GAO 

United States Government Accountability Office

Report to the Chairman, Subcommittee 

on Health, Committee on Ways and 

Means, House of Representatives 

MEDICARE

Per Capita Method 

Can Be Used to Profile 

Physicians and 

Provide Feedback on 

Resource Use 

September 2009 

GAO-09-802 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2009

MEDICARE

Per Capita Method Can Be Used to Profile Physicians

and Provide Feedback on Resource Use 

Highlights of GAO-09-802, a report to the 

Chairman, Subcommittee on Health, 

Committee on Ways and Means, House of 

Representatives 

The Medicare Improvements for 

Patients and Providers Act of 2008 

directed the Secretary of Health 

and Human Services to develop a 

program to give physicians 

confidential feedback on the 

Medicare resources used to provide 

care to Medicare beneficiaries. 

GAO was asked to evaluate the per 

capita methodology for profiling 

physicians—a method which 

measures a patient’s resource use 

over a fixed period of time and 

attributes that resource use to 

physicians—in order to assist the 

Centers for Medicare & Medicaid 

Services (CMS) with the 

development of a physician 

feedback approach. In response, 

this report examines (1) the extent 

to which physicians in selected 

specialties show stable practice 

patterns and how beneficiary 

utilization of services varies by 

physician resource use level; 

(2) factors to consider in 

developing feedback reports on 

physicians’ performance, including 

per capita resource use; and (3) the 

extent to which feedback reports 

may influence physician behavior. 

GAO focused on four medical 

specialties and four metropolitan 

areas chosen for their geographic 

diversity and range in average 

Medicare spending per beneficiary. 

To identify considerations for 

developing a physician feedback 

system, GAO reviewed the 

literature and interviewed officials 

from health plans and specialty 

societies. Further, GAO drew upon 

literature and interviews to develop 

an illustration of how per capita 

measures could be included in a 

physician feedback report. 

Using 2005 and 2006 Medicare claims data and a per capita methodology, GAO 

found that specialist physicians showed considerable stability in resource use 

despite high patient turnover. This stability suggests that per capita resource 

use is a reasonable approach for profiling specialist physicians because it 

reflects distinct patterns of a physician’s resource use, not the particular 

population of beneficiaries seen by a physician in a given year. GAO also 

found that our per capita method can differentiate specialists’ patterns of 

resource use with respect to different types of services, such as institutional 

services, which were a major factor in beneficiaries’ resource use. In 

particular, patients of high resource use physicians used more institutional 

services than patients of low resource use physicians. 

GAO identified four key considerations in developing feedback reports on 

physician performance (see table). 

Key Considerations in Developing Physician Feedback Reports

General considerations Examples of specific considerations

Report content Types of measures, comparative benchmarks 

Report design Length, organization, graphics 

Report dissemination Which physicians should receive reports, frequency of 

reporting, hardcopy versus electronic dissemination 

Transparency Information about purpose, methods, data 

Source: GAO. 

To illustrate how per capita measures could be included in a physician 

feedback report, we developed a mock report containing three types of per 

capita measures. 

Although the literature suggested that feedback alone has no more than a 

moderate influence on physicians’ behavior, the potential influence of 

feedback from CMS on Medicare costs may be greater, in part because of the 

relatively large share of physicians’ practice revenues that Medicare typically 

represents. 

CMS reviewed a draft of this report and broadly agreed with our findings. 

View GAO-09-802 or key components.

For more information, contact A. Bruce 

Steinwald at (202) 512-7114 or 

steinwalda@gao.gov. 
Page i GAO-09-802 

Contents 

Letter 1

Background 6 

Per Capita Profiling Method Shows Specialist Physicians’ Practice 

Patterns Relatively Stable Over 2 Years; Patients of High 

Resource Use Physicians Used More Institutional Services Than 

Other Patients 9 

Research Literature, Health Insurers, and Specialists Identified 

Considerations in Developing Physician Feedback Reports on 

Resource Use 15 

Potential Influence of Feedback Regarding Medicare Costs on 

Physician Behavior Is Uncertain 28 

Concluding Observations 31 

Agency and Professional Association Comments and Our 

Evaluation 31 

CMS Comments 31 

AAOS and ACC comments 32 

Appendix I Methodology 34 

Appendix II Comments from the Centers for Medicare & 

Medicaid Services 41 

Appendix III GAO Contact and Staff Acknowledgments 44 

Bibliography 45 

Tables 

Table 1: Selected Events Preceding CMS Providing Physicians 

Feedback on Their Medicare Resource Use 7 

Table 2: Average Stability of Physicians’ Resource Use by 

Specialty—Averaged Across Four Metropolitan Areas, 

2005-2006 12 

Table 3: Average Stability of Physicians’ and Beneficiaries’ 

Resource Use by Metropolitan Area—2005-2006 12 

 Medicare Physician Profiling
Table 4: Key Considerations in Developing Physician Feedback 

Reports 16 

Table 5: Comments and Suggestions for Designing Physician 

Feedback Reports 19 

Table 6: How the Nation’s Five Largest Health Insurers Make 

Patient-Level Profiling Data Available to Physicians for 

Review and Appeal 23 

Figures 

Figure 1: Stability of Medicare Beneficiaries’ and Specialist 

Physicians’ Resource Use—Averaged Across Four 

Metropolitan Areas and Four Physician Specialties, 2005-

2006 11 

Figure 2: Share of Total Medicare Expenditures per Beneficiary for 

Services Provided by Physicians to their Patients, 

Institutional Services, and All Other Services—Practice 

Average Across Four Specialties in Four Metropolitan 

Areas, 2006 14 

Figure 3: Mock Physician Feedback Report Illustrating Per Capita 

Measures 25 

Figure 3 (cont.): Mock Physician Feedback Report Illustrating Per 

Capita Measures 26 

Figure 4: Example of a Hover in a Mock Physician Feedback 

Report 27 

Figure 5: Beneficiary Resource Use by Health Category for 

Quintiles of Physician Resource Use—Four Specialties in 

Four Metropolitan Areas, 2006 39 

Page ii GAO-09-802 Medicare Physician Profiling
Abbreviations 

CBO Congressional Budget Office 

CBSA Core-Based Statistical Area 

CMS Centers for Medicare & Medicaid Services 

FFS fee-for-service 

HCC Hierarchical Condition Category 

HHS Department of Health and Human Services 

MedPAC Medicare Payment Advisory Commission 

MIPPA Medicare Improvements for Patients and Providers Act 

 of 2008 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 

Page iii GAO-09-802 Medicare Physician Profiling
Page 1 GAO-09-802 

 

United States Government Accountability Office

Washington, DC 20548 

 

September 25, 2009 

The Honorable Pete Stark 

Chairman 

Subcommittee on Health 

Committee on Ways and Means 

House of Representatives 

Dear Mr. Chairman: 

In recent years, evidence has mounted that the Medicare program is 

unsustainable in its present form.1

 Because of rising health care costs and 

the aging of baby boomers into eligibility for Medicare, future program 

spending is projected to consume an increasing share of the government’s 

resources. In their 2009 annual report, the Medicare Trustees projected 

that Medicare expenditures, which reached $468 billion in 2008, will 

increase in future years at a faster pace than the overall economy, rising 

from 3.2 percent of gross domestic product in 2008 to 11.4 percent by 2083. 

Physicians play a central role in the generation of health care 

expenditures, through both the services they provide and the services they 

order, including hospital admissions, diagnostic tests, and referrals to 

other physicians. The evidence suggests that some of the spending for 

services provided and ordered by physicians may not be warranted. For 

example, the wide variation in Medicare spending for physician services—

unrelated to beneficiary health status or outcomes—indicates that health 

needs alone do not determine spending. 

Consistent with physicians’ central role in providing and ordering services 

and their influence on the amount of spending for patient services, 

physician groups, insurers, and Medicare officials have turned to profiling 

as a possible tool to help identify and contain overuse of services and the 

resulting high expenditures. In profiling, the resource use of a physician’s 

1

Medicare is the federally financed health insurance program for persons aged 65 and over, 

certain individuals with disabilities, and individuals with end-stage renal disease. Medicare 

Part A covers hospital and other inpatient stays. Medicare Part B covers physician, 

outpatient hospital, home health, and other services. Medicare Parts A and B are known as 

original Medicare or Medicare fee-for-service (FFS). 

 Medicare Physician Profiling
patients is compared to a benchmark.1

 In our previous report on profiling, 

Medicare: Focus on Physician Practice Patterns Can Lead to Greater 

Program Efficiency,

2

 we profiled generalist physicians and found that in 

each of the 12 metropolitan areas we studied there were physicians who, 

relative to their peers in the same area, treated a disproportionate share of 

overly expensive patients. In that report we used a profiling methodology 

known as per capita, which measures per patient resource use for a 

defined population over a fixed period of time and attributes that resource 

use to physicians. We recommended that the Administrator of the Centers 

for Medicare & Medicaid Services (CMS) develop a profiling system to 

identify individual physicians with inefficient practice patterns and 

provide incentives for physicians to improve the efficiency of care they 

provide.3

 In our subsequent testimony on physician feedback to the 

Subcommittee on Health of the House Ways and Means Committee we 

stated that providing feedback to physicians on their practice patterns 

could be a promising step toward encouraging efficiency in Medicare.4

 The 

Medicare Payment Advisory Commission (MedPAC) has also 

recommended providing feedback to physicians on their resource use.5

 In 

its reports, MedPAC has explored an episode-based profiling methodology, 

which measures resource use for treating a particular episode of illness—

for example, a stroke or heart attack—and attributes that resource use to 

physicians. 

Following the issuance of our report and subsequent testimony, Congress 

passed the Medicare Improvements for Patients and Providers Act of 2008 

(MIPPA), which directed the Secretary of Health and Human Services 

 

1

Physicians can be profiled both in terms of the resources used in providing care to their 

patients and in terms of the quality of that care. In this report, we focus on profiling 

physicians on their resource use, which can be measured in terms of utilization or 

expenditures. 

2

See GAO, Medicare: Focus on Physician Practice Patterns Can Lead to Greater Program 

Efficiency, GAO-07-307 (Washington, D.C.: April 30, 2007), 22. 

3

The Centers for Medicare & Medicaid Services (CMS) is the agency within the Department 

of Health and Human Services (HHS) that oversees Medicare. 

4

See GAO, Medicare: Providing Systematic Feedback to Physicians on their Practice 

Patterns Is a Promising Step Toward Encouraging Program Efficiency, GAO-07-862T 

(May 10, 2007). 

5

The Medicare Payment Advisory Commission (MedPAC) is an independent congressional 

agency established by the Balanced Budget Act of 1997 to advise Congress on issues 

affecting the Medicare program. 

