Medicare Physician Payments: Medicare and Private Payment Differences for Anesthesia Services
Published: 2007-07-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2005 Medicare paid over $1.4 billion for anesthesia services. These services are generally provided by anesthesia practitioners, such as anesthesiologists and certified registered nurse anesthetists (CRNAs). A government-sponsored study found that Medicare payments for anesthesia services are lower than private payments. Congress is concerned that this difference may create regional discrepancies in the supply of anesthesia practitioners, and asked GAO to explore this issue. GAO examined (1) the extent to which Medicare payments for anesthesia services were lower than private payments across Medicare payment localities in 2004, (2) whether the supply of anesthesia practitioners across Medicare payment localities in 2004 was related to the differences between Medicare and private payments for anesthesia services or the concentration of Medicare beneficiaries, and (3) compensation levels for anesthesia practitioners in 2005 and trends in graduate training. GAO used claims data from two anesthesia service billing companies that bill private insurance payers and Medicare to calculate payments by payer for seven anesthesia services in 41 Medicare payment localities. GAO also used data from the Centers for Medicare & Medicaid Services (CMS) and other sources to determine practitioner supply and Medicare beneficiary concentration in 87 Medicare payment localities.
section_title: What GAO Found
paragraphs: GAO found that in 2004 average Medicare payments for a set of seven anesthesia services provided by anesthesiologists alone were 67 percent lower than average private insurance payments in 41 Medicare payment localities--geographic areas established by CMS to account for geographic variations in the relative costs of providing physician services. In 2004, there was no correlation between the overall supply of anesthesia practitioners--that is, the total number of both anesthesiologists and CRNAs per 100,000 people--and either the difference between Medicare and private insurance payments for anesthesia services or the concentration of Medicare beneficiaries in the Medicare payment localities included in GAO's analyses. However, when GAO examined the supply of anesthesiologists and CRNAs separately, GAO found correlations between practitioner supply and payment differences and practitioner supply and beneficiary concentration. Specifically, GAO found that in 2004, the supply of CRNAs tended to decrease as the difference between Medicare and private insurance payments for anesthesia services increased in 41 Medicare payment localities. GAO also found that in 2004 the supply of anesthesiologists tended to decrease as the concentration of Medicare beneficiaries increased across 87 Medicare payment localities, while the supply of CRNAs tended to increase as the concentration of Medicare beneficiaries increased across these Medicare payment localities. For 2005, compensation for anesthesia practitioners was reported to compare favorably with other practitioners, according to information from medical group practices from across the country that responded to a survey of Medical Group Management Association (MGMA) member organizations. The 2005 median annual compensation for general anesthesiologists--approximately $354,240--was over 10 percent higher than the median annual compensation for specialists and over twice the compensation for generalists. For 2005, MGMA-reported median annual compensation for CRNAs-approximately $131,400--was over 40 percent higher than the MGMA-reported median annual compensation for either nurse midwives or nurse practitioners and over 35 percent higher than the MGMA-reported median annual compensation for physician assistants. The number of anesthesiology residency positions offered through the National Resident Matching Program and the number of nurse anesthesia graduates have increased in recent years. CMS stated that the study provided a good summary of information collected from a variety of sources on anesthesia payments and the supply of anesthesia practitioners.

section_title: Letter
paragraphs: In 2005, Medicare—the federal program that helps pay for physician and  other health care services furnished to the nation’s elderly and disabled— paid over $1.4 billion for anesthesia services, which are services  associated with the administration of anesthesia to patients undergoing  surgical or other invasive procedures. Anesthesia services can be  delivered in a variety of settings and are generally provided by anesthesia  practitioners, which include anesthesiologists and certified registered  nurse anesthetists (CRNAs).
Before 1992, Medicare paid for physician services, which include  anesthesia services, using a methodology based on physicians’ historical  charges. In 1992, this methodology was replaced by a physician fee  schedule that based payments for physician services on the amount of  resources used to provide each service relative to all other services,  adjusted for differences in the costs of providing the service across  geographic areas, known as Medicare payment localities. Under the new  physician fee schedule, Medicare payments for some specialties were  expected to increase while payments for other specialties, including  anesthesiology, were expected to decrease compared with the payments  based on physicians’ historical charges. After the first year the physician  fee schedule was in effect, Medicare payments for some physician  specialties—such as general and family practice—increased while  payments for other specialties—such as surgery—decreased. An analysis  of 1992 data by the Physician Payment Review Commission (PPRC) found  that Medicare payments per service for general and family practitioners  increased by 10 percent, while payments per service for surgical  specialties decreased by 8 percent overall during this time period.
