 1971 (Public Law 92-150) provided broadened authority for special project grants

and contracts including support for training programs for NPs (99). Passage of the Nurse Training

Act of 1975 further reinforced the Federal commitment by establishing a new, separate section for support of NP training. Further, in 1977, the Health Professions Educational Assistance Act of 1976 (Public

Law 94-484) was amended by the Health Services Extension Act (Public Law 95-83) to provide additional

grants and contracts for physician extender training

programs (64). Although the Nurse Training Act of
Case Study #16: The Costs and Effectiveness of Nurse Practitioners ● 27

Table A-3.—Practice Setting Location of NPs by Type of NP Programa

Type of program

Certificate Master’s Total

Practice setting location Number Percent Number Percent Number Percent

Inner city . . . . . . . . . . . . . . . . . . 126 31 .40/0 41 42.4°10 167 33.6°\o

Other urban . . . . . . . . . . . . . . . . 65 16.3 24 24.7 89 17.9

Suburban . . . . . . . . . . . . . . . . . . 35 8.8 11 11.3 46 9.3

Rural . . . . . . . . . . . . . . . . . . . . . . 77 19.3 7 7.2 84 16.9

Combination. . . . . . . . . . . . . . . 16 4.0 3 3.1 19 3.8

OtherC. . . . . . . . . . . . . . . . . . . . . 81 20.2 11 11.3 92 18.5

Totald . . . . . . . . . . . . . . . . . . . 400 1 OO.OO

/O 97 1 OO.OO/O 497 1 OO.OO/O

The tendency of NPs to locate more often in innercity areas may be partially explained by the fact that

NP training programs are largely based in urban centers (see table A-4). Moreover, most nurses, who

comprise the applicant pool for NP programs, are

employed in metropolitan areas initially and thus are

more likely to remain there (18).

In the past, it has been difficult for many underserved areas to attract and maintain physicians.

However, practice in these areas may have special

advantages for physician extenders. One study of 85

NPs in rural areas (97) showed that 40 percent chose

rural practice because it “offered a creative approach

to health care delivery. ” Another 25 percent were in

rural settings because of “the opportunity for role

autonomy. ” Both of these responses can be interpreted as reflections of the inadequacy of physician

supply in relation to consumer needs. What may be

defined by physicians as problems of rural practice

may instead present themselves as opportunities for

physician extenders which may not be available in

areas with an adequate or excess supply of physicians

(8,15,37,73,97),

Several training programs have been developed

specifically to prepare NPs to practice in underserved

areas. One of the largest such programs in the country is the FamiIy Nurse Practitioner Program at the

University of California. Students in this program

are recruited from rural areas and trained with a selfselected physician preceptor in a rural practice. Administrators of the program feel that this system has

helped to promote a positive relationship between

physicians and NPs and to encourage their further

use in rural areas (88). Other institutions, including

the University of North Carolina and the University

of Minnesota, operate similar training programs

which place NPs in Area Health Education Centers

and other rural health clinics in their States (28). In

Kentucky, the Frontier Nursing Service trains nursemidwives and family NPs to provide services to rural

areas of southeastern Kentucky and is the only available source of primary care to most residents in this

area (62). These programs have succeeded in placing

and maintaining a high percentage of their graduates

in rural areas.

The practice location of NPs varies by both their

specialty and type of training program from which

they graduated. The specialties most likely to be

represented in inner-city locations are pediatrics,

midwifery, and maternity, while family NPs are the

most likely to be represented in rural areas (see table

A-5). Moreover, a larger percentage of practitioners

from certificate programs (19 percent) than graduates

of master’s degree programs (7 percent) is in rural

areas.

Although physician extenders have made their

presence known in underserved communities, and, as
28 . Backround Paver #2: Case Studies of Medical Technologies

Table A-S.—Practice Setting Location of NPs by Specialty and Type of NP Programa

Type of Pediatric Midwifery Maternity Family Adult Psychiatric Total program/practice - -— -- ---—– —–– -——-– ——–-.–– —. ---

setting location Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent

— — —

Certificate

Inner city. ., .,

Other urban. . . .