Page 2 GAO-09-802 Medicare Physician Profiling
(HHS) to develop a program to provide physicians confidential feedback 

on the Medicare resources used to provide care to Medicare beneficiaries.6

MIPPA gave HHS the flexibility to measure resource use on a per capita 

basis, an episode basis, or both. In response to this mandate, CMS is 

currently testing both profiling methodologies in its Physician Resource 

Use Measurement and Reporting Program. MIPPA also directed us to 

submit a report to Congress on CMS’s physician feedback program by 

2011. 

In your letter of August 22, 2007, you pointed out that both the per capita 

and episode-based methods could be used to identify inefficient 

physicians, but noted that less is known about the per capita method. At 

that time, you asked us to evaluate the per capita method for profiling 

physicians in order to assist CMS with the development of a physician 

feedback approach for Medicare. This report explores the use of a per 

capita method to profile physicians based on their patients’ level of 

resource use, and discusses the development and influence of feedback 

reports. Specifically, this report examines (1) the extent to which 

physicians in selected specialties show stable practice patterns and how 

beneficiary utilization of services varies by physician resource use level; 

(2) factors to consider in developing feedback reports on physicians’ 

performance, including per capita resource use; and (3) the extent to 

which feedback reports may influence physician behavior. 

We focused our analysis on four diverse specialties—a medical specialty 

(cardiology), a diagnostic specialty (diagnostic radiology), a primary care 

specialty (internal medicine), and a surgical specialty (orthopedic 

surgery); and four metropolitan areas—Miami, Fla.; Phoenix, Ariz.; 

Pittsburgh, Pa.; and Sacramento, Calif.7

 We chose these areas for their 

geographic diversity, range in average Medicare spending per beneficiary, 

and number of physicians in each of the four specialties. We limited our 

study to physicians who participate in Medicare fee-for-service (FFS). Our 

results are not generalizable to other geographic areas and specialties. 

 

6

See Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Pub. L. 

No. 110-275, §131(c), 122 Stat. 2494, 2520-27. 

7

These areas refer to the following Core-Based Statistical Areas (CBSA), an umbrella term 

for micropolitan and metropolitan statistical areas: Miami-Fort Lauderdale-Pompano 

Beach, Fla.; Phoenix-Mesa-Scottsdale, Ariz.; Pittsburgh, Pa.; and Sacramento—ArdenArcade—Roseville, Calif. For CBSA definitions, see http://www.census.gov/population/ 

www/metroareas/metroarea.html. 

Page 3 GAO-09-802 Medicare Physician Profiling
To measure beneficiaries’ resource use, we first adjusted for beneficiaries’ 

health conditions, because sick beneficiaries are expected to use more 

resources than healthy beneficiaries. Using Hierarchical Condition 

Category (HCC) and expenditure data obtained from CMS, we estimated a 

risk adjustment model that uses the same 70 HCCs as the model CMS uses 

to set managed care capitation rates. HCCs are a way of summarizing an 

individual’s diagnoses into major medical conditions, such as vascular 

disease or severe head injury.8

 Given beneficiaries’ HCCs during the year, 

we used our model to estimate Medicare’s expected annual expenditures 

for services provided to the beneficiaries in our study. Based on these 

expected expenditures, we placed beneficiaries into 25 discrete risk 

categories. Within each risk category and metropolitan area, we ranked 

beneficiaries from 1 to 100 by their total annual Medicare FFS 

expenditures such that the average beneficiary in a given risk category and 

metropolitan area had a rank of 50.9

 We used this rank as our risk-adjusted 

measure of beneficiaries’ resource use. 

Our measure of physicians’ resource use is derived from the resource use 

of their patients.10 For all physicians in our study, we calculated the 

average rank of their patients. We then used this average to rank 

physicians within the same metropolitan area and specialty on a scale of 

1 to 100. This measure reflects how expensive a physician’s patients are 

compared to the patients of other physicians in the same specialty and 

area after adjusting for differences in patient health status. 

To examine the stability of physicians’ resource use from a year-to-year 

perspective, we analyzed data for 2005 and 2006.11 We divided physicians’ 

and beneficiaries’ resource use into quintiles and examined which 

 

8

Hierarchical Condition Categories (HCC) collapse the over 15,000 diagnosis codes into 189 

clinically-meaningful condition categories which are additionally grouped into hierarchies 

of increasing severity. See app. I. 

9

We did not include Part D (drug) expenditures because not all beneficiaries are enrolled in 

a Medicare Part D prescription drug plan. 

10Our measure of physicians’ resource use therefore includes all resources used by their 

patients, including those ordered by other providers. Patients were assigned to a physician 

if they had at least one evaluation and management visit with the physician during the 

calendar year for cardiologists, internists, and orthopedic surgeons, or if they received any 

service from the physician for diagnostic radiologists. According to our definition of a 

physician’s practice, a beneficiary could belong to the practice of multiple specialists in our 

study. 

11These were the most recent data available when we began our study. 

Page 4 GAO-09-802 Medicare Physician Profiling
physicians and beneficiaries stayed in the same resource use quintile from 

2005 to 2006 and which ones did not.12 We also examined the degree of 

turnover in the patients seen by physicians between 2005 and 2006. In 

addition, we used the physician quintiles to examine how beneficiary 

utilization of selected services in 2006 varied by physician resource use 

quintile.13

We concluded that the information on Medicare claims that we used in 

this report was sufficiently reliable for the purpose of our analysis, 

because it is a record of Medicare’s payments to health care providers. We 

obtained beneficiaries’ FFS expenditures from claims information, and we 

used data from CMS files containing enrollment and institutional status in 

order to determine whether beneficiaries were eligible for our study. CMS 

provided us with a file containing beneficiaries’ HCCs, which we used to 

estimate their expected expenditures. We obtained physicians’ specialties 

from Medicare physician files that CMS uses to administer the program 

and set payment rates. CMS and its contractors closely monitor these files, 

so they are generally considered reliable. In addition, we interviewed 

relevant CMS officials concerning the data and consulted data 

documentation maintained by CMS. We consider the data sufficiently 

reliable for our purposes. 

To determine factors to consider in developing reports to provide 

feedback to physicians on their performance, including their per capita 

resource use, and the extent to which feedback reports may influence 

physician behavior, we reviewed selected literature and interviewed 

experts.14 To identify relevant literature, we searched 31 databases, 

including MEDLINE and Science Citation Index, using terms such as 

“physician performance feedback,” for journal articles and other 

documents published between January 1, 2000, and February 13, 2009. 

From reference lists in documents identified during that search, we 

identified additional documents that met our criteria. We selected for 

review three types of documents: (1) meta-analyses, reviews, or scans of 

the literature on the effectiveness of providing performance feedback to 

physicians; (2) evaluations of various efforts to provide performance 

 

12We divided the physicians into five ascending groups (quintiles) of nearly equal size based 

on the measure of their resource use. 

13See app. I for further discussion of our methodology. 

14See the bibliography. 

Page 5 GAO-09-802 Medicare Physician Profiling
feedback to physicians; and (3) documents that provided guidance from 

experts on methods for providing performance feedback to physicians. In 

addition to reviewing selected literature, we conducted interviews with 

officials of four specialty societies to identify specialty-specific 

perspectives and concerns, and to solicit officials’ comments on a mock 

feedback report we designed. We also conducted interviews with officials 

of the five health insurers with the highest revenues in 2007 about their 

experiences with feedback reports.15

There are several limitations to our findings. Our findings cannot be 

generalized to other areas or specialties. We also restricted our scope to 

individual physicians and did not analyze group practices. Most 

importantly, we did not pilot our mock report, which illustrates how per 

capita measures could be included in a physician feedback report, or test 

it by giving physicians feedback based on actual resource use. 

Consequently, we are unable to evaluate how helpful it would be to 

physicians and, particularly, whether it has potential for increasing 

physicians’ efficiency. 

We conducted our work from February 2008 to September 2009 in 

accordance with all sections of GAO’s Quality Assurance Framework that 

are relevant to our objectives. The framework requires that we plan and 

perform the engagement to obtain sufficient and appropriate evidence to 

meet our stated objectives and to discuss any limitations in our work. We 

believe that the information and data obtained, and the analysis 

conducted, provide a reasonable basis for any findings and conclusions. 

We, MedPAC, and the Congressional Budget Office (CBO) have all 

suggested that CMS profile physician resource use and provide feedback 

to physicians as a step toward improving the efficiency of care financed by 

Medicare. In July 2008, Congress passed MIPPA,16 which directed the 

Secretary of HHS to establish a program by January 1, 2009, to provide 

physicians confidential feedback on the Medicare resources used to 

provide care to beneficiaries. MIPPA gave HHS the flexibility to measure 

Background 

 

15We interviewed officials of four specialty societies: the American Academy of 

Orthopaedic Surgeons, the American College of Cardiology, the American College of 

Physicians, and the American College of Radiology. We also interviewed officials of Aetna, 

Inc.; Cigna Corporation; Humana, Inc.; UnitedHealthGroup, Inc.; and WellPoint, Inc. 

16See Pub. L. No. 110-275, §131(c). 

Page 6 GAO-09-802 Medicare Physician Profiling
resource use on a per capita basis, an episode basis, or both. In response 

to the MIPPA mandate, CMS is pursuing its Physician Resource Use 

Measurement and Reporting Program. (See table 1.) 

Table 1: Selected Events Preceding CMS Providing Physicians Feedback on Their Medicare Resource Use 

Mar. 2005 MedPAC, in its report to Congress, recommended that the Secretary of HHS should use Medicare claims 

data to measure fee-for-service physicians’ resource use and share results with physicians confidentially to 

educate them about how they compare with aggregated peer performance.a

Jun. 2006 MedPAC, in its report to Congress, stated that it is important to use a per capita profiling methodology in 

conjunction with an episode-based profiling methodology in order to get a complete picture of resource 

use.b 

Mar. 2007 CBO, in its testimony to the Committee on Finance, United States Senate, stated that physicians 

participating in fee-for-service Medicare could be required or encouraged to participate in a program that 

would provide physicians feedback on how their practice patterns compared to their peers as a step toward 

encouraging more efficient care.c

 

Apr. 2007 GAO, in its report to Congress, recommended that CMS develop a physician profiling system that included 

feedback and incentives as part of a package of reforms to improve the efficiency of care financed by 

Medicare.d 

May 2007 GAO, in its testimony to the Subcommittee on Health, House Committee on Ways and Means, stated that 

providing feedback to physicians on their practice patterns could be a promising step toward encouraging 

efficiency in Medicare.e

Jul. 2008 Congress passed the Medicare Improvements for Patients and Providers Act of 2008, which mandated 

that the Secretary of HHS establish a program to provide physicians confidential feedback on the Medicare 

resources used to provide care to beneficiaries.f 

Apr. 2008 to Present CMS began a phased implementation of its Physician Resource Use Measurement and Reporting Program 

which, in Phase I, has disseminated approximately 310 Resource Use Reports to physicians in 13 areas. 