While there have been increases in Medicare payments for anesthesia  services since the implementation of the physician fee schedule,  anesthesia practitioners have maintained that Medicare payments for  anesthesia services are too low, especially when compared with the  payments for such services made by private insurance payers. In a 2002  survey of health plans sponsored by the Medicare Payment Advisory  Commission (MedPAC), researchers estimated that Medicare payments for  anesthesia services were about 61 percent lower than private insurance  payments. In contrast, a more recent analysis conducted for MedPAC of  2004 claims data found that Medicare payments for physician services,  excluding anesthesia services, were, on average, 17 percent lower than  private payments.
Congress is concerned that regional differences between Medicare and  private payments for anesthesia services may create discrepancies in the  supply of anesthesia practitioners, which in turn could adversely affect  access to services for Medicare beneficiaries in some areas. In particular,  there is a concern that anesthesia practitioners will choose to practice in  areas where private payments for anesthesia services are highest relative  to Medicare payments and avoid areas where Medicare beneficiaries are  more concentrated relative to the general population. While we previously  reported on the impact of income—of which Medicare payments are one  source—on physicians’ decisions on where to locate and on Medicare  beneficiary access to physician services, our work did not focus on  specific specialists such as anesthesiologists or nonphysician practitioners  such as CRNAs. In 2005 we reported that physician income, regardless of  its source, was generally not a primary factor influencing physicians’  decisions to locate in rural areas, and in 2006 we reported evidence of  recent increases in Medicare beneficiary access to physician services.  However, the difference between Medicare and private payments for  anesthesia services is larger than the difference in payments for other  physician services, raising the concern that Medicare payment levels could  affect where anesthesia practitioners locate and more generally whether  interest in anesthesiology as a profession is also affected.
You asked us to examine the difference between Medicare and private  payments for anesthesia services, and whether the supply of  anesthesiologists in an area relative to the general population is related to  the concentration of Medicare beneficiaries in the area. In this report, we  describe (1) the extent to which Medicare payments for anesthesia  services were lower than private payments across Medicare payment  localities in 2004, (2) whether the supply of anesthesia practitioners across  Medicare payment localities in 2004 was related to the differences  between Medicare and private payments for anesthesia services or to the  concentration of Medicare beneficiaries in these localities, and   (3) compensation levels for anesthesia practitioners compared to other  health care practitioners in 2005 and trends in the number of  anesthesiology residency positions and the number of graduates of nurse  anesthesia programs.
To examine the extent to which Medicare payments for anesthesia  services were lower than private payments, we used 2004 anesthesia  service claims data from two billing companies that bill and track  payments from private payers and Medicare on behalf of anesthesia  practitioners. The two billing companies together provided billing services  on behalf of over 10 percent of all anesthesiologists in the country in 2004.  Although the anesthesia service claims data from the two companies may  not be generalizeable to all anesthesia services provided by  anesthesiologists, billing company officials stated that their claims data  were generally representative of other companies that provide billing for  anesthesia services and that anesthesia practitioner groups that did not  use billing services were not that different from groups that did use billing  services. We ranked the anesthesia service codes present in the claims  data in order of prevalence across the Medicare payment localities  represented in the billing companies’ claims data. Based on the rankings  and prevalence across localities, we identified a set of seven anesthesia  services provided by anesthesiologists alone that were most prevalent and  well represented across the Medicare payment localities included in the  claims data. We retained claims data for all seven of these anesthesia  services in 41 of Medicare’s 89 payment localities to include in our  analyses. See table 1 in appendix I for descriptions of the seven selected  anesthesia services. Using these data, we calculated payment  differences—that is, the percentage by which Medicare payments were  lower than private payments, calculated as the difference between average  private and Medicare payments as a percentage of average private  payments—for the seven selected anesthesia services in each of the 41  Medicare payment localities.
To determine whether the supply—that is, the number—of anesthesia  practitioners was related to the differences between Medicare and private  payments for anesthesia services, we examined the correlation between  the payment differences for the set of seven anesthesia services provided  in the 41 Medicare payment localities and the supply of anesthesia  practitioners in the same 41 localities and determined whether they were  statistically significant. Due to data limitations, our analyses of payment  differences were based on anesthesia services performed by  anesthesiologists alone. However, we included CRNA supply in our  analysis of anesthesia practitioner supply because we had sufficient data  on their supply and because they are major providers of anesthesia  services to Medicare beneficiaries. To estimate the supply of anesthesia  practitioners, we used 2004 data from the American Medical Association  (AMA), the American Association of Nurse Anesthetists (AANA), the U.S.  Census Bureau, and Centers for Medicare & Medicaid Services (CMS) to  determine the number of anesthesia practitioners—both anesthesiologists  and CRNAs, separately and combined—per 100,000 people. To determine  whether the supply of anesthesia practitioners was related to the  concentration of Medicare beneficiaries, we examined the correlation  between the supply of anesthesia practitioners and the concentration of  Medicare beneficiaries in the general population across 87 of Medicare’s  payment localities and determined whether they were statistically  significant.