Suburban .

Rural .. .

Combinatlo n

b

.

Othe r

c

Total. . . .

Master’s

Inner city. .

Other urban, .,

Suburban .

Rural . . ., . .

Combinatio n

b

.

Other c 

. . . . . .

Total. . . . . . . .

Totald

Inner city, . . .,

Other urban. , . . .

Suburban. . . . . .

Rural . . . .

Combinatio n

b

.

Otherc . . .

Total. ., . . .,

70

28

20

26

11

15

170

3

1

1

1 —

1

7

73

29

21

27

11

16

177

—

41.1 0/0

16.5

11.8

15.3

6.5

8.8

100.0

42.80/0

14.3

14,3

14.3

—

14.3

100.0

41 .2’70

16.4

11.9

15.3

6.2

9.0

“100,0

3

2

1

2

—

1

9

12

6

3

—

2

2

25

15

8

4

2

2

3

34

8

10

1

4

—

2

25

3

1

—

—

—

—

4

11

11

1

4

—

2

29

28

14

5

29

5

21

102

16

12

5

3

1

7

44

44

26

10

32

6

28

146

—.

—

—

—

—

—

—

—

—

—

2

1—

—

3

—

—

2

1—

—

3

—

—

—

—

—

—

—

—

—

66.7 %

33.3

—

—

100.0

—

—

66.70/0

33.3

—

—

100.0

—

126

65

35

77

16

81

400

41

24

11

7

3

11

97

167

89

46

84

19

92

497

31 .40/o

16.3

8.8

19.3

4.0

20.2

100.0

42.4%

24,7

11.3

7.2

3.1

11.3

100.0

33.60/’

17.9

9.3

16.9

3.8

18.5

100.0

.

a group, they seem most easily attracted to these

areas, it should not be assumed that this trend will

continue indefinitely. As noted earlier, under current

legal arrangements, physician backup must be available to physician exterders. It is uncertain how many

physician extenders can be absorbed in underserved

areas given this constraint. Also, until now, many

rural practices have been supported by Federal and

State funds. If these resources evaporate in the

future, such rural practices would have to become

financially self-sufficient in order to retain existing

personnel or to employ new personnel. A study of

physician extender practices in rural communities in

California has shown that freestanding rural practices can become financially viable with continued

Federal and State support (31). But without such support or third-party reirnbursement, economic viability is much less likely (63).

Physician and Consumer Acceptance

From the beginning, physician and consumer acceptance of NPs has been a major issue. The widespread use of NPs depends on the willingness of physicians to hire them and patient receptiveness to the

kinds of services they provide, particularly in private

physician practices.

Current Federal reimbursement policies, which do

not include payment for services provided by physician extenders, serve as a disincentive for physicians

to employ physician extenders. Among the other reasons most frequently cited by physicians for not hiring NPs are legal restrictions, limitations on space or

facilities, and resistance from other health providers

(100). Concerns about liability and malpractice

coverage also may discourage physicians from hiring

NPs (45,56,107). However, the use of NPs also provides advantages for physicians to expand the number of patients in their practices, increase their income, broaden the scope of their services, or acquire

more flexibility with their time. Physician extenders

may be useful particularly to rural physicians, who,

because of their fewer numbers, must see considerably more patients and work longer hours than

their urban counterparts (46).

The Institute of Medicine (IOM) reported on a

series of studies in the last decade which attempted to

document both physician approval of the concept of

NPs and physician willingness to hire them (77).

While the findings varied significantly among the
Case Study #16 The Costs and Effectiveness of Nurse Practitioners ● 29

studies, the general pattern showed that physician

approval of the concept of NPs often was not accompanied by a willingness to hire them. While one survey cited by IOM found that as many as 70 percent

of physicians would hire an NP (67), most others

found considerably lower interest. For example,

Lawrence, et al. (45) found that only 24 percent of

those surveyed would hire an NP, although 86 percent expressed approval of the concept (45).

