MEDICARE NCENTIVE PAYMENTS 

IN HEALTH PROFESSIONAL 

SHORTAGE AREAS 

Do They Promote Access to Prima~ Care? 

-4 
EXECUTIVE SUMMARY 

PURPOSE 

To help determine whether Medicare incentive payments promote the Federal interest 

in improving access to primary health care in Health Professional Shortage Areas. 

BACKGROUND 

Ensuring access to primary care physicians is a national concern. The nation suffers 

from a shortage of primary care physicians, and some geographic areas are particularly 

underserved. Medical schools, State governments, nonprofit foundations, and the 

Federal government have responded to these shortfalls by designing programs to 

increase the supply of primary care physicians, particularly in undersexed areas. 

Since 1989, physicians who treat Medicare patients in Health Professional Shortage 

Areas (HPSAS) designated by the Department of Health and Human Services have 

been entitled to bonus payments. Increasing payments to physicians in underserved 

areas, it was believed, would have improved access to care in those areas. The current 

law makes physicians in all HPSAS eligible for bonuses of 10 percent of the amount 

paid for services. Spending for the Medicare incentive payment program has been 

increasing rapidly and reached $68 million in 1992. 

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

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

studies have raised questions about whether the incentives have any effect on 

physicians’ decisions to remain in or move to an underserved area. 

This study focuses on the effectiveness ~f Medicare’s HPSA incentive payment 

program as part of the larger Federal effort to improve access to primary care. We 

recognize that the incentive program’s authorizing legislation mandates payments to 

both specialists and primary care physicians in HPSAS. The widespread concern about 

shortages of primary care physicians, however, prompted us to examine how well the 

incentive payment program addresses that problem. 

Our findings are based on a survey of 497 physicians who recently received Medicare 

incentive payments and on a review of legislative history, regulations, and literature. 

FINDINGS 

A substantial amount of the Medicare incentive money has gone to physicians who 

provide little or no pnmaq care. 

Forty-jive percenl ($31 million) of [he Medicnre incentive money distributed in 1992 wenl 

to physicians who, according IO Federal definitions, are not prima~ care providers. 

i 
According to their own estimates, 74 percent of the specialists who received 

bonuses spend less than half of their time providing primary care sewices, and 

45 percent provide primary care services less than 10 percent of the time. 

Fourteen percent ($10 miliion) of the 1992 incentive money went to urban, hospital-based 

specialists. 

These physicians spend, on average, just 15 percent of their time delivering 

what they consider to be primary care. Because urban hospitals are attractive 

to specialists, providing incentives for specialists to practice there seems 

unnecessary and inconsistent with Federal priorities. 

Among primary care physicians, Medicare incentive payments rarely have a significant 

#ect on practice location deckiom. 

l%”ma~ care physicians WIZOreceived Medicare incentive payments rate them, on average, 

only sligh[ly to moderately importan~ in their [ocarion decisions. 

Only 30 percent rated the bonus payments as extremely or very important. 

Thirty-two percent rated them not at all important. 

Many physicians received on~ a small amount of Medicare incentive monq in 1992. 

The median incentive payment for 1992 for primary care physicians in rural 

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

Practice location determinants are often nonmoneta~, according COinterviewed physicians 

and published literature. 

Net income can be less irdluential in attracting physicians to communities than 

factors such as original hometown, climate, cultural activities, and the 

availability of medical facilities and colleagues. 

ii 
RECOMMENDATIONS 

In our draft report, we presented three options to address our findings: 1) eliminate 

the incentive payment program, 2) modify the program to target it more effectively to 

primary care, or 3) channel funds from the program to new or existing mechanisms for 

improving access to primary care. Since we produced our draft report, the President 

has proposed changing the program to provide larger incentives and to eliminate 

incentives for specialty services in urban areas in his Health Security Act. That 

proposal meets the objective laid out in our second option, Since the Health Care 

Financing Administration (HCFA) also concurred with this option and spoke of the 

President’s proposal as addressing the program’s deficiencies, we have altered our 

recommendation to include only the second option from our draft report. 

I?%eHeahh Care Financing Adminirrration should seek to modify the Medicare incentive 

payment program to (a~et it more effectively to pn”ma~ care. 

Modifying the Medicare incentive payment program would allow the payments to be 

better targeted toward primary care physicians and would create stronger incentives. 

COMMENTS ON OUR DRAFT REPORT 

We shared our draft report with and solicited comments from the Health Care 

Financing Administration (HCFA), the Public Health Service, the Assistant Secretary 

for Planning and Evaluation (ASPE), the Assistant Secretary for Management and 

Budget, the Assistant Secretary for Legislation, and the Physician Payment Review 

Commission. We received comments from HCFA and ASPE. We reproduce these 

comments and provide detailed responses to each in appendix B. 

We are pleased that HCFA concurred with our recommendation and after considering 

the options we presented in our draft report elected to seek to modify the Medicare 

incentive payment program to target it more effectively to primary care. We have 

eliminated the other options we initially presented. We have addressed HCFA’S 

technical comments as necessary. 

We are pleased that ASPE concurred with our recommendation and found our 

methodology sound. We have clarified our presentation as necessary to address 

ASPE’S concerns. We do not wish to propose the option to modify the HPSA 

designation as ASPE suggests. The HPSA designation is also used for other purposes, 

e.g., for placement of National Health Service Corps providers. Thus the ramifications 

of modi~ing the HPSA designation go beyond the scope of this report. 

... 

111 
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TABLE OF CONTENTS 

PAGE 

EXE~~ S-RY . . ..-. . . . . . . . .“ . . . . . 1 

~ODU~ON,,........... . . . . . . . . . . . . . . . . .. 4 . . . . . . ... . . . . . . .. 

F~~GS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

� Substantial payments tophysicians who provide little ornoprima~ . . care. .. .. .. .. .. 4

5 

� Minimal effect onprimag care physicians’ practice locatlondeclslons. .. .. . . . . . 8 . . . . . . . . . 

~cO_~A~ONS... . . . . . . . . . . . . . 9 

~W~oN~D~~REpORT . . . . . . . . . . . . . 

~PEND1~ A-1 . . . . . . ... . . . . . . . . . . . . . . 

A. Methodolo~ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1 

B: Detailed Comments andOIG Response . . . . . . . . . . . . . . . . . . . .. .. .. .. . . ... c-1 . . . . . . . . . . . . “ . . . . . .. 

C. Notes . . . . . . . . . . . . . . . . . . . . . . 
INTRODUCTION


PURPOSE 

To help determine whether Medicare incentive payments promote the Federal interest 

in improving access to primary health care in Health Professional Shortage Areas. 

BACKGROUND 

Ensuring access to primary care physicians is a national concern. By detecting and 

treating problems early, and by making proper referrals to specialists when necessary, 

primary care physicians can improve the health status of their patients while reducing 

total health care expenditures.l (Primary care physicians are defined here and in 

most other discussions as doctors in the fields of general or family medicine, general 

internal medicine, pediatrics, and obstetrics/gynecology .2) Given the promise of better 

health at lower cost, primary care physicians naturally play prominent roles in plans 

for State-level and national health care reforms 

The nation suffers from a shortage of primary care physicians, however, and some 

geographic areas are particularly underserved.4 Medical schools, State governments, 

and nonprofit foundations have responded to these shortfalls by designing programs to 

encourage more medical school students and graduates to choose primary care as their 

field of practice and to locate their practices in traditionally underserved areas. 

The Federal government, through the Department of Health and Human Services 

(HHS), has also signaled its desire to improve access to primary care. The National 

Health Service Corps, Area Health Education Centers, Community and Migrant 

Health Centers, and Primary Care Cooperative Agreements are among the major 

programs operated with this goal in mind. 