To compare compensation levels of anesthesia practitioners with those of  certain other physicians and nonphysician practitioners, we obtained 2005  compensation information from the Medical Group Management  Association’s (MGMA) Physician Compensation and Production Survey,  2006 Report Based on 2005 Data. The MGMA report contains  compensation information for physicians and nonphysician practitioners  from MGMA member organizations that participated in the survey. MGMA  member organizations include medical group practices from across the  country. To examine selected trends in the number of anesthesiology  residency positions and in the number of graduates of nurse anesthesia  programs, we used data from the National Resident Matching Program  (NRMP) and the Council on Certification of Nurse Anesthetists (CCNA).  We used these data to examine the number of anesthesiology residency  positions offered and filled through the NRMP between 2000 and 2006 and  to examine trends in the number of newly graduated nurse anesthetists  between 1999 and 2006.
Our analyses aggregated data to the Medicare payment locality level and  as a result may not capture variations in payment differences, anesthesia  practitioner supply, and Medicare beneficiary concentration that might  exist below the locality level. Additionally, we do not know if the payment  differences, anesthesia practitioner supply, or Medicare beneficiary  concentrations calculated at the locality level are representative of all  areas within a locality, particularly for localities that encompass entire  states. We limited our correlation analyses to determining whether a  statistically significant association existed between the supply of  anesthesia practitioners and payment differences or Medicare beneficiary  concentration. However, practitioners’ decisions on where to locate could  be influenced by many other factors and at levels not captured by our  analysis at the Medicare payment locality level.
To ensure the reliability of the data we used, we interviewed officials from  the billing companies and other organizations that provided us with data,  and reviewed documentation relating to anesthesia service claims,  anesthesia practitioner supply, and Medicare beneficiary information. We  tested the internal consistency and reliability of all the data and  determined they were adequate for our purposes. For more information on  our scope and methodology and on the reliability of our data, see   appendix I. We performed our work from September 2004 through May  2007 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: Anesthesia services are generally administered by anesthesia practitioners,  such as anesthesiologists and CRNAs. In 2004, there were approximately  42,000 anesthesiologists and 30,000 CRNAs in the United States.  Anesthesiologists are physicians who have completed a bachelor’s degree,  medical school, and an anesthesiology residency, typically 4 years in  length. CRNAs are licensed as registered professional nurses and have  completed a bachelor’s degree and a 2- or 3-year nurse anesthesia graduate  program. In our prior work, we showed that physician specialists, who  include anesthesiologists, tend to locate in metropolitan areas.
Anesthesia services can be provided in several ways. Anesthesia services  can be provided by anesthesiologists alone, by anesthesiologists working  with CRNAs or other practitioners, or by CRNAs alone. In 2004,  proportionally more anesthesia services provided to Medicare  beneficiaries were provided by anesthesiologists working as the sole  anesthesia practitioner and by anesthesiologists working with another  practitioner, such as a CRNA, compared to the proportion of anesthesia  services provided by CRNAs as the sole anesthesia practitioner.
CRNAs can directly bill Medicare for the provision of anesthesia services.  In order to receive Medicare payment for anesthesia services, CRNAs  generally are required to practice under the supervision of a physician or  an anesthesiologist, except in states that have obtained an exemption from  this requirement from CMS. As of May 2007, CMS reports that 14 states  had requested and obtained this exemption, which would allow CRNAs to  practice independently without physician supervision in a variety of  inpatient and outpatient settings.
subsections: section_title: Medicare’s Calculation of Payments for Anesthesia Services
paragraphs: Anesthesiologists derive approximately 28 percent of their income from  Medicare. CRNAs derive approximately 35 percent of their patient mix  from Medicare. In the Omnibus Budget Reconciliation Act of 1989,  Congress required the establishment of a national Medicare physician fee  schedule which sets payment rates for services provided by physicians and  other practitioners. Under the Medicare physician fee schedule, Medicare  payments for anesthesia services are generally the lesser of the actual  charge for the service or the anesthesia fee schedule amount. Payments  for anesthesia services are subject to the same annual updates as all other  services paid under the physician fee schedule. However, Medicare  payments for anesthesia services are calculated differently than payments  for other services covered by the physician fee schedule. Specifically,  Medicare fee schedule payments for anesthesia services are calculated  using both “base” and “time” units. The relative complexity of an  anesthesia service is measured by base units; the more activities that are  involved, the more base units assigned by Medicare. The time spent  performing an anesthesia service is measured continuously from when the  anesthesia practitioner begins preparing the patient for services and ends  when the patient may be safely placed in postoperative care and is  measured by 15-minute units of time with portions of time units rounded  to one decimal place. The sum of the base and time units are converted  into a dollar payment amount by multiplying the sum by an anesthesia  service-specific conversion factor, which also accounts for regional  differences in the cost of providing services. As such, each Medicare  payment locality has a unique anesthesia conversion factor assigned by  CMS.