Physician attitudes toward NPs are perhaps more

strongly influenced by their medical education experience than any other single factor. Medical education does not encourage delegation of patient-carerelated tasks to nonphysicians and emphasizes ultimate physician responsibility in all aspects of care.

Physicians may feel that by using NPs they will sacrifice quality of care and important elements of the

physician-patient relationship. As a result, physicians may be particularly reluctant to delegate tasks

to a large degree or to accept the NP as a professional

colleague (19,96).

In its review of studies on task delegation, IOM

concluded that while physicians who employed NPs

were satisfied with their performance, they were

“more disposed to delegate duties that are in the

realm of nursing practice and not in the realm of

medical practice” (105). While confident of the NP’s

ability to take medical histories, provide counseling,

and perform other routine tasks relating to primary

care, many physicians express hesitation in allowing

NPs to perform physical examinations or other more

technical procedures. In the past, pediatricians have

been the most receptive to NPs functioning in an expanded capacity, but the recent increase in the number of pediatricians and pediatric NPs, combined

with the declining birth rate, may alter this pattern in

the future (1).

Because exposure to team practice is a recent and

still limited innovation in medical education, older

physicians (particularly those in long-standing solo

private practices) are somewhat less likely than

younger ones to be receptive to NPs, Physicians in

group practices generally are more willing to employ

NPs than solo practice physicians. Several explanations are offered for this pattern, including the suggestion that members of group practices are more familiar with team practice and more willing to delegate tasks to gain time for other professional activities or for leisure (45,54).

Because of the reluctance of physicians in private

practice to employ NPs, most NPs practice in organized settings. As seen in table A-6, only 14.2 percent

of NPs surveyed by Sultz, et al. (100) were employed

in private physician practices.

Consumer acceptance of NPs is essential to the integration of NPs into medical services delivery. The

patient’s confidence in the NP’s professional competence, the quality of communication between patient and NP, and improved access to services due to

NP participation in the practice are key factors in

achieving consumer acceptance.

From the beginning, consumers have shown less

resistance than physicians to NPs. Studies on consumer acceptance reviewed by IOM show that patients seem to perceive little or no difference between

physicians and NPs once an ongoing relationship is

established (76). In fact, several studies have found

patients preferring NPs for many services previously

provided by physicians (41,48,53,57). Other studies

have reported that patients under the care of NPs

broke fewer appointments and complied more strictly with prescribed treatments than those of physicians (14,51,81,85). NPs tend to spend more time per

patient visit and place greater emphasis on counseling and education. These aspects of NP practice

enhance their attractiveness to patients.

As with physicians, consumer acceptance of NPs

increases with exposure to them. It is here that the

physician plays a critical role. The patient often uses

the physician’s attitude toward the NPs as a signal to

accept or reject NP services (68). Moreover, reports

of experimental projects introducing NPs noted the

necessity of assuring patients assigned to NPs that

such assignment would not restrict their access to the

physician. As a result, patient confidence in the

availability of the physician was generally sufficient

for them to receive the majority of their care from the

NP (17).

Obviously, acceptance by physicians and consumers is just as great an issue for PAs as for NPs.

Because of the differences in their training and skills,

one group may be preferred by physicians in certain

situations. Whereas the PA usually functions more

directly with the physician or as a physician substitute, the NP may bring a broader spectrum of services to a practice. This is an area which has yet to be

explored in depth.

Legal Restrictions

Since licensure is a State responsibility, each State

has legal jurisdiction to regulate the practice of health

professionals. As new professions emerge, they seek

recognition by the State. In such instances, the State

must act with little precedent or experience to guide

its actions. The lack of uniformity in State regulation

of NPs and PAs reflects their relatively recent introduction and the continued uncertainty about their

appropriate role in health services delivery. Moreover, as pointed out by CBO (18), changes in medical

practice legislation generally occur in consultation
30 . Backround Paper #2: Case Studies of Medical Technologies

Table A-6.—NPs by the One Employment Setting in Which They Spent Most of Their Time

as NPs and Type of NP Programa

Type of program

Certificate Master’s Total

Employment setting Number Percent Number Percent Number Percent

22

17

5

248

59

15

75

98

6

80

4

32

43

1

42

40

2

—

—

4

7

In-hospital practice. . . . . . . . . . . . . ‘- — --- .- . - - —

Patient unit . . . . . . . . . . . . . . . . .