To target support for primary care where the support is most needed, HHS defined 

and identified Health Professional Shortage Areas (HPSAS).5 These are counties, 

census tracts, or other geographic areas where the ratio of population to primary care 

physicians is at least 3,000 to I.b The original purpose of defining HPSAS was to 

create a list of possible placement sites for physicians obligated to serve in the 

National Health Service Corps.’ Since 1989, however, HPSAS have had an additional 

meaning. Physicians who treat Medicare patients in those areas are now entitled to 

bonus payments. The payments comprise a percentage of what the physicians 

otherwise receive through Medicare Part B reimbursement policies. 

The Medicare bonus payments, as first conceived, were intended to address low 

prevailing payment rates to primary care physicians in undersexed, rural areas. 

Increasing the payments, it was believed, would have improved access to care in those 

areas. In its version of the Omnibus Reconciliation Act of 1987, the House of 

Representatives proposed that the bonuses go only to primary care physicians in rural 

—. 
areas with the most severe shortages. It set the bonus rate at 10 percent.g But the


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


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


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


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


the House of Representatives passed legislation that would have restricted the


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


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


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


shortages .*1


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


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


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


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


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


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


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


capped.


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


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


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


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


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


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


in or move to an underserved area.


This study examines the efficacy of Medicare’s HPSA incentive payment program as


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


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


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


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


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


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


physicians, and we do so for three reasons.


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


care while limiting support for specialty care.14 Second, the administration’s efforts


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


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


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


is because an area’s status as a HPSA depends entirely on the representation of


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


specialists.


2

If the Medicare incentive payment program is to be effective and efficient in 

improving access to primary care in undeserved areas, it will have to satisfy two 

conditions. First, it must direct its resources to physicians who provide primary care. 

Second, the payments Imust be an important factor in influencing these physicians to 

establish or maintain practices in underserved areas. To determine whether these 

conditions are being satisfied, we surveyed recent recipients of Medicare incentive 

payments. We learned what types of physicians are receiving payments, where they 

are practicing, and how important the payments are in their practice location 

decisions. 

METHODOLOGY 

We selected a random sample of 497 physicians from the records of 10 Medicare 

carriers. These physicians, according to carrier records, received Medicare incentive 

payments for the quarter ending December 31, 1992.17 Each was mailed a 

questionnaire, and 405 (81.5 percent) responded. From the carriers, we obtained 

payment histories and other information for all 497 physicians. We also conducted 

telephone interviews with 33 physicians. To supplement the information obtained 

through this survey, we reviewed literature on the subject of access to primary care in 

undersexed areas. Details of our methodology appear in appendix A. 

We conducted this inspection in accordance with the @ta/ity S[ondards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

SCOPE 

This report focuses on Medicare incentive payments for which only physicians are 

eligible. Physicians include cioctors of medicine, osteopathy, podiatry, and optometry. 

Therefore, our discussion of primary care includes cn-dy physicians and not providers 

such as nurse practitioners, physician assistants, and other nonphysician providers. 

The role that these providers can play in improving access to primary care is discussed 

in our May 1993 inspection report, “Enhancing the Utilization of Nonphysician Health 

Care Providers” (OEI-01-90-02070). 

3

FINDINGS


A SUBSTANTIAL AMOUNT OF THE MEDICARE INCENTIVE MONEY HAS 

GONE TO PHYSICIANS WHO PROVIDE LITTLE OR NO PRIMARY CARE. 

Forty-five percent of the Medicare incentive money didribuled in 1992 went to physicians 

who, according to Federal definitions, are not pn”maty care provkiem 

Half (50 percent) of the providers who received HPSA incentive payments in late 1992 

are specialists, and they received about half of the money distributed that year 

(45 percent), or about $30.5 million.; The percentage of incentive money going to 

specialists was greater in urban areas (54 percent) than in rural areas (35 percent) .18 

Incentive payments made to specialists could still help improve access to primary care 

if the specialists were providing primary care, but this is not generally the case. 

According to their own estimates, 75 percent of specialists spend less than half their 

time providing primary care services.lv Forty-five percent spend less than 10 percent 

of their time on primary care. In contrast, 97 percent of primary care physicians 

spend half their time or more delivering primary care, and 76 percent spend at least 

90 percent of their time on prima~ care. 

Physicians who spend less than 10 percent of their time on primary care received one 

quarter (26 percent) of the incentive money in 1992. Physicians who spend 90 percent 

or more received 44 percent. 

Fourteen percent of the 1992 incentive money went 10 urban, hospi~al-based specialks. 

Although they are designated as areas with too few physicians, HPSAS can contain 

large and prestigious hospitals. Institutions such as Brigham and Women’s Hospital in 

Boston, Mt. Sinai Medical Center in Cleveland, and Buffalo General Hospital are 

located in HPSAS. This is because HPSA designations are made completely without 

reference to the presence of either health care facilities or physicians not in primary 

care fields. 

These hospitals’ facilities, prestige, and large-city locations make them attractive to 

specialists who practice primarily in hospitals. For these physicians, Medicare bonus 

payments seem to be more of a windfall than an incentive. Increasing payments to 

physicians who provide specialty services in hospitals alongside hundreds of other 

specialists seems inconsistent with efforts to encourage physicians to provide primary 

care in areas with few other doctors. 

*We provide confidence intervals for our estimates in appendix A. 

4 
Furthermore, urban hospitals. because of their reputations and convenient locations, 

attract patients from wide areas. Therefore, many of the people treated by physicians 

who practice in urban HPSA hospitals probably do not even live in HPSAS themselves. 

The law does not require that the patients of physicians receiving Medicare incentive 

payments be residents of HPSAS, or that HCFA record whether or not these patients 

live in HPSAS. 

In extreme examples, neither the patients nor the physicians spend most of their time 

in HPSAS. One of the physicians in our sample has a private practice in a wealthy 

New Jersey suburb. On rare occasions, when his patients require services unavailable 

in the suburban hospital, he will admit them to Cooper Hospital in nearby Camden. 

Cooper Hospital, a 400-plus bed, university-affiliated institution, is in an urban HPSA. 

For the services he provided to his suburban patients in Camden, this physician 

received, consistent with Federal law, $1,500 in incentive payments in 1992. 

The HPSA incentive program paid approximately $9.4 million in 1992 to specialists 

who spend most of their time when they are in HPSAS providing services in hospitals. 

These physicians spend, cm average, just 15 percent of their time delivering what they 

consider to be primary care. Thirty-seven percent of them provide no primary care at 

all. 

Furthermore, incentive payments to urban, hospital-based specialists are higher on 

average than payments to other physicians. Urban, hospital-based specialists received 

median payments for 1992 of $1,425, compared to $656 for all incentive payment 

recipients. Although it can be argued that the general lack of physicians in rural 

areas20 justifies paying bonuses to specialists in rural hospitals, paying higher-thanaverage incentive payments to urban, hospital-based specialists seems inappropriate. 

AMONG PRIMARY CARE PHYSICIANS, MEDICARE INCENTIVE PAYMENTS 

RARELY HAVE A SIGNIFICANT EFFECT ON PRACTICE LOCATION 

DECISIONS. 

We established in the previous section that much of the Medicare incentive money 

goes to physicians who provide little or no primary care. We turn next to the question 

of whether money that does reach primary care physicians is effective in encouraging 

them to practice in underserved areas. Statistics presented in this section are taken 

from the responses of the 262 physicians in our sample who meet the Federal 

definition of primary care physicians (see the Introduction). Because we realize that 

some specialists provide primary care, we tested an alternative definition of primary 

care physicians. We conducted the same analyses for the group of physicians in our 

sample who say they spend at least half their time delivering primary care. The results 

of those analyses were very similar to the ones presented below. 