The program is exploring both per capita and episode-based methodologies.g 

Source: GAO. 

a

MedPAC, Report to the Congress: Medicare Payment Policy (Washington, D.C.: March 2005), 142. 

b

MedPAC, Report to the Congress: Increasing the Value of Medicare (Washington, D.C.: June 2006), 

xvi. 

c

CBO, Medicare’s Payments to Physicians: Options for Changing the Sustainable Growth Rate

(Washington, D.C.: March 1, 2007), 16-17. 

d

GAO, Medicare: Focus on Physician Practice Patterns Can Lead to Greater Program Efficiency, 

GAO-07-307 (Washington, D.C.: April 30, 2007), 22. 

e

GAO, Medicare: Providing Systematic Feedback to Physicians on their Practice Patterns Is a 

Promising Step Toward Encouraging Physician Efficiency, GAO-07-862T (Washington, D.C.: May 10, 

2007). 

f

Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), Pub. L. No. 110-275, 

§131(c), 122 Stat. 2494, 2520-25. 

g

Federal Register, vol. 74, Physician Resource Use Measurement and Reporting Program, no. 132 

(Washington, D.C.: July 13, 2009), 33589-33591. 

Page 7 GAO-09-802 Medicare Physician Profiling
Key Decisions in Physician 

Profiling 

When profiling physicians on their resource use, five key decisions must 

be made: 

• Which resource use measurement methodology to use. There are two 

main profiling methodologies: per capita and episode-based. Using both 

types of measures of resource use may provide more meaningful results by 

more fully capturing the relevant characteristics of a physician’s practice 

patterns. 

• How to account for differences in patient health status. Accounting for 

differences in patient health status, a process sometimes referred to as 

risk-adjustment, is an important and challenging aspect of physician 

profiling. Because sicker patients are expected to use more health care 

resources than healthier patients, we believe the health status of patients 

must be taken into account to make meaningful comparisons among 

physicians. There are various risk-adjustment methods and the suitability 

of a given method will depend on characteristics of the physicians to be 

profiled and their patients. 

• How to attribute resource use to physicians. Important attribution 

decisions include whether to assign a patient’s resource use to the single 

physician who bears the greatest responsibility for the resource use, to all 

physicians who bore any responsibility, or to all physicians who met a 

given threshold of responsibility, such as providing a certain percentage of 

the expenditures or volume of services. A single attribution approach may 

not be applicable for all types of measures or for all types of physician 

specialties. 

• What benchmark(s) to use. Physician profiling involves comparing 

physicians’ resource use to a benchmark. There are differing opinions on 

what are the most appropriate and meaningful comparative benchmarks. 

• How to determine what is a sufficient sample size to ensure meaningful 

comparisons. The feasibility of using resource use measures to compare 

physicians’ performance depends, in part, on two factors: the availability 

of enough data on each physician to compute a resource use measure and 

a sufficient number of physicians to provide meaningful comparisons. It is 

important to calculate resource use measures only for physicians with 

sufficient sample sizes in order to address concerns that a physician’s 

profile may be distorted by a few aberrant cases. There is no consensus on 

what sample size is adequate to ensure meaningful measures. 

Page 8 GAO-09-802 Medicare Physician Profiling
Responding to the MIPPA mandate to establish a physician feedback 

program by January 1, 2009, CMS began in April 2008 to develop its 

program for reporting to physicians on their resource use. In the first 

phase of the program, CMS identified eight priority conditions and 

disseminated approximately 310 Resource Use Reports to physicians in 

selected specialties who practiced in one of 13 geographic areas. The 

reports generally included both per capita and episode-based resource use 

measures that were calculated according to five different attribution rules. 

The reports also contained multiple cost benchmarks relative to 

physicians in the same specialty and geographic area. In Phase II, CMS is 

proposing to expand the program by adding quality measures and 

reporting on groups of physicians as a mechanism for addressing small 

sample size issues. 

Using a per capita profiling method, we found that from 2005 to 2006, 

specialist physicians showed considerable stability in their practice 

patterns, as measured by resource use—greater stability than their 

patients, despite high patient turnover. We also found that our per capita 

method can differentiate specialists’ patterns of resource use with respect 

to different types of services, such as institutional services,17 which were a 

major factor in beneficiaries’ resource use. In particular, patients of high 

resource use physicians used more institutional services than patients of 

low resource use physicians. 

CMS’s Resource Use 

Measurement and 

Reporting Program 

Per Capita Profiling 

Method Shows 

Specialist Physicians’ 

Practice Patterns 

Relatively Stable Over 

2 Years; Patients of 

High Resource Use 

Physicians Used More 

Institutional Services 

Than Other Patients 

 

17For the purposes of this report, we defined institutional services as hospital inpatient and 

skilled nursing facility services. 

Page 9 GAO-09-802 Medicare Physician Profiling
Specialist Physicians’ 

Resource Use More Stable 

Than Beneficiaries’ 

Resource Use 

Using a per capita method to profile specialist physicians, we found that 

their practice patterns, as measured by the level of their resource use, was 

relatively stable over 2005 and 2006 by comparison with individual 

beneficiaries’ resource use (see figure 1).18 This is true despite the fact that 

our measure of physicians’ resource use is derived from their patients’ 

resource use and that the specific patients whom physicians see are not 

always the same from year to year. Among the physicians we studied, less 

than one-third of patients seen by study physicians in 2005 were also seen 

by the same physician in 2006. This stability suggests that per capita 

resource use is a reasonable approach for profiling physicians, because it 

reflects distinct patterns of a physician’s resource use, not the particular 

population of beneficiaries seen by a physician in a given year. 

We divided both physician and beneficiary resource use into five groups of 

approximately equal size (quintiles) and found that, on average across the 

four metropolitan areas and four specialties, 58 percent of physicians and 

30 percent of beneficiaries were in the same quintile of resource use in 

2005 and 2006. The pattern was even more pronounced for the top 

resource use quintile: 72 percent of physicians and 35 percent of 

beneficiaries remained in that quintile. If the level of physicians’ and 

beneficiaries’ resource use was purely random, only 20 percent would be 

expected to have remained in the same quintile. 

 

18We defined beneficiaries’ resource use in terms of their resource use compared to that of 

other beneficiaries with similar health conditions. Physicians’ resource use is derived from 

beneficiaries’ resource use. It is defined as the average resource use of those Medicare 

beneficiaries in our study population whom the physician saw compared to the average 

resource use of other physicians’ Medicare beneficiaries. To determine stability of 

beneficiaries’ resource use, we identified beneficiaries who were in our study population in 

both 2005 and 2006. To determine stability of physicians’ resource use, we identified 

physicians in the four specialties we studied who saw at least one of the Medicare 

beneficiaries in our 2005 study population and at least one beneficiary in our 2006 study 

population. We divided physicians and beneficiaries into quintiles according to their 

resource use. See app. I. 

Page 10 GAO-09-802 Medicare Physician Profiling
Figure 1: Stability of Medicare Beneficiaries’ and Specialist Physicians’ Resource 

Use—Averaged Across Four Metropolitan Areas and Four Physician Specialties, 

2005-2006 

0

10

20

30

40

50

60

70

80

Beneficiaries

Physicians

Resource use 

remained in top

quintilea both years

Resource use 

remained in same

quintilea both years

Percent

Percentage

expected

by chance

Source: GAO analysis of Medicare claims data.

Note: The specialist physicians include cardiologists, diagnostic radiologists, internists, and 

orthopedic surgeons in Miami, Fla.; Phoenix, Ariz.; Pittsburgh, Pa.; and Sacramento, Calif. 

a

Beneficiaries and physicians are divided into five ascending groups of nearly equal size based on the 

level of their resource use. 

We also examined the stability of physicians’ resource use by specialty and 

found a similar pattern, although not to the same extent in all specialties. 

The average percentage of physicians who were in the same resource use 

quintile in 2005 and 2006 ranged from 48 percent for orthopedic surgeons 

to 60 percent for internists. Resource use in the top quintile was more 

stable and ranged from 69 percent for diagnostic radiologists to 74 percent 

for internists. (See table 2.) 

Page 11 GAO-09-802 Medicare Physician Profiling
Table 2: Average Stability of Physicians’ Resource Use by Specialty—Averaged 

Across Four Metropolitan Areas, 2005-2006 

Physician Specialty

Average percentage 

remaining in same quintilea

Average percentage 

remaining in the top quintilea

Cardiology 59 71

Diagnostic radiology 58 69

Internal medicine 60 74

Orthopedic surgery 48 70

Source: GAO analysis of Medicare claims data. 

Note: The four metropolitan areas are Miami, Fla.; Phoenix, Ariz.; Pittsburgh, Pa.; and Sacramento, 

Calif. 

a

Physicians are divided into five ascending groups of nearly equal size based on the level of their 

resource use. 

In each of the four metropolitan areas, physicians showed greater stability 

in their resource use than individual beneficiaries, although the 

percentages varied. For example, the percentage of physicians remaining 

in the top quintile ranged from 68 percent in Phoenix to 76 percent in 

Miami. For beneficiaries, the percentage in the top quintile ranged from 

31 percent in Phoenix to 39 percent in Miami. (See table 3.) 

Table 3: Average Stability of Physicians’ and Beneficiaries’ Resource Use by 

Metropolitan Area—2005-2006 

Physiciansa Beneficiaries 

Metropolitan 

Area 

Average 

percentage 

remaining in 

same quintileb

Average 

percentage 

remaining in 

the top 

quintileb

Average 

percentage 

remaining in 

same quintileb

Average 

percentage 

remaining in 

the top 

quintileb

Miami 62 76 31 39

Phoenix 56 68 29 31

Pittsburgh 52 70 30 32

Sacramento 58 71 30 32

Source: GAO analysis of Medicare claims data. 

a

Cardiologists, diagnostic radiologists, internists, and orthopedic surgeons. 

b

Beneficiaries and physicians are divided into five ascending groups of nearly equal size based on the 

level of their resource use. 

Page 12 GAO-09-802 Medicare Physician Profiling
The greater stability of physicians’ resource use compared to beneficiaries’ 

resource use could be due to their individual practice styles, as well as to a 

range of other factors, such as participation in formal or informal referral 

networks. These networks have a range of providers, including other 

physicians, who treat their patients and refer them for treatment, testing, 

and admissions to hospitals. 

Beneficiary Use of 

Institutional Services 

Varies by Physician 

Resource Level 

Beneficiaries seen by high resource use physicians generally were heavier 

users of institutional services than those seen by lower resource use 

physicians, and institutional services accounted for more than one-half of 

total patient expenditures. This pattern was consistent across three of the 

four specialties we studied, with orthopedic surgery being the exception. 

Institutional services were the major driver of Medicare expenditures for 

beneficiaries in physicians’ practices, accounting on average for 54 

percent of expenditures. Services provided by a particular physician in our 

study directly to that physician’s patients accounted for only 2 percent of 

total expenditures or about $350 for each beneficiary in a physician’s 

practice. All other services—those provided by other physicians, home 

health care, hospice care, outpatient services, and durable medical 

equipment—accounted for the remaining 44 percent of expenditures. (See 

fig. 2.) 