Emergency room. . . . . . . . . . . . .

Ambulatory clinical practice . . . . .

Private practice. . . . . . . . . . . . . .

Prepaid group practice. . . . . . . .

Hospital-based clinic . . . . . . . . .

Community-based clinic

or center. . . . . . . . . . . . . . . . . .

Other ambulatory practice. . . . .

Nonhospital institutional setting .

School for mentally or

physically handicapped. . . . .

Grades 1-12, public school

system. . . . . . . . . . . . . . . . . . .

College health programs . . . . . .

Other non hospital institutional

setting . . . . . . . . . . . . . . . . . . .

Nonhospital community setting . .

Health department or

home health agency. . . . . . . .

Social services or agency . . . . .

Other nonhospital community

setting . . . . . . . . . . . . . . . . . . .

School of nursing . . . . . . . . . . . . . .

Extended care facility. . . . . . . . . . .

Other b 

. . . . . . . . . . . . . . . . . . . . . . .

Overall . . . . . . . . . . . . . . . . . . . . . 403 100.070 97 100.070 500 1OO.OO

/O

5.5%

4.2

1.3

61.5

14.6

3.7

18.6

23.1

1.5

19.9

1.0

7.9

10.7

0.3

10.4

9.9

0.5

13

12

1

69

12

5

27

23

2

1

1

8

6

1

13.4”/0

12.4

1.0

71.2

12.4

5.2

27.8

35

29

6

317

71

20

102

7.0 ”/0

5.8

1.2

63.4

14.2

4.0

20.4

23.7

2.1

1.0

1.0

116

8

81

4

32

44

23.2

1.6

16.2

0.8

6.4

8.8

8.2

1

50

0.2

10.0

6.2

1.0

45

3

9.2

0.6

1.0

1.7

1

2

3

1

1.0

2.1

3.1

1.0

1

2

7

8

0.2

0.4

1.4

1.6

with the medical profession. The requirements for

physician supervision, restrictions on functions such

as drug prescribing, and prohibition of independent

practice all reflect the influence of organized

medicine on this process.

In 1978, Miller and Byrne, Inc. (58) published a

survey of State legislation governing the practice of

NPs and PAs. Each State regulates NPs through the

State’s nurse practice act. In some States, NPs are

able to practice without significant changes in existing statutes. Although they perform functions

beyond that of traditional nursing, their expanded

role is considered an extension of nursing allowed by

the statute, rather than a significant departure requiring new regulations. In States that prohibited nurses

from engaging in diagnosis and prescription of treatment, NPs could not practice without new statutory

authority. The response of these States has been

either to replace previous statutes with new definitions of nursing roles or to amend existing law to accommodate expanded role nursing. The response of

some States has been to provide more open-ended

authority in recognition of evolving nursing roles.

For example, the California Nurse Practice Act states

that nursing is “a dynamic field . . . which is continually evolving to include more sophisticated patient care, ” and also recognizes “the existence of

overlapping functions between physicians and registered nurses” and permits “sharing of functions”5

(58). While States have generally recognized the participation of nurses in activities previously restricted

to physicians, they have maintained prohibitions

against nurses functioning independently in the medical sphere.