5

I?n”rnmycare physicians who received Medicare incen~ive payments rate theq on average, 

slight~ to moderately important in their iocah”on deckion.s. 

We asked incentive payment recipients, “How important are the bonus payments in 

your decisions about where to practice?” They recorded their answers on a 5-point 

scale, as shown in figure 1 below. Only 30 percent rated the bonus payments as 

extremely or very important. 

Figure 1 

Importance of Payments to Primary Care Physicians 

2 (Very) (18%) I 

3 (Moderately) (21%) (Extremely) (13%) 

4 (Slightly) 17%) 

at All) (32?40) 

N-208


Sour- OIG Surveyof PhysiciansReceivingMedicareIncentivePayments,Spring1993


Numbersdonotaddto 1ob%ortofiguresintexi becauseofroundingerrors.


I 

The mean rating was 3.37, which falls between slightly and moderately important. 

The numbers presented above probably exaggerate somewhat the true importance of 

the incentive payments. Several of the physicians who rated the payments at least 

slightly important also indicated that they were unaware, prior to receiving our 

questionnaire, that Medicare offered incentive payments to physicians in HPSAS.21 It 

seems unlikely that these physicians could truly attach any importance to the payments 

without knowing of their existence. Also, when we intemiewed physicians about the 

written responses they provided to us, they frequently indicated that they had 

overstated the importance of the incentive payments. 

6

A study commissioned by HCFA predicted that bonus payments would be more 

effective in retaining physicians who already practice in HPSAS than in attracting new 

physicians to HPSAS.Z2 Yet primary care physicians who have practiced in their 

current locations since before the incentive payments began found the payments less 

important (mean rating = 3.54) to their decisions than did their counterparts who 

arrived since the payments started (mean rating = 3.05). Physicians with previously 

established practices represent 65 percent of our primary care subsample, and the 

average length of practice among all primary care physicians is 11 years. 

Many physicians received only a small amount of Medicare incentive money in 1992. 

The mean 1992 incentive payment for physicians in our sample was $2,375. But the


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


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


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


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


seem insignificant in comparison with physicians’ average incomeszs and therefore


are unlikely to have major effects on physicians’ location decisions.


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


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


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


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


$1,723).


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


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


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


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


Practice location determinants are often nonmonetary, according to interviewed physicians 

and publkhed literature. 

The apparently low importance attached to incentive payments by physicians in our 

sample is consistent with prior research on location decisions. According to research 

reviewed by the HCFA-commissioned study, net income can be less irdluential in 

attracting physicians to communities than factors such as original hometown, climate, 

cultural activities, and the availability of medical facilities and colleagues.zs Such 

factors are also more important than income in physicians’ decisions to stay or leave 

rural areas.26 

The importance of Sociill and cultural factors was reinforced in conversations with the 

14 primary care physicians in our telephone interview subsample. The reasons they 

mentioned for choosing their current practice location included presence of family, site 

of training, and need for physicians in their areas. None indicated that they would 

stop practicing in their HPSAS if the incentive payments were discontinued. 

7

RECOMMENDATIONS


In our draft report, we presented three opticms to address our findings: 1) eliminate 

the incentive payment program, 2) modify the program to target it more effectively to 

primary care, or 3) channel funds from the program to new or existing mechanisms for 

improving access to primary care. Since we produced our draft report, the President 

has proposed the Health Security Act. As part of that proposal, the Medicare 

incentive payment program would be changed to provide twenty percent bonuses to 

physicians providing services in HPSAS and would eliminate bonuses for specialty 

services in urban areas. The increase in the size of the payments could make them 

more effective incentives. The elimination of incentives for specialty services in urban 

areas could more effectively target the program to primary care. Because HCFA 

concurred with this option and spoke of the President’s proposal as addressing the 

program’s deficiencies, we have altered our recommendation to include only the 

second option from our draft report. 

The HeaUh Care Financing Administration (HCFA) shouid seek 10 modifi ~he Medicare 

incentive payment program to ta)get it more efleclively 10 prima?y care. 

As we noted in the background section, the current statute authorizes Medicare 

incentive payments to both specialists and primary care physicians in HPSAS. 

However, current Federal priorities call for budgetary restraint and emphasis on 

primary care. Meanwhile, Medicare’s HPSA incentive payment program is directing 

millions of dollars to providers of specialty care. The money that it does provide to 

primary care physicians seems to have only slight importance in their decisions to 

practice in underserved areas. Thus, the program appears inconsistent with current 

Federal interests. 

The incentive program as currently designed has two fundamental flaws that limit its 

effectiveness in enhancing access to primary care. Bonuses are being given to many 

physicians who are not providing primary care, and they are not strong influences on 

physicians’ locations decisions. These flaws suggest that (1) the payments should be 

targeted more specifically, and (2) they should be modified to create stronger 

incentives. Because higher payments seem to have more influence on physicians, the 

program might be more effective if the payments were increased. Payments to some 

physicians could be increased without adding to overall expenditures if payments were 

withdrawn from other physicians. 

One option for increasing payments is to raise the bonus percentage. The bonus 

could be set, for example, to 15 or 20 percent of standard Part B payments. There 

are many options for limiting payments in order to offset payment increases. one 

would be to confer eligibility on only those physicians in HPSAS who were recognized 

by HCFA as primary care providers. Another would be to make all physicians in 

HPSAS eligible, but to provide incentive payments only when they provided what 

HCFA considered to be primary care services. A third would be for HCFA to identify 

8 
Medicare enrollees who reside in HPSAsand to allow incentive payments for 

physicians only when they treat HPSA residents. 

9 
COMMENTS ON THE DRAFT REPORT 

We shared our draft report with and solicited comments from the Health Care 

Financing Administration (HCFA), the Public Health Service, the Assistant Secretary 

for Planning and Evaluation (ASPE), the Assistant Secretary for Management and 

Budget, the Assistant Secretary for Legislation, ,

lnd the Physician Payment Review 

Commission. We received comments on our draft report from the Health Care 

Financing Administration (HCFA) and the Assistant Secretary for Planning and 

Evaluation (ASPE). We reproduce these comments and provide detailed responses to 

each in Appendix B. 

We are pleased that HCFA concurred with our recommendation and after considering 

the options we presented in our draft report elected to seek to modify the Medicare 

incentive payment program to target it more effectively to primary care. Because they 

selected this option and because the President’s Health Security Act includes a 

proposal to make improvements to the program, we have eliminated the other options 

we initially presented. We have addressed HCFA’S technical comments as necessary. 

We are pleased that ASPE concurred with our recommendation and found our 

methodology sound. We have eliminated the option about which ASPE had concerns, 

for the reasons noted above. We do not wish to propose the option to modify the 

HPSA designation as ASPE suggests, because the HPSA designation is used for other 

purposes. We note that our Management Advisory Report “Design Flaws in the 

Medicare Incentive Payment Program,” (OEI-01-93-OO05 1), issued in June 1994, 

discusses this issue. We have clarified our presentation as necessary to address 

ASPE’S other concerns. 

10

APPENDIX A 

METHODOLOGY 

Our sources for this report included: (1) responses to a mail survey of a sample of 

HPSA incentive payment recipients, (2) informaticm about those recipients supplied by 

Medicare carriers, (3)telephone inte~iews with asubsample of incentive payment 

recipients, and (4) a review of written material including laws, committee reports, . ., 

regulations, HHS memoranda, and periodical literature. In this appendix we describe 

each of our data collection techniques and explain the analyses we performed. 