Page 13 GAO-09-802 Medicare Physician Profiling
Figure 2: Share of Total Medicare Expenditures per Beneficiary for Services 

Provided by Physicians to their Patients, Institutional Services, and All Other 

Services—Practice Average Across Four Specialties in Four Metropolitan Areas, 

2006 

Source: GAO analysis of CMS claims data.

54%

44%

2%

Services provided by a particular

physician to his or her patients

Institutional servicesa

All other servicesb

Note: The percentages shown are the average share of Medicare expenditures for the beneficiaries in 

the practices of cardiologists, diagnostic radiologists, internists, and orthopedic surgeons in Miami, 

Fla.; Phoenix, Ariz.; Pittsburgh, Pa.; and Sacramento, Calif., with a minimum of 100 Medicare patients 

in their practice. 

a

Institutional services include inpatient hospital and skilled nursing care. 

b

Part B physician and supplier services (other than those provided directly by the physician), home 

health care, hospice care, outpatient hospital services, and durable medical equipment. 

Expenditures for institutional services for a physician’s patients grew as 

the level of physician resource use increased. Dividing the level of 

physician resource use into quintiles, we examined the relationship of 

physicians’ resource use and expenditures for services provided to their 

patients. Average expenditures for institutional services increased more 

steeply by physician resource quintile than expenditures for all other 

services.19

 

19Increases in per beneficiary expenditures across the physician resource use quintiles 

were accompanied by an increase in the average risk score of beneficiaries for all the 

specialties. However, this tendency did not significantly affect our physician resource use 

measure, because the resource use of physicians in higher quintiles was higher than that of 

physicians in lower quintiles for all of the patients they saw, regardless of health status. See 

app. I. 

Page 14 GAO-09-802 Medicare Physician Profiling
The four specialties all exhibited this pattern of increasing beneficiary 

expenditures for institutional services accompanying increasing physician 

resource use, although for orthopedic surgery the increase was small. The 

increase in average beneficiary expenditures for all other services that 

accompanied increasing physician resource use was similar for three of 

the four specialties and was steeper for internal medicine. 

We also examined the average number of physicians seen by the Medicare 

beneficiaries we studied and found that it was positively associated with 

increasing physician resource use. Overall, the number of physicians seen 

increased from an average of about 13 physicians per beneficiary in the 

lowest quintile of resource use to more than 23 in the highest. The increase 

in the number of physicians seen was accompanied by an increase in 

average beneficiary expenditures for institutional services that was 

steeper than the rise in other services. 

Through our review of selected literature and interviews with officials of 

health insurance companies, specialty societies, and profiling experts, we 

identified several key considerations in developing reports to provide 

feedback to physicians on their performance, including their per capita 

resource use. We also drew on information from these sources to develop 

an example of how per capita measures could be presented in a physician 

feedback report. 

Research Literature, 

Health Insurers, and 

Specialists Identified 

Considerations in 

Developing Physician 

Feedback Reports on 

Resource Use 

Key Considerations in 

Developing Physician 

Feedback Reports Include 

Content, Design, 

Dissemination Strategy, 

and Transparency 

We identified four key considerations in developing reports to provide 

feedback to physicians (see table 4). 

Page 15 GAO-09-802 Medicare Physician Profiling
Table 4: Key Considerations in Developing Physician Feedback Reports 

General 

considerations Examples of specific considerations 

Report content Types of measures, comparative benchmarks 

Report design Length, organization, graphics 

Report dissemination Which physicians should receive reports, frequency of reporting, 

hardcopy versus electronic dissemination 

Transparency Information about purpose, methods, data 

Source: GAO analysis. 

Our review of selected literature suggested that a physician feedback 

report should contain three basic elements: an explanation of the 

information contained in the report (which we will discuss in the context 

of transparency), measures describing the performance of the physician or 

physicians to whom the report is directed, and comparative benchmarks. 

Report Content 

Measures. Both the selected literature we reviewed and the officials we 

interviewed supported including measures of quality along with measures 

of cost, and ensuring that measures are actionable by providing 

information that can help physicians improve their performance. The 

officials we interviewed were divided as to whether these measures should 

reflect physicians’ performance at the individual level or the group level. 

• Quality measures. All five of the insurers we contacted were profiling 

physicians in terms of quality and cost, and four of the five had adopted a 

model code for physician ranking programs that called for rankings to be 

based on quality as well as cost.20 Most of the specialty society officials we 

interviewed also called for the inclusion of quality measures in physician 

feedback reports, and some cautioned that focusing solely on costs could 

create perverse incentives—for example, encouraging physicians to 

reduce inappropriately the level of care provided to patients. The lack of 

widely accepted, claims-based quality measures for some specialties has 

limited the number of specialties some insurers profile. For example, at 

the time of our interview, one insurer was profiling physicians in only one 

 

20The model code was developed in 2007 by the New York State Attorney General’s office in 

consultation with medical societies, including the American Medical Association, and 

consumer groups. The model code was developed during the course of an investigation by 

the Attorney General’s office into insurers’ potentially deceptive steering of patients to the 

least expensive physicians under the guise of physician ranking programs. As of February 

2009, the Attorney General’s office had settled with eight insurers, instituting reforms 

designed to ensure that ranking programs are based on accurate and transparent measures. 

Page 16 GAO-09-802 Medicare Physician Profiling
specialty (cardiology) while planning to begin profiling other specialties 

within a year. 

• Actionable measures. According to one research report we reviewed, 

little research has been done to determine how the reporting of global 

scores—such as an overall per capita cost rank—influences physician 

behavior,21 but experts on physician profiling and a broad array of 

stakeholders, including physicians and insurance company officials, 

agreed that performance data should be disaggregated into enough 

categories to enable physicians to identify practice patterns to change. 

According to some profiling experts, resource use reports must pinpoint 

physicians’ overuse and misuse of resources, and identify practices that 

add costs but do not improve desired outcomes. Similarly, specialty 

society officials we interviewed emphasized the importance of including 

measures that focus on areas in which the physician has control. 

• Individual versus group measures. Another measurement 

consideration is whether physicians in group practices should be profiled 

as individuals or as a group. The insurers we contacted took varying 

approaches. In some cases, the approach was driven by contracting 

arrangements, with insurers constructing group profiles for physicians 

with whom they had group contracts. One insurance company official 

pointed out that profiling at the group level allows more physicians to be 

profiled, as it increases the data available to construct a profile. Another 

official advocated profiling at the individual level because he believes 

physicians are more interested in assessments of individual performance. 

Officials of the four specialty societies generally saw some merit to both 

approaches, but some underscored the difficulty of identifying group 

affiliations or noted that groups are not necessarily homogeneous enough 

for a group assessment to be appropriate. 

Comparative benchmarks. One consideration addressed by multiple 

publications we reviewed was the kind of benchmark to which physicians’ 

performance should be compared. For example, a physician’s 

performance may be compared to (1) an evidence-based standard, (2) a 

standard based on professional judgment, such as the consensus standards 

endorsed by the National Quality Forum, or (3) to a statistical norm, such 

as the average for a physician’s peers locally or nationally. 

 

21Beckman, et al., “Current Approaches to Improve the Value of Care,” p. 9. 

Page 17 GAO-09-802 Medicare Physician Profiling
Although studies we reviewed offered conflicting evidence as to whether 

including peer comparisons in physician feedback reports increases their 

effectiveness, some profiling experts and specialty society officials believe 

comparative information is useful and of interest to physicians. In the 

literature we reviewed, for example, one profiling expert suggested that 

such comparisons can motivate behavior change by taking advantage of 

physicians’ desire to perform at least as well as their peers; another stated 

that performance statistics are not meaningful to physicians without peer 

comparisons. 

A physician’s peer group can be defined in various ways. According to one 

study, some organizations that provide performance feedback to 

physicians have found comparisons within specialty and locality most 

useful to and most frequently requested by physicians.22 Representatives of 

some of these organizations said physicians find local information more 

relevant because it reflects the practice patterns of their geographic area. 

All five insurers we contacted compare physicians to others in the same 

market and specialty; one of the five also compares physicians to peers 

nationwide on some measures. In contrast, officials of all four specialty 

societies recommended comparisons at the national level, with officials of 

one society stating that there is no scientific basis for regional variations in 

practice patterns.23 There was less agreement about whether physicians 

should be compared to others in their specialty or to a more narrowly 

defined group. Officials of one specialty society advocated comparisons at 

the subspecialty level in recognition of the variation in resource use 

patterns among subspecialists. Another official pointed out that such 

comparison groups could be difficult to define because physicians in some 

specialties tend to have multiple subspecialties. Because views differ on 

appropriate comparison groups, one hospital-owned healthcare alliance 

plans to incorporate in its physician reports a customizable feature that 

will allow users to select the peer comparison they wish to see. 

Comparisons to physicians’ own past performance (trend data) are 

commonly presented in feedback reports, and the majority of physicians 

surveyed in one study found these comparisons useful. 

 

22Teleki, et al., p.7. 

23Officials of two specialty societies also recommended state or local comparisons. 

Page 18 GAO-09-802 Medicare Physician Profiling
The selected literature we reviewed offered little hard evidence on how 

feedback reports should be designed to engage physicians’ interest or to 

prove their comprehension of the material. However, researchers and 

profiling experts offered some comments and suggestions based either on 

their experience with clinical performance measurement or on an analysis 

of the literature on consumer behavior and its possible implications for 

physician reporting (see table 5). 

Report Design 

Table 5: Comments and Suggestions for Designing Physician Feedback Reports 

Topic Comments 

Amount of material and report length • Effective reports do not necessarily provide a high level of detail. 

• Detailed supporting data can be made available in a separate drilldown section. 

• Physician feedback reports can vary greatly in length depending on the number of topics 

covered and the level of detail. 

Organization • The organization of the report may be more important than its length. 

• All high-level summary information should be in one place so that it’s easy to absorb. 

• Reports should move from gross measures to more refined. 

• Spatial organization, through the use of headings and lists, is critical for helping readers 

find information. 

Graphics • Visual formats provide the best methods for data interpretation and are useful for 

highlighting the most important measures. 

• Information can be conveyed visually in tables, graphs, and score cards. 

• Tables may be better to show specific numeric values, while graphs may be better to 

display information for comparative purposes, because they facilitate the organization of 

material into meaningful groups. 

• A score card or summary-rating format consolidates data even further than tables or 

graphs, using colors or symbols to help readers easily identify successes as well as 

areas for improvement. 

Source: GAO analysis of selected literature. 

The amount and combination of material that should be included in a 

single report is an important consideration. According to one publication 

that summarized a review of multiple feedback reports, some 

organizations issue separate reports on efficiency/cost and 

effectiveness/clinical quality, in part to avoid diluting the impact of either 

set of measures. Others believe a single report gives physicians a more 

complete picture of their performance. 