The PA, unlike the NP, represented a new type of

health professional previously not covered by State

law (58). For this reason, new statutory authority

was required in every State where PAs were allowed

to practice. Initially, States responded by expanding

physician delegator authority under the Medical

Practice Acts to allow PAs to work under physician

supervision. The majority of States, however, have
Case Studv #16: The Costs and Effectiveness of Nurse Practitioners ● 31

enacted regulatory statutes giving the State board of

medical examiners authority over training and employment of PAs. As with NPs, the laws regarding

PAs tend to vary from State to State. For example,

legislation in New Mexico, Ohio, and South Carolina

contains extensive lists of specific medical tasks

which PAs may or may not perform. In other States,

such as Oregon, where the laws are much less explicit, the PA may perform whatever tasks are permitted by the supervising physician. There is also

wide variation regarding the particular type of supervision required for PAs. Some States permit telephone consultation as a sufficient means of supervision while others also require the physician to establish written protocols and review all patient

records on a regular basis. Very few States require

direct “over-the-shoulder” supervision, but in remote

areas where the physician and the PA may be in different locations, the physician is often required to

regularly visit the facility where the PA works. When

the Miller and Byrne study (58) was published, four

States had no guidelines to regulate PAs.

The legal restrictions placed on NP and PA practice are a significant barrier to their integration into

medical delivery. Such restrictions can make it impossible for physician extenders to practice at a level

commensurate with their training. Moreover, the

lack of uniformity in State laws limits the mobility of

physician extenders. While all training programs

must meet minimum standards for accreditation, the

content of such programs tends to reflect the law of

the States in which they are located. While an NP or

PA trained in one State may be capable of performing authorized functions in other States, their specific

training experience may not fulfill licensing requirements outside their State of training. Although

this does not prohibit relocation, it does create a major disincentive. Moreover, since most physician extender training programs are concentrated on the east

and west coasts, it may be difficult to achieve a distribution of graduates from areas where they were

trained to other areas of the country where their services are most needed.

Reimbursement

Reimbursement remains a major obstacle to the expanded use of physician extenders. Insurers are generally reluctant to extend coverage to new service

providers because of either legal restrictions or desire

to control costs and to avoid encouragement of other

health workers who provide similar services from

seeking compensation (18,58). While some private

third-party payers support the concept of reimbursement for physician extender services, virtually none

provide payment.

Approximately half the States provide some type

of reimbursement for physician extender services

under their medicaid programs. In all cases, payment

is made to the supervising physician or institution.

Federal reimbursement under the medicare program

has allowed institutions to include physician extender

compensation in their calculation of reasonable cost

for reimbursement purposes. Federal payments for

primary care services provided by physician extenders, however, have been restricted by provisions

enacted before these new professions were established. In most cases, services traditionally, performed by physicians are not reimbursable under

Federal programs when provided by physician extenders (64). Under medicare part B, reimbursement

for medical services rendered by physician extenders

is restricted to those “furnished as an incident to a

physician’s professional services, of kinds which are

commonly furnished in physicians’ offices and are

commonly either rendered without charge or included in physicians’ bills” (213).6

In 1977, the Rural Health Clinic Services Act

(Public Law 95-210) waived such restrictions in the

medicare and medicaid programs for physician extenders practicing in certified rural health clinics

located in designated underserved areas. The Act

provides payment for physician extender services

even when not directly supervised by a physician at

all times. This allows such clinics staffed only by

physician extenders, with physician backup, to provide reimbursable primary care services to medicare

and medicaid beneficiaries. Payment is on a reasonable cost basis and is restricted to those physician extender services authorized under State legislation.

Because of variation in legal and reimbursement policies among States, the impact of Public Law 95-210

on each State will differ (105).

Changes in reimbursement policy, while significant, have come slowly and on a very limited basis.

The result has been to tie physician extender practice

to the supervising physician or institution. Because

most physician extenders are currently employed in

organized settings, reimbursement restrictions have

not prevented the growth of their professions. Without expanded employment opportunities in physician

private practices, however, physician extenders will

not be able to assume an important role in medical
32 ● Background Paper #2: Case Studies of Medical Technologies

care delivery. Current reimbursement restrictions

make such an expansion unlikely. Modifications of

current reimbursement policy could address this

problem. A number of questions including the scope

of services to be reimbursed, method of payment to

physician extenders in physician offices, level of payment for services that both physician extenders and

physicians can provide, payment levels in underserved v. adequately served areas, and the recipient

of payment for physician extender services must first

be resolved (64).