MAIL SURVEY 

To select a representative sample of incentive payment recipients, we obtained from 

the Health Care Financing Administration (HCFA) a list showing the distribution of 

incentive payments for the quarter ending September 30, 1992. The list showed, for 

each of the 58 Medicare carriers, the total amount paid in Medicare incentives for 

that quarter and the total number of physicians receiving incentive payments. We 

excluded from that list the carrier for the Railroad Retirement Board (RRB), to avoid 

duplicate counting of physicians who submit claims to both that carrier and the carrier 

in their home State. 

Subsequently, we employed a two-stage Rao-Hartly-Cochran sampling technique27 to 

randomly select ten carriers and approximately 50 physicians* within each carrier for 

a total of about 500 physicians. At the first stage, we used the software Rats/Stats 

from the DHHS Office of Inspector General, Office of Audit Semites, to randomly 

assign the 57 carriers into 10 groups. This produced three groups of five carriers and 

seven groups of six carriers from which the software selected a carrier with probability 

proportional to size. Size was measured by the number of HPSA physicians in the 

carrier according to the list provided by HCFA. The ten carriers and their probability 

of selection appear in the table below. 

*When we selected our sample from the carriers, we did not know whether the 

sample would consist entirely of physicians, even though only providers of physicians’ 

services are eligible for incentive payments. When reviewing a sample of 1991 

Medicare claims associated with HPSA bonus payments, we discovered a number of 

claims which used provider specialty codes resemed for nonphysicians, such as 

laboratories and medical equipment suppliers. As it turned out, however, all but one 

of the providers in our sample were either physicians --doctors of medicine, osteopathy, 

podiatry, and optomet~--or facilities employing physicians. The one exception was a 

physician assistant. For clarity’s sake, we refer to all sampled providers as physicians. 

A-1 
r 1 

1State (Carrier) ~ Number of Number of , ~ Probability of ~ Probability ~ 

I Bcmus- Bonus- Selection ~ of ; 

i Receiving Receiving ~ Within Group i Selection I 

~ Physicians in Physicians in t I Overall I , Group’ Carrier ~ 

1 Alabama (Blue 2,796 834 i 2+-+ 

Shield) I 

, \ I 

Georgia (Aetna) I 4,061 1,340 i 33.0% 6.4% \ — 

Idaho (Equitable) ! 799 71 8.9% 0.3~G A


Indiana 2,581 317 12.390 1.5% I


(AdminaStar


Federal) 1


New Jersey (Penn. ~ 1,584 987 , 62.3% 4.770 1 

‘ Blue Shield) I \ 1 f 

Western New York ~ 1,921 895 t 46.6% 4.376 , 

(Blue Shield) 1 I 

) 

Ohio (Nationwide) 2,011 1,007 1 50.0%	 ~ 4.8YG ~ I 

Puerto Rico (SSS) I 1,259 ‘ 706 56.1% I 3.4% 1 

Texas (Blue Shield) 2,246 ~ 1,145 51.0% ~ 5.570 I


[ West Virginia 1,727 ‘ 436 25.2% i 2.17G


~ (Nationwide-Ohio) I


‘For quarter ending September 30, 1992.


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


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


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


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


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


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


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


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


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


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


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


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


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


A-2

~———” 

~i Useable \ Respons] 

I ~ Universe’” I

\ ‘~~~~e \ Responses (%) ~ 

carrier 

735 

1 

; 42 \ 34 i 81 

:7 

Alabama I 37 ~ 74 

l,~~s \ 50 

Georgia \

I 73 

,

I 47 ~ 44 94 

Idaho \ 83 

I 320 ; 53 \ 

44 

Indiana 1 45 ! 88 

917 ; 51 

New Jersey 46 90 

863 51 

Western New \ I 

York 

954 ! 50 \ 36 ~ 72 

ohio 

458 

I 

\ 51 33 { 65 

puerto Rico , 44 i S8 

Texas I ~,066 i 50 

: ; I 81 ! 

I 414 \ 52 \ 42 

West Virginia I 405 ~ 82 

I 

‘ 6,908 1 497 

Total 

aForquarter ending December 31, 1992. 

bUniverse and sample sizes reflect adjustments to exclude 11 physicians 

Seven originally selected but later determined by the carriers to be ineligible for the of these physicians were in Alabama, 

incentive payments they received. Idaho, New York, and West Virginia. 

and there was one each in Georgia, 

Most of the provider numbers selected corresponded clinic, to hospital, individual orother physicians. multiple-When 

they corresponded instead to a group practice, 

physician setting, we telephoned the provider and obtained the names of physicians 

within the group or institution at random. 

We mailed a questionnaire and cover letter to each selected physician between March We sent a follow-up letter and replacement questionnaire to 

16 and April 6, 1993. The questionnaire is reproduced at the end of this 

nonrespondents on April 16. 

appendti, along with unweighed response frequencies. 

We accepted replies to our survey until June 11, 1993. The response rates we 

achieved are displayed in the table above. 

INFO~TION FROM CARR~RS 

From each of the 10 carriers in our sample, we requested specialty, the following total amount informationpaid 

for each of the physicians selected by random sampling: 

by Medicare excl~tding HPSA incentive payments for CYS 198S- 1992, total urban 

HPSA incentive payments for calendar years 1991-1992, total rural HPSA incentive 

A-3 
payments for CYS 1989-1992. and whether the carrier had information indicating that


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


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


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


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


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


For timeliness’s sake, we did not conduct tests to determine the validity of this


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


analyses necessaty for the objectives of this study.


TELEPHONE INTERVIEWS


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


physicians’ experiences with the incentive payment program and to compare


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


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


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


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


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


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


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


interpretations of physicians’ responses.)


DOCUMENT AND LITERATURE REVIEW


The written materials we reviewed included the following: 

� Bills introduced during the 100th through 103rd Congresses; 

� Regulations published by the Health Care Financing Administration (HCFA) 

and Public Health Service (PHS); 

� Memoranda from HCFA and the Office of Inspector General’s Office of 

Investigations and Office of Audit Services; 

� Articles on access to primary care and physician reimbursement published in 

medical journals and weekly newspapers. 

ANALYSIS OF QUESTIONNAIRE AND CARRIER DATA 

Weighting of resporwes 

The responses were weighted in accordance with the Rao-Hartley-Cochran sampling 

method. This allowed us to make projections to the universe from which the sample 

was drawn, i.e., recipients of incentive payments nationwide. 

A-4

Categorization of incentive payment recipien~r into specialir~r and prima~ care physicians 

The generally accepted definition of primary care physicians includes general and 

family practitioners, internists, pediatricians, and obstetriciardgy necnlogists. But not all 

physicians in these specialties deliver primary care , and physicians in other specialties 

may deliver a good deal of primary care. Furthermore, physicians’ specialties can be 

self-designated and may change over time. The Medicare carriers’ records of 

physicians’ specialties are not always accurate. 

With these difficulties in mind, we did our best to sort the physicians in our sample 

into primary care physicians and specialists. We categorized a physician as a primary 

care physician if both of the following conditions were met: (1) either the carrier’s 

records or the physician’s questionnaire response showed the physician’s field as one 

of the five mentioned in the preceding paragraph; and (2) the physician did not 

answer “No” to the question, “DO you consider yourself to be a primary care 

physician?” 

By allowing either the carrier’s records or the physician’s responses to identify primary 

care physicians, we avoided mischaracterizing physicians as specialists. For example, 

carrier records might show “internal medicine” for a physician who considered herself 

to practice “geriatrics,” or carrier records might show “clinic” when the physician we 

chose within the clinic might be a family practitioner. In both of these cases, our 

method would include the physicians as primary care physicians unless the physicians 

indicated that they were not so. 