Officials of the three insurers we contacted that routinely issued feedback 

reports to physicians said that their companies produced summary 

reports, typically one to two pages in length, containing high-level 

information, but also made more detailed information, such as patientlevel data, available to physicians. One insurer’s summary report consisted 

Page 19 GAO-09-802 Medicare Physician Profiling
of one page of cost efficiency measures and one page of effectiveness 

measures. The cost efficiency page presented average cost per episode of 

care by service category for the physician and the physician’s peer group, 

as well as the ratio of the two, in both tabular and graphic form. The 

effectiveness page presented process-of-care measures for selected 

conditions, including cardiovascular disease and asthma. Company 

officials said summary reports were limited to two pages to accommodate 

physicians’ attention spans and that the two sets of measures were 

presented separately to discourage attempts to link the two. Specialty 

society officials agreed reports should be short—most proposed one to 

two pages—and strongly recommended that information be presented 

graphically to the extent possible. One official, noting that physicians are 

very visually oriented, recommended feedback reports consisting mainly 

of easily understood graphics. 

The selected literature we reviewed, our interviews with specialty society 

officials, and existing physician feedback reports suggested reports can be 

kept short by segmenting some information into separate documents—for 

example, a cover letter that explains the report’s purpose, a description of 

the profiling methodology, a set of frequently asked questions, and a list of 

definitions. 

Some key considerations with respect to report dissemination are which 

physicians should receive reports, how frequently to issue reports, and 

whether to issue reports in hardcopy or electronically. 

Report Dissemination 

Which physicians should receive feedback reports. One major 

decision is whether to issue reports to all physicians for whom 

performance measures can be calculated or only to a subset who fail to 

meet certain performance standards—a decision that may involve 

weighing reporting costs against potential impacts. None of the studies we 

reviewed directly addressed this issue, but all of the specialty society 

officials we interviewed advised sending reports to all or nearly all 

physicians, rather than just to poor performers. They gave several reasons: 

to provide positive recognition to physicians who are performing well; to 

avoid singling out certain physicians as poor performers, especially on the 

basis of excess costs over which they have little control; and to create 

opportunities for voluntary peer-to-peer learning among physicians who 

are at different points along the performance spectrum. Similarly, all three 

of the insurers that routinely issued feedback reports sent them to all 

physicians for whom they had performance measures. 

Page 20 GAO-09-802 Medicare Physician Profiling
Frequency of reporting. According to one book we reviewed, 

organizations that provide feedback to physicians should do so more than 

once a year to give physicians an opportunity to improve their 

performance in a timely manner.24 However, because of the time needed to 

gather sufficient data to identify trends and patterns of performance, many 

organizations provide feedback no more than twice a year. Of the two 

insurers that told us how frequently they issued feedback reports, one did 

so annually and the other at least every 6 months. Officials of the latter 

company said the frequency of their reporting was limited by the number 

of claims in their dataset and suggested that CMS would not face the same 

limitations. 

Hardcopy versus electronic dissemination. Reports can be 

disseminated in hardcopy through various channels, such as the mail, or 

electronically, through e-mail or a Web site. One literature scan we 

reviewed cited certain advantages of electronic formats such as Webbased applications. Specifically, they allow users to organize information 

as they choose and are well suited to presenting data from the general to 

the specific, which facilitates information processing. Although this report 

noted some concerns about physicians’ access to the Internet, according 

to a report based on a national survey of physicians in December 2002 and 

January 2003, almost all respondents said they had Internet access, and 

most said they considered it important for patient care.25

Of the three insurers that routinely issued feedback reports, two issued 

them electronically and one issued them in hardcopy. Officials of the latter 

company said that staff typically hand-delivered the reports to physicians 

during on-site visits in order to discuss the results.26 Officials of most of 

the specialty societies we contacted did not advocate one dissemination 

mode over the other, but some noted that organizations that issue re

electronically must confront certain challenges, such as ensuring that 

security features do not make access difficult, addressing the lack of highports 

 

24Marder et al., p. 162.

25Bennett, Nancy L., Linda L. Casebeer, Robert E. Kristofco, Sheryl M. Strasser. “Physicians’ 

Internet Information-Seeking Behavior.” The Journal of Continuing Education in the 

Health Professions, Vol. 24 (2004), pp. 31-38. 

26At the time of our interview, this insurer was profiling and providing feedback to 

physicians in only one specialty. However, officials said that the company would continue 

to hand-deliver results to all physicians even after it begins reporting to physicians in 

additional specialties. 

Page 21 GAO-09-802 Medicare Physician Profiling
speed Internet service in some areas, and determining whether to send 

reports by e-mail or to instruct physicians to access them on the Internet.27

One specialty society official recommended using both modes of 

dissemination to accommodate different preferences. 

Both the selected literature we reviewed and our interviews with officials 

from insurance companies and specialty societies underscored the 

importance of ensuring transparency regarding the purpose of the report 

and the methodology and data used to construct performance measures. 

Transparency

Purpose. According to one literature scan, feedback reports should 

explicitly state their purpose—for example, to reduce costs, improve 

quality, or simply to provide information—and should highlight any items 

for which the physician will be held accountable.28

Methodology. Two important considerations are where to provide 

information about methodology—whether in the report itself or through 

some other mechanism, such as a Web page—and how much technical 

detail to provide. Some of the insurers we contacted provide information 

on-line about their profiling methodologies, including details about 

measures, attribution of care to physicians, risk adjustment, and statistical 

issues. In addition, some of the officials we interviewed said that company 

staff will meet with physicians to explain the profiling methodology, if 

requested. For example, officials of one company said that it has on staff 

four profiling experts, mostly nurses, in addition to about 20 medical 

directors who can answer physicians’ questions. 

Specialty society officials we interviewed highlighted a potential trade-off 

between providing enough information in the report to persuade 

physicians of the validity of the measures and keeping the report concise 

enough to maintain physicians’ interest. All of the officials we interviewed 

agreed that physicians should have access to details about the 

methodology; some suggested this information might best be disseminated 

through a Web site. Explaining how the data are risk-adjusted to account 

 

27When disseminating information electronically, federal agencies, including CMS, must 

comply with requirements under Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 

§794d), which requires that federal employees and members of the public who are 

individuals with disabilities have access to and use of the information that is comparable to 

the access to and use of the information by federal employees and members of the public 

who are not individuals with disabilities. 

28Teleki, et al., pp. 5-6. 

Page 22 GAO-09-802 Medicare Physician Profiling
for differences in physicians’ patient populations was cited by specialty 

society officials as particularly important. 

Data. Another consideration is ensuring transparency with regard to the 

data used in profiling—making patient-level detail available so physicians 

can reconcile performance measures with their own information about 

their practices. All five of the health insurers we contacted provided 

opportunities for physicians to examine patient-level data and file appeals 

before results are made public, although their processes or policies for 

doing so varied (see table 6). 

Table 6: How the Nation’s Five Largest Health Insurers Make Patient-Level Profiling Data Available to Physicians for Review 

and Appeal 

Insurer A Insurer B Insurer C Insurer D Insurer E 

Availability of patientlevel data Generally e-mailed 

upon request 

Generally mailed 

upon request 

Accessible on-line 

to each physician 

Accessible on-line 

to each physician 

Hand-delivered to 

each physician group 

during site visits 

Window for review and 

appeal 

90 days 45 days 60 days 45 days 45 days 

Source: GAO analysis of information provided by insurers. 

Officials of one of the two insurers that made detailed data available online said their company previously sent hardcopy reports to physicians, 

but learned from medical office managers that they would prefer an online format that could be manipulated to facilitate physician comparisons. 

Officials of the other insurer said that their company planned to make the 

data available in a manipulatable format soon. Most of the specialty 

society officials we interviewed agreed that patient-level data should be 

made available to physicians, but some predicted that few physicians 

would access them. Two interviewees suggested practice size would 

probably be a factor; one added that physicians in smaller groups would 

likely lack the resources and skills to analyze the data. 

Per Capita Measures Can 

Be Presented in a 

Physician Feedback 

Report 

Drawing upon lessons culled from the literature and our interviews, we 

developed a mock report that illustrates how per capita measures could be 

included in a physician feedback report. Such a report could also include 

other measures such as quality measures and episode-based resource use 

measures. We included two types of per capita measures—risk-adjusted 

cost ranks and risk-adjusted utilization rates—each presented with local 

and national comparative benchmarks. To provide further context, we also 

included per capita measures showing how the average Medicare costs of 

Page 23 GAO-09-802 Medicare Physician Profiling
patients the physician treated at least once were distributed among service 

categories, and the percentage of those costs that were for services 

directly provided by the physician to whom the report is directed. We kept 

the mock report under two pages and included minimal text, while 

ensuring transparency by indicating the availability of methodology details 

and supporting data. To accommodate physicians’ differing dissemination 

preferences, we designed the mock report to be available in both 

electronic and hardcopy formats. (See fig. 3.) 

Page 24 GAO-09-802 Medicare Physician Profiling
Figure 3: Mock Physician Feedback Report Illustrating Per Capita Measures 

Source: GAO.

Overall Medicare Resource Use Measures

Physician Information:

Name: Dr. John Doe

NPI: • • • • • • • 2487

Area: Cityville

Report Information:

Reporting Period: 01/01/2007 - 12/31/2007

Specialty: Cardiology

FFS Medicare: Physician Report

Page X of Z

How the average Medicare costs of patients

you treated at least once were distributed

How the average risk-adjusted Medicare costs

of patients you treated at least once compared 

to those of other cardiologists

U=59

A=45

N=51

Physician visits

A N U

You:

45% ($604)

of category

All providers:

10% ($1,342)

of total

You:

20% ($161)

of category

All providers:

6% ($805)

of total

U=56

A=45

N=47

Imaging

A N U

U=62

A=47

N=49

All services

A N U

U = Your rank A = Area rank N = National rank

U=57

A=47

N=51

Physician procedures

A N U

You:

65% ($610)

of category

All providers:

7% ($939)

of total

U=43 U

A=46

N=50

Laboratory

U A N

You:

18% ($73)

of category

All providers:

3% ($403)

of total

U=43

A=47

N=53

Skilled nursing and home health

25 50 75

U A N

U=62

A=47

N=49

Hospital inpatient

A N U

You

0% ($0)

of category

All providers:

44% ($5,906)

of total

U=48

A=41

N=50

Hospital outpatient

A U N

You

0% ($0)

of category

All providers:

8% ($1,074)

of total

You:

0% ($0)

of category

All providers:

14% ($1,879) 

of total

Average patient risk-adjusted cost rank Payments to all providers and you

You:

11% ($1,449)

of category

All providers:

100% ($13,422)

of total

U

U

U

U

Physician visits

Imaging

All services

Physician procedures

Laboratory

Skilled nursing and home health

Hospital inpatient

Hospital outpatient

Click here for detailed information on the methodology used to construct these measures. 

Click here to break down these measures into more specific service categories or patient populations.