Practice With Physicians v.

Independent Practice

The functions of NPs are directly influenced by

their employment setting. NP training encourages independence, responsibility, and autonomy as important aspects of professional development. As a result,

NPs generally prefer employment settings which offer increased self-sufficiency and greater decisionmaking responsibility in patient care. Organized settings tend to offer less opportunity to meet these expectations, but because such settings are more receptive to hiring NPs, the major portion of NPs are

employed in them (1o00. NPs might prefer to work in

physician private practices or in independent practices, but the opportunities to do so are limited. The

major portion of physicians are in private solo or

group practices, and yet a 1976 survey by Sultz, et al.

(99) found only 14 percent of NPs employed in physician private practices. While the actual number of

NPs in independent practice is not known, the American Nursing Association estimates that there are

about 300 private independent NP practices (18).

For many NPs, employment in physician private

practices presents several perceived advantages over

less flexible institutional settings. In particular, group

practices which emphasize a “team” approach seem

to allow NPs increased participation in many aspects

of practice (11,12), However, physicians may be discouraged from using NPs in their private practices

because of legal restrictions or ambiguities and lack

of third-party reimbursement for NP services, Also,

the increase in the number of medical school graduates may further reduce physician interest in NPs or

PAs.

The experience of NPs in physician private practices varies considerably, since the physician determines the exact nature of their responsibilities. In

some situations, NPs may actively participate in

diagnosis and treatment of illness, provide counseling and patient education, and perform a wide range

of other duties. In other settings, however, the physician may be unwilling to delegate a broad spectrum

of tasks, and the functions of the NP may be limited

to more traditional nursing tasks (11,12).

As an alternative to their interest in employment in

physician private practices, a small number of NPs

have attempted to establish independent practices.

There are many difficulties in undertaking such practices. Initially, an independent practice requires a

substantial financial investment. Startup costs can be

$15,000 or more, and the NP must be prepared to

operate at a deficit until an adequate clientele can be

developed (2). Moreover, since in the limited cases

where third-party reimbursement is available for NP

services, the payment is made to the supervising

physician or institution, rather than directly to the

NP, virtually all independent practices must rely on

out-of-pocket payments from patients. As a result,

very few independent practices have attained financial self-sufficiency. Those that have been successful

usually have either been located in metropolitan

areas or have provided a particular service not widely available otherwise in the community, such as

home visits (2,110). However, more often NPs in private independent practice report that they must supplement their incomes through speaking engagements, teaching, and other nursing employment (2,4,

6,23,95).

In addition to serious financial problems, the appropriateness of independent practice by NPs is questioned by physicians, nurses, consumers, and policymakers. It has been noted that nurses may perceive

NPs as taking on a more dominant role, similar to

that of physicians, and therefore may be reluctant to

support independent practice (18). In one study, 73

percent of nurses and 2 percent of physicians felt that

the proper role for an NP is to practice with a physician (18). Since NPs’ independent practices would depend on physician referrals to establish a clientele,

the concerns expressed by physicians suggest that

such referrals generally will not be forthcoming.

Consumer reluctance to use independent NPs comes

from inherent resistance to any new provider, from

unfamiliarity with a nonphysician providing medical

services, and because, when given the choice, many

would continue to prefer a physician. Some independent NPs’ practices have waited several months

for their first patients (87).

Independent practices will not develop under existing characteristics of NP practice. As a result of current legal specification of the kinds of services NPs

can perform without the supervision of a physician,

the majority of NPs in independent practice provide

traditional nursing care rather than primary medical

care (50).
Since the introduction of NPs, there have been

some changes in licensure laws to allow them to practice in a manner more commensurate with their training. NPs have sought statutory changes which would

allow them to practice more broadly. In some cases,

States have responded to these efforts (e.g., California recently acted to allow nurses to become members of a medical corporation). ’ Whether or not

policy makers agree on the degree of independence to

be prescribed legally for physician extenders, a growing number support the position that reimbursement

policies should be revised to encourage NP and PA

employment. With the existing structure of health

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