As a check on this assignment procedure, we also divided physicians in our sample 

into primary care physicians and specialists based on the amount of time they reported 

spending on what they considered to be primary care services. We arbitrarily selected 

so percent of the physici~ns’ time as the dividing line between the two groups. The 

analyses we conducted using this definition showed essentially the same results as 

those using the definition explained in the two preceding paragraphs. 

Calculation of individual bonuses 

The amounts paid to physicians in our sample as incentives come from carriers’ 

records. We had to make adjustments to some of the figures provided by carriers 

because they represented payments made to groups of physicians, such as group 

practices or clinics, rather than to individual physicians. 

To compensate, we divided the total incentive amount paid by the number of 

physicians per provider number, as reported by respondents. So if the carrier showed 

an incentive payment of $20,000 to a group practice and the physician we chose from 

within that group indicated that the group contained 20 physicians, we set the amount 

paid equal to $1,000. If the provider number did not correspond to an individual 

physician and the physician we selected from that provider did not indicate the 

A-5

number of physicians using that provider number, we considered the incentive amount 

to be missing and excluded it from analysis. 

Sample sues for statistics presented 

Some of the statistics presented in the report apply to our entire sample of 497


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


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


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


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


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


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


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


providing the information in question.


ESTIMATES AND CONFIDENCE INTERVALS


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


other than median payment amounts and proportions of respondents choosing


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


as shown in the table below:


statistic 

I


( Point Estimate 9070 Cmfidencx?interval


Proportion of incentive recipients who are specialists 

! 

49.8% 44.7% - 54.9’%0 

Proportion of incentive money that went to specialists 1 

I 45.4% 34.190- 56.77c> 

Proportion of incentive money that went to specialists in urban areas 

1 53.570 35.2% - 71.89Z0 

Proportion of incentive money that went to specialists in rural areas 

I 35.2T0 22.0% - 48.4% 

Proportion of specialists who spend less than half their time on primary care 

I 

I 74.1% 67.l% - 81.l~o 

Proportion of specialists who spend less than 10% of their time on primary care 

I 

I 44.5% 33.2% - 55.8% 

Proportion of prima~ care physicians who spend at least half their time on primary care 

I 97.070 94.9% -99.170 

(continued) 

A-6

Statistic —— ~– Point Estimate ~ 90% Cmtfidencz Internal 

Proportion of primary care physicians who spend at least 90% of their time on primary care 

I 

77.5% I 71.9% - 83.1% 

Proportion of incentive money that went to physicians spending less than 10% of their time on 

primary care 

I 

25.7% ~ 9.6% - 41.8% 

Proportion of incentive money that went to physicians spending at least 90% of their time on 

primary care 

) 

43.s70 32.3% - 55.3% 

Proportion of incentive money that went to urban, hospital-based specialists 

13.8% 3.8% - 23.8% 

Proportion of time spent on primary care by urban, hospital-based specialists I

Ii , 15.3% 6.4% - 24.2% II 

Proportion of urban, hospital-based specialists who provide no primary care , 

37. 1%. 1 26.7% - 47.55% 

Mean	 importance rating of primary care physicians (PCPS) 

3.37 3.23-3.54 

1 

Mean importance rating for PCPS with previously established practices 

1 3.54 3.35-3.73 

I 

Mean importance rating for PCPS with new practices 

3.05 I 2.82-3.28 

Proportion of PCPS with previously established practices 

64.7% ! 56.8+%-72.670 

Mean length of practice in current location for PCPS (in years) 

10.5 8.8- 12.2 

Mean incentive payment to PCPS 

) S2,375 I $1,777-$2,973 

Mean incentive payment to PCPS with high importance ratings I 

\ $3,832 $2,610-$5,054 

Mean incentive payment to PCPS with low importance ratings 

$1.723 $1,102-$2,344 

A-7

QUESTIONNAIRE 

Following are the questions asked of physicians in our survey, along with unweighed 

frequencies and means of their responses: 

W$ich of the following best describes you? (If you bill A4edicore using nlore than one provider number, 

answer with respect to the provider nun[her printed on the /ques(ionnoircj. ) 

~ Percentage 

Physician (SO1OPractice) ~~() 55.6 

Physician (Group Practice) 136 34.3 ,

I 

Supplier 11 2.8 

Institution I 5 1.3 

Laboratory I 1 

1 

0.3 

Other 13 

1 [ 5.8 I 

Total 396 100.0 J 

If you circkd group practice, how muny physicians ore in your group? 

N Mean Standard Minimum Maximum 

~ Deviation ~ 

352 3.5 ] 8.4 1 85 —-. . .—.— 

Note: We assigned the number 1 to physicians who circled “Physician (Solo Practice).” 

A-8

--

W%at is your principal speciidly? 

Family Practice 

Internal Medicine 

General Practice 

General Surgexy 

Diagnostic Radiology 

Podiatry 

Cardiology 

Optometry 

Ophthalmology 

Orthopedic Surgery 

Obstetrics/Gynecology 

Anesthesiology 

Urology 

Psychiatry 

Chiropractic 

Emergeney Medicine 

Otolaryngology 

Gastroenterology 

Pathology 

Physical Medicine 

Neurology 

Dermatology, Pulmonary 

Disease, Nephrolo~, 

Rheumatology, 

Frequen~y 

1“1 - 62 

I 47 I 11.6 

I 

31 1 7.7 

I , 

I 19 I 4.7 

~ 18 4.4 

I 16 

I 

4.0 

I 14 

,

I 3.5 

I 10 2.5 

( 

9 2.2 

8 1 2.0 

7 1.7 I 

I 

I 

7 —— 

I 

— 1.7 _— 

I 6 I 1.5 

I 

6 , 1.5 

I 5 I 1.2 

4 1.0 I 

4 1.0 I 

I 4 1.0

1 4 1.0 

1 I

I 3 

(

( 

0.7

~ 2 each 1 3.0 total 

I 

I 

1 

Hematology/Oncology, and 

Medical Oncology I 

Neurosurgery, Plastic Surgery, 1 each 1 2.0 total 

Geriatrics, Vascular Surgery, 1 

Hematology, Radiation i 

Oncology, Physician Assistant, 

and Other I 

Total 1 405 100 

A-9


1 
Are you boord elig”bleor board c[]rti/7cdin thor speci[tlly? 

I 

) Frequency Percentage 

Yes 329 ( S2.7 

1 A 

No I 69 I 17.3 r ! 

Total 1 39s ! 100.0 11 

Do you consider yourself to he o primmy care phy.sicion? 

! Frequen~y Percentage 

Yes I 2s1 70.6 

I I 

No I 117 29.4 

Total 

I

! 398 I 100.0 

About what percentage of your po[ien!-care ho[ws do you spend delivering what you consider to be prirnaiy 

care? 

In what year were you born? 

N Mean Standard Minimum I Maximum 

Deviation \ 

[ 

392 ; 1946 I 10.5 1 1915 1966 

Have you ever been a menlber of the Notional Health Service Corps? 

1 Frequen~y Percentage 

Yes I 21 I 5.4 

1 

No 367 94.6 

I 

L Total 388 I 100.0 

About what percentage of your pmients ore insured by Medicare? 

A-10

Do you accept pntienrs on Medicaid? (Note: excludes physicians from Puerto Rico, which has an unusual 

Medicaid program.) 

I ( I 1’ I 

1 Frequency Percentage I 

( I


\ Yes 349 I 94.1 I


I Total I 371 100.0 ~ i 

If yes, about what percentage of your potients ore insured by Medicaid? (See note to previous question.) 