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

Page 25 GAO-09-802 Medicare Physician Profiling
Figure 3 (cont.): Mock Physician Feedback Report Illustrating Per Capita Measures 

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

Overall Medicare Resource Use Measures

Physician Information:

Name: Dr. John Doe

NPI: • • • • • • • 2487

Area: Cityville

Report Information:

Reporting Period: 01/01/2007 - 12/31/2007

Specialty: Cardiology

FFS Medicare: Physician Report

Page Y of Z

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

SAMPLE REPORT

 Cardiologists Cardiologists

You In Your Area Nationwide

Hospitalizations (per 100 patients) 58.3 41.3 46.0

Rehospitalizations (per 100 patients) 8.6 4.5 5.1

Evaluation & Management Visits (per patient) 3.7 3.1 3.5

Click here for detailed information on the methodology used to construct these measures. 

Risk-adjusted utilization rates

Note: This figure is an illustration of how per capita measures could be included as part of a physician 

feedback report, which could include a cover letter, quality measures, and other resource use 

measures. All of the data presented in the figure are hypothetical. 

Page 26 GAO-09-802 Medicare Physician Profiling
Specialty society officials who vetted a draft of the mock report made 

several recommendations. Some recommendations centered on taking 

advantage of electronic capabilities, such as adding hovers to define key 

terms (see fig. 4), creating interactive features to let physicians explore 

“what if” scenarios, and including links to educational materials and 

specialty guidelines. Officials also recommended adding information on 

pharmaceutical costs, a category we did not include because not all 

beneficiaries are enrolled in a Medicare Part D prescription drug plan. 

Figure 4: Example of a Hover in a Mock Physician Feedback Report 

Source: GAO.

File Edit Save Close Help

Overall Medicare Resource Use Measures

Physician Information:

Name: Dr. John Doe

NPI: • • • • • • • 2487

Area: Cityville

Report Information:

Reporting Period: 01/01/2007 - 12/31/2007

Specialty: Cardiology

FFS Medicare: Physician Report

U=62

A=47

N=49

All services

A N U

You:

11% of category

($1,449)

All providers:

100% of total

($13,422)

The electronic version of the 

feedback report could make 

use of interactive features.

For example, the report could 

use “hovers” to display a short 

definition of key terms in the 

document and a reference to 

a page with more information.

To meet requirements for 

federal agencies to make 

electronic information accessible 

to disabled individuals, the 

feedback report could show 

all hover definitions on the last 

page of the document, if it 

were printed.

How the average Medicare costs of patients

you treated at least once were distributed

How the risk-adjusted Medicare costs of patients

you treated at least once compared to those of

other cardiologists

Average patient risk-adjusted cost rank Payments to all providers and you

A=47

N=49

You:

11% of category

($1,449)

All providers:

100% of total

($13,422)

Payments to all providers and you

U

A

ank

U=62

A=47

A patient’s risk adjusted cost rank is calculated 

by comparing the patient’s Medicare costs to all 

other Cityville patients with similar risk scores

and represents how unexpectedly expensive or 

inexpensive the patient’s Medicare-covered care was. 

Your rank is the average rank of all patients you

treated at least once. See Glossary for more details.

More generally, specialty society officials said that they particularly liked 

the graphs and charts in our mock report. One official added that our 

report was easier to understand than other reports he had seen and that he 

thought it would get physicians’ attention. Another official commented 

how the presented per capita measures could give physicians insight on 

the care their patients are receiving that they were not previously aware 

of—a perspective other cost measures could not provide. However, 

multiple officials said the measures as presented were too broad to be 

actionable and might not seem relevant to physicians, as most physicians 

feel responsible only for the costs of services they directly order or 

provide, not for the total cost of patients’ care. Two officials suggested 

Page 27 GAO-09-802 Medicare Physician Profiling
that these per capita measures would have more value in health care 

systems that emphasized coordination of care. 

Our review of available literature on the effectiveness of physician 

feedback suggests that feedback alone generally has no more than a 

moderate influence on physician behavior. However, the potential 

influence of feedback from CMS regarding Medicare costs is uncertain, 

and may be greater than that of feedback from other sources, because 

Medicare reimbursement typically represents a larger share of physicians’ 

practice revenues than that from other insurers. 

Potential Influence of 

Feedback Regarding 

Medicare Costs on 

Physician Behavior Is 

Uncertain 

In general, studies examining the effect of feedback on physicians’ 

behavior have found it to have a small to moderate effect.29 Factors that 

appear to influence the effectiveness of feedback include its source, 

frequency, and intensity. For example, one review of the literature 

concluded that physicians were more likely to be influenced by reports 

from a source they expected to continue monitoring their performance. 

This review also found that repeated feedback over a period of several 

years may be more likely to get physicians’ attention.30 Another review 

reported that the intensity of the feedback appeared to influence its 

effectiveness. The review cited individual, written feedback containing 

information about costs or numbers of tests, but no personal incentives, as 

among the least intensive, and therefore likely to be among the least 

effective approaches.31

Consistent with the literature we reviewed, most of the insurance 

company officials we interviewed questioned whether providing 

performance feedback to physicians would have a significant impact on 

the physicians’ behavior in the absence of other incentives. While all five 

insurers profiled physicians, none used the results solely to provide 

 

29These studies varied in terms of the type of feedback provided (verbal and/or written; 

directed to individuals or groups; delivered by senior colleagues, professional standards 

review organizations, or other sources), types of clinicians to whom the feedback was 

delivered (physicians, dentists, nurses, or other providers), frequency and duration of the 

feedback, the content, whether the feedback was combined with other interventions, and 

the outcomes studied. 

30Veloski, p. 125. 

31Jamtvedt, “Audit and Feedback,” pp. 5 and 24. 

Page 28 GAO-09-802 Medicare Physician Profiling
feedback.32 Officials of four of the five insurance companies said that to 

affect physicians’ behavior, profiling results must be made public, thus 

influencing patients’ choice of physicians, or linked to monetary 

incentives, as in pay-for-performance arrangements. However, officials of 

one company disagreed, stating that feedback alone can affect physicians’ 

behavior if the reports show how they rank against their peers and make 

clear what behavior they need to change to improve their efficiency. These 

officials also said that the impact of feedback could depend on the size of 

physicians’ practices and whether they have the resources to review the 

reports and the management structure to affect changes. 

Whether the experiences of private insurers or the lessons from the 

literature on the influence of feedback will hold in the case of the 

Medicare program is uncertain. A survey conducted in 2004-2005 found 

that, for most physicians, Medicare represented more than one-quarter of 

practice revenue, and for 17 percent of physicians, the proportion was 

more than one-half.33 Because physicians typically contract with a dozen 

or more health insurance plans, few, if any, of these plans are likely t

represent as large a share of physicians’ practice revenue as Medicare. 

Hence, the impact of feedback from CMS might be greater than that from 

other sources. In addition, one profiling expert suggested that physicians 

might expect feedback from CMS to be only the first step in efforts to 

influence physicians’ behavior—to be followed, for example, by public 

reporting of profiling results. This perspective comports with 

recommendations in our earlier report.

o 

 

34 Two interviewees said that 

providing feedback on a confidential basis would be an appropriate first 

step. One said it would allow time to test the profiling methodology and 

gauge physicians’ reactions; the other said it would provide an opportunity 

for physicians to vet the measures and identify any errors. 

Most of the specialty society officials predicted that feedback from CMS 

would have a small to moderate effect on physician behavior, similar to 

that described in the literature we reviewed, but some officials offered 

32Two used the information to assign ratings to physicians in the provider directories made 

available to members, two used it to select physicians for high-performance networks, and 

one used it for both purposes. 

33These data are weighted national estimates from the Community Tracking Study 

Physician Survey conducted by the Center for Studying Health System Change. 

34See GAO-07-307. 

Page 29 GAO-09-802 Medicare Physician Profiling
suggestions for enhancing its effectiveness. Other suggestions can be 

drawn from the literature we reviewed. These suggestions included: 

• providing advance notice of feedback reports (through presentations, 

letters, or other communications) to help ensure that physicians open and 

read the reports; 

• working through credible intermediaries, such as medical societies or 

locally prominent physicians, to assure physicians that the feedback 

process is reasonable and legitimate; 

• providing opportunities for physicians to discuss the reports through 

videoconferences, teleconferences, or on-line discussion groups; and 

• offering in-person follow up, possibly drawing on the resources of the 

Medicare Quality Improvement Organizations.35

Involving physicians in the development of a feedback system may also 

enhance its effectiveness. One literature scan concluded that physician 

involvement in system design was vital for obtaining physician buy-in.36

Information from insurers suggested that, although physicians may not 

always be involved in initial development of feedback systems, their 

feedback can prompt modifications. Some insurance officials we 

interviewed described an iterative process involving ongoing 

communication with physicians and continuous modification of reports 

and systems. For example, officials of one insurance company said that 

the company did not seek initial input from physicians—in the belief that 

they would not have been able to provide much input without a complete 

understanding of the data and methodology—but took into account 

physicians’ responses to earlier, less formal systems. Officials of other 

companies described various mechanisms for obtaining physicians’ 

perspectives, including formal physician advisory councils, regular 

meetings with officials of national medical societies, and town hall 

meetings with physicians at the local level. 

 

35Medicare Quality Improvement Organizations are private organizations that contract with 

CMS to monitor and improve the care delivered to Medicare beneficiaries in the 50 states, 

the territories, and the District of Columbia. 

36Although another review of the literature concluded that physician involvement had little 

or no impact on the effectiveness of a system in changing physician behavior, the 

researchers acknowledged that this finding was unexpected and could be related to a lack 

of detail in the studies they reviewed about the level of physicians’ involvement. 

Page 30 GAO-09-802 Medicare Physician Profiling
Concluding 

Observations 

Profiling physicians to improve efficiency is used by some private 

insurance companies and, at the direction of Congress, is being adopted by 

the Medicare program. We believe that a per capita methodology is a 

useful approach to profiling physicians on their practice efficiency and 

could be part of a feedback program that could also include quality 

measures and episode-based resource use measures. 

Our findings are consistent with those of our previous report on physician 

profiling in which, through analysis of physician practice patterns, we 

determined that CMS could use profiling to improve the efficiency of 

Medicare. Despite a more diverse mix of physician specialties in our 

present analysis, and with certain exceptions noted in our findings, we 

found substantial consistency in certain patterns we observed across 

metropolitan areas and specialties. We also found consistency across time 

in that physicians who showed high resource use in one year tended to 

stay high in the subsequent year. 

We provided a draft of this report to the HHS for comment and received 

written comments from CMS, which are reprinted in appendix II. We also 

solicited comments on the draft report from representatives of the 

American Academy of Orthopaedic Surgeons (AAOS), the American 

College of Cardiology (ACC), the American College of Physicians, and the 

American College of Radiology. We received oral comments from the first 

two. 