I I T 

N Mean ~ Standard ~ Minimum Maximum ~ 

Deviation ~ v ~ 327 19.4 16.7 o 90 

Do you accept patients without heollh insurance? 

I 

Frequency 1 Percentage 

Yes 393 97.5 

No 10 2.5 

Total 403 100.0 

If yes, about what percentage of your patients are uninsured? 

r-y---­ , Mean 

346 13.7 

Were you aware, before receiving this xurvq, 

provided within HPSAS? 

r 

!! 

~ 

‘1 Yes 

No , 

Total 

, 

Standard ~ Minimum Maximum 

Deviation ! 

I 

12.4 I 0 I 75 

that Medicnre ojjlered incentive payments for selected services 

Frequency Percentage 

305 75.9 

97 24.1 

402 100.0 

A-II 

I 
Were you aware, before receiving (his sunwy, thar you recmt[y received an incentive payment fkorn 

Medicare? 

Frcq ucncy Percentage ~ 

Yes 236 I 71.9 , 

No 112 I 28.1 1 

Total I 

I 398 I 100.0 

How many years have you practiced within the bound flries oJ”a HPSA ? (If you practiced {here before the 

area was designated as a HPSA, include fhose years. If you practice in more than one HPSA, answer with 

respecr to the HPSA in which you have prncticed the longest. ) 

1 I I 

N Mean Standard ~ Minimum ~ Maximum ~ I Deviation ! -~ ~ 

376 I 

\ 10.6 ~ 9.4 o 

I 

42 

In 1992, about what percentage of your working hours did you spend wifhin a HPSA ? 

r 

N Mean Standard	 I Minimum Maximum 1 

I I Deviation I 1 

362 70.7 i 37.4 0 100 

Within the HPSA(S] where you practice, in which of the following settings do you spend nzos[ of your 

working hours ? 

Private Office 

Hospital 

Nursing Facility 

IIOther 

More Than One 

Total 

I 

Frequency 1 Percentage 

I 215 I 54.7 

I 87 , 22.1 

I 4 1 1.0 

I 1 

13 3.3 II 

Response 34 8.7 

1 

393 I 100.0 

About what percentage of your total 1992 revenues (Medicare and non-Medicare) did the HPSA-related 

incentive pflyntents constitute? 

We discarded this question, because a large number of respondents either did not know or gave figures 

higher than 10 percent. Ten percent is the maximum possible response to this question, and that 

number would only apply to physicians whose income came entirely from Medicare. 

A-12

How important ore the bonux paynzcn[s in your decisions about w’here[o practice? 

, 

Frequency I Percentage ——. — ———— —+ ‘ 

Extremely (1) 

Very (2) 

Moderately (3) 

Slightly (4) 

Not at All (5) 

Total 

?)9 10.0 -----1 

63 16.1 

78 19.9 

) 

77 1 19.7 

134 ~ 34.3 

391 I 100.0 

I 1 

N~ Mean ~ Standard ~ Minimum ~ Maximum 

I Deviation 

391 ??.5 1.4 1 5 

A-13


II 
MAIL SURVEY INSTRUMENT 

A-14 
following settings YOU 

-~g *U 1 &ou@ 7 ~~e ~oe ~ de prfldi%i.f2,allfOCti~ d & p-.


Which of the following best describti you? (Circle one. If you.bill Medicare USUQ? 

more than one provider number, answer with respectto the provder number P~t~ on 

he revuse side of the page) Institution Laboratory 

Supplier 

?hysician (Solo Practiu) ~ther(~pec~fi~ 

Physician (Group Practice) 

If you circld group practice, how many physicians are in your group? ~ NO 

What is your principal specialty? 

YES NO 

Are you board eligible or board certified in that specialty? 

Do you consider yourSelf to be a primary care physician? 

About what per~nmge of your patient-are hours do you spend delivering what you 

consider to be primaq care? 

In what year were you born? 

Have vou ever been a member oi the Nationai Health Service Corps? 

WS No 

About what percen~ge of your patiens are insurd by Mediare? 

Do you aapt patien~ on Mediaid? ws NO 

IF YES, about what Perantage ‘f ‘our ‘~di=id? 

Do you accept patienu without health insuranw? 

IF YES, about what percentage of your patien~ are uninsured? 

~ering ens 8 through 14, please direti your en lo the workyou have&m b a H& 

YES NO 

~-==---

Were you aware, before receiving this survey, that Medimre offered inWntive 

payrnenw for selected setim provided within I-IPSAS? ws NC 

Were you aware, before receiving this survey, that you rewntly received an incentive 

) HOWmany yearn have you practiced within the boundarie of a HPSA? (~fyou 

practied there before the area was designated as a HPSA, include those years. If you 

practice in more than one HPSA, answer with respect to the HPM in which you have 

In 1992, about what perw*tage of your wor~ng hours did YOUsPend ‘ithin a ‘PSAT ~ 

.2 Within the I-IPSA(S)where you practi~, in which ]f of you the no longerpractice in doa HPSA, 

spend most of your worting hours? (Circfe one. 

Clinic answerwith respect to the HPSA whereyou most recentfypracticed) Other (spe.ifi~~

. Nursing Facility Hospi@ 

13 ;b~;~h~t~erunmge of your total 1992 revenu~ (Mediare and non-Medimre) did 

the HPSA-relatd incentive payments constitute? 

5 

14 How important are the bonus paymen~ in your9

3

decisions about where4to practiw? (Circfe one.) 

2 Not at all 

1 slightly

Very Moderately important important 

Wremely important 

important important 

I I 

wyoU Ptietiptiwae*@~f_fo4~~r~ 

r 
TELEPHONE INTERVIEW DISCUSSION GUIDE -

A-16 
Health Professional Shortage Area Study


Telephone Intetiew Questions for Physicians who Responded to Mail Survey


Name of ReqxmdenC


Control Number of Respondent (State and Number):


Telephone Numben


Date of Intervicx


Name of Interviewe~


You’ve been practicing in your current location for _ years, is that right? 

NO (If no, give correct answer: ) 

/Me you in a rural or an urban setting? (An area ir rural if it k NOT in a Metropolitan 

Statistical Area) 

RURAL URMN DON’T KNOW 

Where did you practice before moved to your current location? (If nol a familiar 

locatioq prvbe to find out if it was a rural or urban setting.) 

What brought you to your current location? 

Do you have any plans to move to another location in the near future? If SO,where, 

and why will you be moving? 

A-17

How would you describe the availability of primary health care services in Your area? 

How would you describe the availability of specialty health care sexvices in Your area? 

How far is the nearest (respondentti specialy) from your office? 

How did you hear about the Medicare incentive payment program? (If lhv were 

recently in another location, were they receiving incentive payments there?) 

(Ask next 2 questions only ij they’ve been practicing in the HPLL44 years or 1=) TO 

what extent were the incentive payments a factor in encouraging to you practice in an 

undersexed area? 

If the payments had not been offered, would you still have chosen to practice there? 

A-18

To what extent arc the payments a factor in your decision to keep practicing in your 

area? 

If the payments were no longer offered, would you move? 

Are there approaches other than bonus payments that the Federal Government could 

take to increase access to needed medical care for residents of underserved areas? 

&obe for both rnonetq and nonmonetaty approaches.) 

Do you have anything else to add? 

A-19

APPENDIX B 

DETAILED COMMENTS ON THE DRAFT REPORT AND 

OIG RESPONSE TO THE COMMENTS 

In this appendix, we present in full the comments on the draft report offered by the 

Health Care Financing Administration (HCFA) and the Assistant Secretary for 

Planning and Evaluation (ASPE). We also present our response to each set of 

comments. 