Agency and 

Professional 

Association 

Comments and Our 

Evaluation 

Our draft report did not include any recommendations for CMS to respond 

to. CMS broadly agreed with each of our three findings: CMS Comments 

• CMS agreed that the per capita methodology is a useful approach to 

measuring physicians’ resource use and noted that per capita 

measurement is one of the cost of care measures included in CMS’s 

Physician Resource Use Management and Reporting Program. CMS also 

agreed that the consistency of our per capita measure across years is an 

important finding and stated that the agency intends to examine measure 

consistency in the ongoing administration of its program. 

• CMS found the attention in our report to considerations for developing a 

physician feedback system to be particularly helpful. CMS listed several 

examples of how its program already addresses many of these 

considerations and is in the process of addressing others. We agree with 

Page 31 GAO-09-802 Medicare Physician Profiling
CMS that some of the approaches described in our report would require 

significant resources and recognize that CMS will need to investigate how 

to balance the trade-offs between different approaches in order to best 

leverage its resources. 

• CMS agreed that physician feedback may have a moderate influence on 

physician behavior. CMS further stated its commitment to developing 

meaningful, actionable, and fair measurement tools for physician resource 

use that, along with quality measures, will provide a comprehensive 

assessment of performance. We continue to believe that providing 

physicians feedback on their performance could be a promising step 

toward encouraging greater efficiency in Medicare; however, we are still 

concerned that efforts to achieve greater efficiency that rely solely on 

physician feedback without financial or other incentives will be 

suboptimal. 

CMS also provided technical comments, which we incorporated as 

appropriate. 

The representatives of AAOS and ACC raised no major issues with regard 

to the substance of the report. The AAOS representative said that the 

report captured well the key aspects of physician profiling and the key 

considerations in developing physician feedback reports. The ACC 

representatives endorsed the overall approach of a feedback report 

consisting of a high-level summary accompanied by additional sections 

with greater detail and a separate document that explains the 

methodology in detail. The representatives of both groups said that 

physicians should be provided feedback on both quality and resource use, 

but differed on whether they should be presented in the same report. Both 

groups also stressed that physicians should only be compared to 

physicians within their specialty or subspecialty. 

AAOS and ACC 

comments 

Both the AAOS and the ACC representatives commented on the design of 

our mock report. Both said that the measures of physician resource use by 

type of service and the benchmark comparisons were easy to understand. 

They had difficulty, however, in understanding a related measure that 

shows the physician’s share of payments by service category. We did not 

alter our mock report in response to these comments, but believe that the 

concerns they expressed should be taken into account by organizations 

designing physician feedback reports. 

Page 32 GAO-09-802 Medicare Physician Profiling
The representatives of both groups stressed the importance of risk 

adjustment in the measurement of physician resource use and suggested 

that we include a fuller explanation of risk adjustment techniques in our 

report. We did not expand our explanation of such techniques because 

they are not the focus of this report; however, we acknowledge the 

important role played by risk adjustment techniques in constructing 

physician feedback reports on resource use. 

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the Acting 

Administrator of CMS, committees, and others. The report will also be 

available at no charge on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions, please contact me at (202) 512-7114 

or steinwalda@gao.gov. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of the report. 

GAO staff who made major contributions to this report are listed in 

appendix III. 

Sincerely yours, 

ld 

Director, Health Care 

A. Bruce Steinwa

Page 33 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

Page 34 GAO-09-802 

Appendix I: Methodology 

This appendix describes the per capita methodology that we used to 

measure beneficiaries’ and physicians’ Medicare fee-for-service (FFS) 

resource use. We focused our analysis on four diverse specialties: a 

medical specialty (cardiology), a diagnostic specialty (diagnostic 

radiology), a primary care specialty (internal medicine), and a surgical 

specialty (orthopedic surgery). We included diagnostic radiologists in our 

study because they are less amenable to episode grouping, the major 

alternative to per capita profiling of physicians. We limited our analysis to 

physicians in these specialties who practiced in one of four areas: Miami, 

Fla.; Phoenix, Ariz.; Pittsburgh, Pa.; and Sacramento, Calif.1

 We chose 

these areas for their geographic diversity, range in average Medicare 

spending per beneficiary, and number of physicians in each of the four 

specialties. Our results apply only to the four specialties in the four 

metropolitan areas we studied. 

To conduct our analysis, we obtained 2005 and 2006 Centers for Medicare 

& Medicaid Services (CMS) data from the following sources: (1) Medicare 

claims files that include data on physician, durable medical equipment, 

skilled nursing, home health, hospice, and hospital inpatient and 

outpatient services; (2) Denominator File, a database that contains 

enrollment and entitlement status information for all Medicare 

beneficiaries in a given year; (3) Hierarchical Condition Category (HCC) 

files that summarize Medicare beneficiaries’ diagnoses; (4) files 

summarizing the institutional status of beneficiaries; and (5) Unique 

Physician Identification Number Directory, which contains information on 

physicians’ specialties. 

In order to develop a resource use measure that accounts for differences 

in health status between beneficiaries, we developed a risk adjustment 

model that uses an individual’s diagnoses during the year to estimate the 

total Medicare FFS expenditures expected for the individual in that year. 

As our inputs to the model, we used the same 70 HCCs as those in the 

model CMS uses to set managed care capitation rates.2

 HCCs are a way of 

Adjustment for 

Differences in Patient 

Health Status 

 

1

These areas refer to the following Core-Based Statistical Areas (CBSA), an umbrella term 

for micropolitan and metropolitan statistical areas: Miami-Fort Lauderdale-Pompano 

Beach, Fla.; Phoenix-Mesa-Scottsdale, Ariz.; Pittsburgh, Pa.; and Sacramento—ArdenArcade—Roseville, Calif. For CBSA definitions, see http://www.census.gov/population/ 

www/metroareas/metroarea.html. 

2

We also included one additional variable to represent beneficiaries who did not have any 

of the included 70 HCCs. 

 Medicare Physician Profiling
Appendix I: Methodology 

summarizing an individual’s diagnoses into major medical conditions, such 

as vascular disease or severe head injury.3

 To estimate our model, we used 

HCC and expenditure data for 2005 and 2006 five percent national samples 

of Medicare FFS beneficiaries.4,5

For all Medicare FFS beneficiaries who received at least one service in 

2005 or 2006 from a physician located in any of our four metropolitan 

areas and who also did not meet our exclusion criteria (see footnote 5), 

we used our risk adjustment model to estimate their total expected 

Medicare FFS expenditures. Based on their expected expenditures, we 

placed beneficiaries into 1 of 25 discrete risk categories.6

 The categories 

were ordered in terms of health status from healthiest (category 1) to 

sickest (category 25). Next, within each risk category and metropolitan 

area, we ranked beneficiaries from 1 to 100 by their total actual annual 

Medicare expenditures, such that the average beneficiary in a given risk 

category and metropolitan area had a rank of 50.7

 We used this rank as our 

risk-adjusted measure of beneficiary resource use. 

Methodology Used to 

Determine 

Beneficiaries’ 

Resource Use 

 

3

Hierarchical Condition Categories (HCCs) collapse the over 15,000 diagnosis codes into 

189 clinically meaningful condition categories which are additionally grouped into 

hierarchies of increasing severity. If a beneficiary’s diagnoses correspond to more than one 

condition within a hierarchy, he or she is assigned only the most severe one. 

4

We derived our expenditure data from beneficiaries’ Part A and Part B Medicare FFS 

claims. We did not include Part D claims because not all Medicare beneficiaries are 

enrolled in a Part D prescription drug plan. We made two adjustments to the data used to 

estimate the model: (1) we annualized the expenditures of beneficiaries who died during 

the year and (2) we capped total annual expenditures for all beneficiaries at $100,000 in 

order to reduce the effect of beneficiaries with extreme values in the model’s estimation. 

5

We excluded several types of beneficiaries: (1) those who were institutionalized for more 

than 3 consecutive months during the year, (2) those who were enrolled in a Medicare 

Advantage plan for any part of the year, (3) those who were newly enrolled in Medicare, 

and (4) those enrolled on the basis of having end-stage renal disease. 

6

We chose the break points for the risk categories based on beneficiaries’ risk scores—the 

ratio of their predicted cost to the sample mean. The first 10 risk categories had intervals of 

0.1, while the subsequent 15 had intervals ranging from 0.2 to 4. We initially specified 26 

risk categories, but dropped the final one containing beneficiaries with risk scores 

exceeding 18.0 because it contained less than 120 beneficiaries in each year. 

7

We included expenditures from all claims submitted on the beneficiary’s behalf, including 

claims from locations outside the four selected metropolitan areas and claims from all 

provider types (hospital inpatient, outpatient, physician, durable medical equipment, 

skilled nursing facility, home health, and hospice). We did not include Part D prescription 

drug costs because not all Medicare beneficiaries are enrolled in a Medicare Part D 

prescription drug plan. 

Page 35 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

To examine the stability of beneficiaries’ resource use, we divided the 2005 

and 2006 beneficiary populations into five ascending groups of nearly 

equal size (quintiles) based on the level of their resource use.8

 We then 

identified beneficiaries in each of the four metropolitan areas who saw a 

physician in their area in 2005 and again in 2006. We measured the stability 

of beneficiaries’ resource use as the percentage of beneficiaries who 

remained in the same quintile in 2006 that they were in during 2005. In 

addition, we determined the percentage of beneficiaries who remained in 

the highest resource quintile. 

For the purposes of this study, we defined a physician’s practice as all 

Medicare FFS beneficiaries who did not meet our exclusion criteria and 

who had at least one evaluation and management visit with the physician 

during the calendar year for cardiologists, internists, and orthopedic 

surgeons, or who received any service from the physician for diagnostic 

radiologists.9,10 To ensure that a physician’s resource use measure would 

not be overly influenced by a few patients with unusually high or low 

Medicare expenditures, we excluded physicians with small practices—

those who treated fewer than 100 of the Medicare patients in our study 

during the year.11 For all physicians, we calculated the average beneficiary 

resource use rank of the patients in their practices,12 which ranged from a 

low of 26.0 to a high of 91.8 in 2006. Next, within each metropolitan area 

and specialty, we ranked physicians on the basis of this average from 1 to 

100 such that the average measure of physician resource use was 50. We 

used this rank as our measure of physician resource use. This measure 

reflects how expensive a physician’s patients are compared to the patients 

of other physicians in the same specialty and area after adjusting for 

Methodology Used to 

Determine and 

Compare Physicians’ 

Resource Use 

 

8

Each beneficiary resource use quintile includes 20 ranks such that the first quintile 

consists of beneficiaries with ranks 1-20 and the last quintile consists of beneficiaries with 

ranks 81-100. 

9

We applied this criterion for diagnostic radiologists because they typically do not have 

evaluation and management visits. 

10According to our definition of a physician’s practice, a beneficiary could belong to the 

practice of multiple specialists in our study. 

11We excluded 28 percent of the physicians in the four specialties in 2005 and 29 percent in 

2006 because they treated less than 100 Medicare patients a year. Our analyses included 

5,890 physicians in 2005 and 5,828 in 2006. 

12Our measure of physicians’ resource use therefore includes all resources used by their 

patients, including those ordered by other providers. 

Page 36 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

differences in patient health status. For example, a cardiologist in Miami is 

only compared to other cardiologists in Miami. 

To examine physicians’ resource use, we divided the physicians into five 

ascending groups (quintiles) of nearly equal size based on the measure of 

their resource use described above.13 In the same manner as we measured 

the stability of beneficiaries’ resource use, we measured the stability of 

physicians’ resource use by determining the percentage of them who 

remained in the same physician resource use quintile from 2005 to 2006. 

We also measured the degree of turnover in the patients seen by 

physicians by computing the percentage of patients seen in 2005 by each 

physician that were also seen by the same physician in 2006. 

We examined utilization patterns by physician resource use quintile by 

decomposing the 2006 Medicare expenditures of physicians’ patients into 

those for institutional services (inpatient hospital and skilled nursing 

care), those for services provided directly by the physician to his or her 

patients, and those for all other services—outpatient hospital, home health 

care, hospice care, durable medical equipment, and all other Part B 

services of Part B providers and suppliers. We also measured the number 

of physicians seen by a physicians’ patients by physician resource use 

quintile. 

Although our measure of a beneficiary’s resource use is independent of the 

beneficiary’s health status, there was an association between physician 

resource use and the mix of healthy and sick patients in physicians’ 

practices—physicians who ranked high in terms of resource use also 

treated a larger proportion of beneficiaries who were in poor health than 

did physicians who ranked low in resource use. However, the resource use 

of all their patients was also consistently higher than that of low resource 

use physicians’ patients regardless of patient health status. Figure 5 shows 

the average resource use of beneficiaries in five health status categories 

 

13Each physician resource use quintile includes 20 ranks such that the first quintile consists 

of physicians with ranks 1-20 and the last quintile consists of physicians with ranks 81-100. 

Page 37 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

across the five physician resource use quintiles.14 For example, patients in 

the healthiest category who were treated by physicians in the highest 

resource use quintile had an average resource use rank of 74, whereas 

similarly healthy patients treated by physicians in the lowest quintile had 

average resource use rank of 53. This ordering of the differences in patient 

resource use by the level of physician resource use is repeated across all 

health categories. It indicates that physicians have consistent patterns of 

resource use with respect to all of their patients, regardless of their 

patients’ health status. 

 

14The five health status categories collapse the 25 risk categories into five broader health 

status categories. Each health status category consists of 5 risk categories, which span the 

following ranges of risk scores (r): r ≤ .5, .5 < r ≤ 1.0, 1.0 < r ≤ 2.0, 2.0 < r ≤ 5.0, 5.0 < r ≤ 18.0. 

The first health category includes the healthiest beneficiaries and comprises, on average, 

27 percent of the Medicare patients seen by the physicians in our study in 2006; the fifth 

includes the sickest beneficiaries and comprises 16 percent of their Medicare patients. The 

second, third, and fourth health categories comprise, respectively, 14, 18, and 25 percent of 

the physicians’ Medicare patients. 

Page 38 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

Figure 5: Beneficiary Resource Use by Health Category for Quintiles of Physician 

Resource Use—Four Specialties in Four Metropolitan Areas, 2006 

Beneficiary resource use

Beneficiary health categorya

Physician resource use quintileb

Source: GAO analysis of CMS claims data.

40

45

50

55

60

65

70

75

5 (high resource use)

4

3

2

1 (low resource use)

5

(sickest)

1 2 3 4

(healthiest)

Note: Beneficiary resource use is averaged across the cardiologists, diagnostic radiologists, 

internists, and orthopedic surgeons in Miami, Fla.; Phoenix, Ariz.; Pittsburgh, Pa.; and Sacramento, 

Calif. who met our requirement for a minimum of 100 Medicare patients in their practice. 

a

Each health category consists of 5 risk categories, which span the following ranges of risk scores (r): 

r ≤ .5, .5 < r ≤ 1.0, 1.0 < r ≤ 2.0, 2.0 < r ≤ 5.0, 5.0 < r ≤ 18.0. The first health category includes the 

healthiest beneficiaries and comprises 43.8 percent of the study population; the fifth includes the 

sickest beneficiaries and comprises 5.5 percent of the study population. The second, third, and fourth 

health categories comprise, respectively, 17.3, 17.4, and 16.1 percent of the study population. 

b

Physicians are divided into five ascending groups of nearly equal size based on the level of their 

resource use, which is based on the average level of resource use of their patients. 

The mix of healthy and sick patients in physicians’ practices did not affect 

the positive relationship we found between average institutional 

expenditures per beneficiary and physician resource use level. Within each 

beneficiary health category, the patients of high resource use physicians 

had average institutional expenditures that exceeded those of the patients 

Page 39 GAO-09-802 Medicare Physician Profiling
Appendix I: Methodology 

of physicians with lower resource use. Similar analyses showed that 

patient mix did not affect (1) the positive relationship between physicians’ 

resource use and the average number of physicians seen by their patients, 

(2) the positive relationship between physicians’ resource use and 

expenditures for all other services provided their patients, and (3) the 

steeper rise in the use of institutional services by physicians’ patients with 

increasing physician resource use as compared to the rise in the use of all 

other services. 

Page 40 GAO-09-802 Medicare Physician Profiling
Appendix II: Comments from the Centers for Appendix II: Comments from the Centers for Medicare & Medicaid Services 

Medicare & Medicaid Services 

Page 41 GAO-09-802 Medicare Physician Profiling
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 42 GAO-09-802 Medicare Physician Profiling
Appendix II: Comments from the Centers for 

Medicare & Medicaid Services 

Page 43 GAO-09-802 Medicare Physician Profiling
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 44 GAO-09-802 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact A. Bruce Steinwald, (202) 512-7114, or steinwalda@gao.gov. 

In addition to the contact named above, Phyllis Thorburn, Assistant 

Director; Alison Binkowski; Nancy Fasciano; Richard Lipinski; Drew Long; 

Jessica Smith; Maya Tholandi; and Eric Wedum made key contributions to 

this report. 

Staff 

Acknowledgments 

 Medicare Physician Profiling
Bibliography Bibliography 

Balas, E. Andrew, Suzanne Austin Boren, Gordon D. Brown, Bernard G. 

Ewigman, Joyce A. Mitchell, and Gerald T. Perkoff. “Effect of Physician 

Profiling on Utilization: Meta-analysis of Randomized Clinical Trials.” 

Journal of General Internal Medicine, vol. 11, no. 10 (1996): 584-590. 

Beckman, Howard B., Anthony L. Suchman, Kathleen Curtin, and Robert 

A. Greene. “Physician Reactions to Quantitative Individual Performance 

Reports.” American Journal of Medical Quality, vol. 21, no. 3 (2006): 192-

199. 

Beckman, Howard B., Thomas Mahoney, and Robert A. Greene. Current 

Approaches to Improving the Value of Care: A Physician’s Perspective. 

The Commonwealth Fund. November 2007. 

Hartig, J.R., and Jeroan J. Allison. “Physician Performance Improvement: 

An Overview of Methodologies.” Clinical and Experimental 

Rheumatology, vol. 25, supplement 47 (2007): S50-S54. 

Jamtvedt, Gro, Jane M. Young, Doris Tove Kristoffersen, Mary Ann 

O’Brien, and Andrew D. Oxman. “Audit and Feedback: Effects on 

Professional Practice and Health Care Outcomes.” Cochrane Database of 

Systematic Reviews, no. 2 (2006). 

Jamtvedt, Gro, Jane M. Young, Doris Tove Kristoffersen, Mary Ann 

O’Brien, and Andrew D. Oxman. “Does Telling People What They Have 

Been Doing Change What They Do? A Systematic Review of the Effects of 

Audit and Feedback.” Quality & Safety in Health Care, vol. 15, no. 6 

(2006): 433-436. 

Kiefe, Catarina I., Jeroan J. Allison, O. Dale Williams, Sharina D. Person, 

Michael T. Weaver, and Norman W. Weissman. “Improving Quality 

Improvement Using Achievable Benchmarks for Physician Feedback: A 

Randomized Controlled Trial.” JAMA, vol. 285, no. 22 (2001): 2871-2879. 

Marder, Robert J., Mark A. Smith, and Richard A. Sheff. “Changing 

Physician Practice: Providing Physicians Useful Feedback.” In Effective 

Peer Review: A Practical Guide to Contemporary Design, 2nd ed., 153-

164. Marblehead, Mass.: HCPro, Inc., 2007. 

Micklitsch, Christine N. and Theresa A. Ryan-Mitlyng. Physician 

Performance Management: Tool for Survival and Success. Englewood, 

Colo.: Medical Group Management Association, 1996. 

Page 45 GAO-09-802 Medicare Physician Profiling
Bibliography 

Mold, James W., Cheryl A. Aspy, and Zsolt Nagykaldi. “Implementation of 

Evidence-Based Preventive Services Delivery Processes in Primary Care: 

An Oklahoma Physicians Resource/Research Network (OKPRN) Study.” 

Journal of the American Board of Family Medicine, vol. 21, no. 4 (2008): 

334-344. 

Nathanson, Philip. “Influencing Physician Practice Patterns,” Topics in 

Health Care Financing, vol. 20, no. 4 (1994): 16-25. 

Pacific Business Group on Health. Advancing Physician Performance 

Measurement: Using Administrative Data to Assess Physician Quality 

and Efficiency. September 2005. 

Paxton, E. Scott, Barton H. Hamilton, Vivian R. Boyd, and Bruce L. Hall. 

“Impact of Isolated Clinical Performance Feedback on Clinical 

Productivity of an Academic Surgical Faculty.” Journal of American 

College of Surgeons, vol. 202, no. 5 (2006): 737-745. 

Teleki, Stephanie S., Rebecca Shaw, Cheryl L. Damberg, and Elizabeth A. 

McGlynn. Providing Performance Feedback to Individual Physicians: 

Current Practice and Emerging Lessons. RAND Health Working Paper 

Series. July 2006. 

Van Hoof, Thomas J., David A. Pearson, Tierney E. Giannotti, Janet P. 

Tate, Anne Elwell, Judith K. Barr, and Thomas P. Meehan. “Lessons 

Learned from Performance Feedback by a Quality Improvement 

Organization.” Journal for Healthcare Quality, vol. 28, no. 3 (2006): 20-31. 

Veloski, Jon, James R. Boex, Margaret J. Grasberger, Adam Evans, and 

Daniel B. Wolfson. “Systematic Review of the Literature on Assessment, 

Feedback and Physicians’ Clinical Performance: BEME Guide No. 7.” 

Medical Teacher, vol. 28, no. 2 (2006): 117-128. 

(290661) Page 46 GAO-09-802 Medicare Physician Profiling
GAO’s Mission The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday afternoon, GAO 

posts on its Web site newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.” 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Phone The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s Web site, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Contact: 

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Ralph Dawn, Managing Director, dawnr@gao.gov, (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, DC 20548 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548 

Public Affairs 

Please Print on Recycled Paper