B-1

---

*,,,VU,, ,. Health Care +> -. 

.- DEPARThlENT OF HEALTH & HUI$IAN SERVICES Financing Admmmtratlon & 

“* f+J*,.>* >2 Memorandum 

,kt4R 71994 

Date 

Bruce C. Vladec, A 

From Administrator % 

Subject	 Office of Inspector General (OIG) Draft Reports: “Medicare Incentive Payments in 

Health Professional Shortage Areas,” (OEI-01-93-00050) and “Design Flaws in the 

Medicare Incentive Payment Program” (OEI-01-93-00051) 

To 

June Gibbs 13rown 

Inspector General 

We reviewed the above-referenced final reports in which OIG provided the results of 

its review on payments being made to physicians under the Medicare Incentive 

Payments program. 

The Health Care Financing Administration (HCFA) concurs with the second 

recommendation. However, we do not concur with the first recommendation and are 

not able to comment on the third recommendation because of a lack of specificity in 

the OIG proposals and because of the potential impact of proposed changes in the 

Health Security Act.. Our specific comments are attached. 

Thank you for the opportunity to review and comment on this report. Our detailed 

comments on the findings and recommendations contained in the report are attached 

for your consideration. P1ease advise us if you would like to discuss our comments at 

your earliest convenience. 

Attachment 

. ——. —_ _. .— 

—. 

— 

B-2

Health Care Financinq Administration’s (HCFA) Comments 

on Office of Inspector General (OIG) Draft Re~orts: 

“Medicare Incentive Pavments in Health Professional Short.mze Areas” 

(OEI-01-93-00050) and “Design Flaws in the Medicare 

Incentive Pavment ProPram” (OEI-01-93-00051] 

Recommendation 1 

HCFA should seek to eliminate the Medicare incentive payments entirely. 

HCFA Response 

We do not concur. OIG stated in their report that two-thirds of primary care 

physicians indicated that the payments range from slightly to extremely important. 

One-third of primary care physicians indicated that the payments are very important 

to their practice location decisions. In light of these findings and absent a definitive 

evaluation of how important the payments are to physicians in their practice location 

decisions HCFA believes it is premature to recommend eliminating the program. 

We believe that elimination of the program would cast aside this useful mechanism 

for providing better access to medical care for beneficiaries in underserved areas. 

Recommendation 2 

HCFA should modify the Medicare incentive payment program to target it more 

effectively to primary care. 

HCFA Res~onse 

We concur. However, the OIG study appears to be based on the premise that the 

intent of the incentive payment program is to improve beneficia~ access to primary 

care services. While we would agree that legislative histoxy points to the House of 

Representatives’ intent to limit the bonus to primary care services, this restriction 

was not adopted by the Senate or the Conferees. In addition, there may be accessto-care problems for specialist services in rural health professional shortages areas 

(HPSAS). Therefore, we do not want to target the bonus payment exclusively to 

primary care. 

We believe that Congress clearly intended to increase beneficiary access to health 

care in HPSAS. We also recognize that since the overwhelming percentage of 

specialists practice in urban areas, an access-to-care problem does not likely exist for 

access to specialists in urban areas. For example, although a number of prestigious 

hospitals are located in urban HPSAS, many patients who are treated at such 

hospitals tire affluent and travel to those facilities seeking the finest specialty care. 

These patients do not have access problems. As a result a very large share of 

incentive payments made to specialists affiliated with those hospitals reflects services 

B-3

for 

Page 2 

furnished to beneficiaries who Jive outside the HPSA. We believe that making 

incentive payments to specialists in urban HPSAS is an unnecessary expenditure 

the trust fund. 

The President’s Health Security Act contains a proposal to limit bonus payments in 

urban HPSAS to primary care setices. The savings would be used to increase the 

incentive payments for primary care sclvices in both urban and rural HPSAS from 10 

to 20 percent The expectation is that a 20 percent bonus wouId be more significant 

in encouraging the provision of primary care services. 

Recommendation 3 

HCFA should channel funds from the Medicare incentive program for new or 

existing mechanisms for improving access to primary care. 

HCFA Res~onse 

We believe that OIG’S proposals to rechannel savings from shrinking the incentive 

payment program to Medicaid or a fixed bonus program are not sufficiently 

developed for us to comment on at this time. We agree with OIG noted in its 

repo~ it is too early in the history of this program for an evaluation of its 

effectiveness. If the two fundamental flaws identified by OIG were allowed to 

continue, we would agree that alternative approaches could be considered for the 

long term. However, we believe that the aforementioned legislative proposal, which 

will limit incentive payments in urban areas to primary care services and raise 

incentive payments in both urban and rural areas will correct those deficiencies. 

TECHNICAL COMMENTS 

OIG should include a copy of both the written survey and telephone intelview 

instruments in its report. There was a reference to contradictions between responses 

gathered in interviews and the survey questionnaires. The opportunity to review both 

instruments might be helpful to our understanding of the mixed responses. 

We question whether the sample of 497 physicians out of the 2~000 physicians 

receiving HPSA payments is representative of the nation. It appears that a s~pinterval random sampling method was used to select the physicians for the survey. 

This method is satisfactory if a representative sample is drawn. However, if the 

sample is not representative, a stratified sample would produce a more representative 

population. OIG should include more data on the soci~economic characteristics of 

the physician population selected for review. Suggested additional descriptive 

characteristics include the proportion of urban to rural physician responses and the 

volume of services the physicians provide for which incentive payments were made. 

B-4 
OIG RESPONSE TO HCFA COMMENTS 

We are pleased that HCFA concurs with our second option to modify the incentive 

payment program to target it more effectively to primary care. The President’s Health 

Security Act proposal to alter the program could, by increasing the size of the 

incentive payment, make it a more effective incentive. Also by eliminating incentive 

payments made for specialty services in urban areas, some of the least well-targeted 

payments could be eliminated. While we acknowledge that shortages of specialists 

likely are occurring in rural areas, we note our concern that the criteria for designating 

HPSAS do not include shortages of specialty sewices. Furthermore, given limited 

resources and the well-articulated priorities of the current Administration to increase 

access to primary care, targeting the program more towards primary care may be 

more crucial than targeting specialty care set-vices. Nonetheless, we consider the 

proposal to be meeting the objective laid out by the option. 

We have eliminated from our recommendation the first option (elimination of the 

program) and the third option (rechanneling funds ti-om the program). We note that


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


considered them and commented on them.


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


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


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


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


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


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


with the appropriate weighting methods. Furthermore, we present confidence


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


of our estimates based on the sample.


B-5

9 

/“ ~EPARTMENT OF HEALTH & HUMAN SERVICES Qfuceof U16Secmw 

2’.$ - — WaMnQl~. OX. 2U201 

EWan -B. X$tchell 

principal13eputy
Inspector General 

A68is&i.nt Secretary for “ 

Planning and Evaluation 

~.epo~~ ~~ .ysd~c~r~’
 ~~cc~.t~~epa~~nt ~~c?~li~‘­
 ._
 concurrence with Coxnent ,


This pair of repofisexanzinea the MedicareIncantiVt3 Pa~entS 

Program,which providesbonus payments to both primarycam and 

specialtycare physicianswho work in Health Processionalshortage Areas (HPSAS). The firstreportevaluate9 the f3uccess of 

this program in improving accesa to primary care physician, and 

the second seeks to identity design flaws inherent to the pXogram. Our comments relate exclusively to the fizst report. 

From a methodologicalstandpoint,we foundthis study sound. 

Still,We believethat at tties both its presentation and its 

conclusions are hadvertently rnisleatling. rox exampLe: 

. A B@O* finding,highlightedon pags 4 and in the Execu~iVe 

Summary, k! that about half of the $68 million of bonuses 

paid in 1992 went to specialists rather than prtiary care 

physicians. ‘I’hisstatementgives the Impressionthis entire


amountwas spent for r3peaialtY care servicef3. Within the 

text at the report, however, it is stated that specialists 

in HPSAS provide a aignifi.cant amount of primary care services; therefore, the percentage OZI funds spent for spec~alty servicesis substantially18s5. We feel this fact is 

crucial to an evaluation of the prograzu$s Uupact on pztiam 

cam accees. Ther@fOre,we suggestthat OXG calculatethe 

percentageof’ fundspaid for specialtycare senfices~~d 

that it presentthis figure as prominently as the percentage

paid to specialists.


.	 When askedhow importantMedicarebonus paymentswere in 

their locationaldecision,52 percent of prinary care phY~*­

cian8 rated them as “moderately to extremely tipotiant”~ 

while Ot’dy 32 percentof them rated the paymentsas “not at 

alll~Important. Easedon these figures,OIG concludesthat 

lt~edicar~
 ~centive pa~~nts apparently have little effect 

B-6

FagO


.


2 -,Bryan Mitchell


on practice locationdecisions.m Considering mat ~er half 

Of physicians mmmyed rated the pa~e~ts as a~ least XnOderately important, the wording Of Oxcfa Conclusion r3Q611U3 

misleading,perhapseven inaccurate.


TM Zi?X3t of the renoti~s two recommendations iE tO elMnate the incentive ~aymerat program entirely. we are not 

certain that the evidence justifiesGO strong a 

recommendation, for two reasons: 

* Firstras discussedabove,We feal the evid-ce 

againstthe program is less compelling than f30m9 of tha 

highlighted findings suggesk 

- Second, tha report evaluatesthe pro=am agafista


standarddifferentfrom the one it was deaigxled
to


achieve. The origlna~l~gislationexplicitlymade bo­


p%ti~ care doctors and”’
 specialistsel~gtile fO~ 

bonuses; th6 OIG study,tWWZVer, focuses on oXIIY 

prh=y care, and criticizesthe progrm for pr=idtig 

bonuses for 8peeLalty care. 

OXG does acknowledgethis difference in goals at me be@nning of the zeport. Howevez, given the important perspective which this information gives on the zeport’8recamendations?we feel it shouldbe further emphasized- ThezefOr6, i.fOXG continues to recommendthat the iMentiVe 

p%ogran h eliminated,we suggestthat the diffewmce in 

goals be axpllcitlynoted both in the ~xeouti~e S-am and 

iamdiately before the recommendations. ~Sor r@9a~dles~ ‘f 

what recommendationsare offered,OZG shouldexplicitly 

state that it views the original legislativegoal to be 

inappropriate,and describethe reasons why it feels change

is warranted. 

Finally, we SU~eSt that OIG include an additionaloption in its 

list of recommendations.The reportindicatesthat 14 percent of 

bonuses currentlygo to specialistsin za~ge,prestigious 

hospitalsIoaatedin inner cities. These physiciansXeCeive 

bonusesbecauseHPSA designationsare based only oxa the numbe= of 

Pzisn=y Cars physicians in an area, not the number of health caxe 

facilitiesor f3pecialif3tz3.
 TO ensurethat bonusesare targeted

to thosa areasmost in need, OIG shouldrecommend that PHS modify


i~s method for designatingHPSAa to cansider all types of


providersin an area.


wa==­

~avicl T. Ellwood 

prepared W: C. Prentice 690-7994 

B-7

OIG RESPONSE TO ASPE COMMENTS 

The ASPEconcurred with our recommendation, but expressed concern about the first


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


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


third option) as a result of HCFA’S response and the Health Security Act proposal.


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


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


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


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


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


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


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


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


concerns about presentation and conclusions. We made some clarifications in


response to these concerns. In response to ASPE’S proposal that we include


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


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


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


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


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


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


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


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


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


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


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


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


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


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


finding statement.


B-8

APPENDIX C


NOTES


1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

Barbara Starfield and Lisa Simpson, “primary Care as Part of US Health 

Services Reform,” Journal of [he American Medical Association 269 [June 23/30, 

1993) 24: pp. 3136-39; W. Pete Welch et al., “Geographic Variation in 

Expenditures for Physicians’ Services in the United States,” New ErZgla12d 

Journal of Medicine 328 (March 4, 1993) 9: pp. 621-27. 

42 C.F.R. 5 (Appendix A), Sec. 1.B.3.(a). 

State-level: “’State of the States,’ 1993: Reform of the Health Care System 

Remains an Imperative,” Stole Hewltil Notes - Special Issue, March 15, 1993, 

pp. 6-8. 

National: Bill Clinton, “The Clinton Health Care Plan,” New England Journal of 

Medicine 327 (September 10, 1992) 11: pp. S04-7. 

Robert M. Politzer et al., “Primary Care Physician Supply and the Medically 

Underserved: A Status Report and Recommendations,” JoulTlal of t}le America~t 

Medical Association 266 (July 3, 1991) 1: pp. 104-109; Steven A. Schroeder and 

Lewis G. Sandy, “Specialty Distribution of U.S. Physicians--The Invisible Driver 

of Health Care Costs,” New Engkmd ]ournal of Medicine (April 1, 1993) 13: pp. 

961-963. 

Health Professional Shortage Areas (HPSAS) were originally known as Health 

Manpower Shortage Areas (HMSAS). 

The criteria for HPSA designation are contained in 42 C.F.R. 5. There are also 

areas designated as HPSAS for dentists, psychiatrists, and other caregivers 

rather than for primary care physicians, but this report does not address those 

HPSAS. Medicare incentive payments apply only to HPSAS designated with 

respect to primary care physicians. 

Health Policy Research Consortium, Medicare Bonus Payments to Physicians in 

Health Manpower Silortage Areas: Final Report, Cooperative Agreement No. 

18-C-98526/l-05, report prepared for Health Care Financing Administration, 

April 1989, pp. 1:2-4. 

H.R. Rep. No. 391(1), 100th Cong., pp. 3S9-90. See also H.R. 3188, 100th 

Congress. 

Omnibus Budget Reconciliation Act of 1987 (P.L. 100-203), Sec. 4043. 

c-1 
10. 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

18. 

19. 

20. 

21, 

H. R. Conf. Rep. No. 386, 10lst Cong., p. 754.


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


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


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


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


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


Administration, to Stewart Streimer, Health Care Financing Administration,


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


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


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


Health Policy Research Consortium, p. 1:1.


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


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


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


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


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


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


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


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


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


for bonuses are permitted.


The Physician Payment Review Commission did an analysis of incentive


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


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


semice payments. Because specialty services generally are more expensive than


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


receiving incentive payments were specialists.


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


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


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


respondents rather than the entire sample.


Office of Technology Assessment, 1990, p. 8.


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


question said they were unaware before receiving our questionnaire that


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


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


c-2 
22. Health Policy Research Consortium, p. 3:14. 

23. The median net income for physicians, after expenses and before taxes, was 

$139,000 in 1991, according to the American Medical Association


Socioeconomic Monitoring System 1992 core survey of nonfederal patient care


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


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


obstetricians/gynecologists, $200,000.


24.	 The weighted correlation coefficient is -0.25 (’p e .001), indicating a significant 

relationship between high incentive payments and low numbers on ratings. 

25. Health Policy Research Consortium, pp. 3:5-9. 

26. Health Policy Research Consortium, pp. 3:11 

27.	 William G. Cochran, Sampling Tecimiques (3rd Ed.), New York: John Wiley & 

Sons, 1977, p. 266. 

c-3