The calculation of the Medicare payment for an anesthesia service  associated with a lens surgery—the most common anesthesia service  provided to Medicare beneficiaries in 2004—performed by an  anesthesiologist or a CRNA working without another anesthesia  practitioner is shown in figure 1. Subject to certain exceptions, Medicare  payments for anesthesia services provided by anesthesiologists and  CRNAs are equal in most situations. For illustrative purposes, we  assumed that the service was provided in the Connecticut payment locality  and took 21 minutes to perform. In 2004, the total Medicare payment for  this service would have been $99.31, which was equal to the product of the  anesthesia service conversion factor specific to the locality ($18.39) and  the sum of the base and time units associated with the anesthesia service  (5.4 total units).
In contrast, Medicare payments for other physician services are calculated  using relative value units (RVUs) that correspond to the different  resources required to provide physician services. The RVUs are each  adjusted to account for geographic differences in the cost of providing  services, summed, and then multiplied by a general fee schedule  conversion factor, which is applicable across all Medicare payment  localities.
section_title: Physician Acceptance of Medicare’s Payment as Payment in Full
paragraphs: Physicians who bill Medicare for services can accept Medicare’s payment  as payment in full (with the exception of the ability to bill a Medicare  beneficiary for 20 percent coinsurance plus any unmet deductible). This is  known as accepting assignment. Or they may exercise an option to bill a  Medicare beneficiary for the difference between Medicare’s payment and  its limiting charge. This is known as balance billing. High rates of  assignment may serve as an indicator of physicians’ willingness to serve  Medicare beneficiaries. In April 2004, 99.4 percent of the anesthesia  services provided by anesthesiologists to Medicare beneficiaries were  provided by anesthesiologists who accepted Medicare payment as  payment in full. The anesthesiologists’ assignment rate for anesthesia  services was comparable to rates for other hospital-based specialists, such  as pathologists (99.4 percent) and radiologists (99.6 percent), and was  higher than the rate for all other physicians (98.8 percent).
section_title: Anesthesia Practitioners Can also Provide Other Physician Services
paragraphs: In addition to anesthesia services, anesthesiologists and CRNAs can also  provide other nonanesthesia types of physician services covered by  Medicare. Payments for these other physician services—which can include  medical services such as office visits, and procedures such as pain  management services—represented approximately 31 percent of  anesthesiologists’ and 2 percent of CRNAs’ revenue from Medicare in  2004. Because payment for these services is determined by a different  formula than anesthesia services, a significant portion of these Medicare  payments are closer to private payments levels for the same services, in  contrast to the difference in payments for anesthesia services. According  to a MedPAC-sponsored analysis, the average difference between  Medicare and private payments for medical services such as office visits  and for procedures provided in 2001 was 5 percent and 25 percent,  respectively.
section_title: Market Factors Influence Private Payments
paragraphs: Most private payers, like Medicare, determine payments for anesthesia  services using base units, time units, and anesthesia-specific conversion  factors. Unlike the Medicare program, however, private payers can set  their fees in response to market forces such as managed care prevalence  and the extent of competition among providers. For example, private  anesthesia conversion factors are generally negotiated between payers and  anesthesia practitioners. In addition, some private payers use different  methods to determine time units, such as rounding up fractional time units  to the next whole number or using 10-minute increments for each time  unit, which can result in higher anesthesia payments. When setting  payment rates, some private payers also allow higher payments for certain  patient-related factors such as extremes in age.
In our prior work we found that private payments for physician services,  excluding anesthesia and some other services, differed by about   100 percent between the lowest- and the highest-priced metropolitan areas  and were responsive to market forces, such as regional differences in the  extent of competition among hospitals and health maintenance  organizations’ (HMOs) ability to leverage prices. For example, we found  that areas with less competition and lower levels of HMO price leverage  had higher payments than areas with more competition and greater levels  of HMO price leverage. We have also reported that because private payers  can adjust their payment levels to account for market forces, their  payment levels vary more than Medicare payments across geographic  areas.
section_title: Average Medicare Payments for Anesthesia Services Provided by Anesthesiologists Alone Ranged from 51 Percent to 77 Percent Lower than Average Private Payments
paragraphs: We found that average Medicare payments for a set of seven anesthesia  services provided by anesthesiologists alone were lower than average  private payments in 41 Medicare payment localities in 2004, and ranged, on  average, from 51 percent lower to 77 percent lower than private payments  (see fig. 2). For all 41 payment localities, Medicare payments were lower  than private payments by an average of 67 percent. In 2004, the average  Medicare payment for a set of seven anesthesia services was $216, and the  average private payment for the same set of anesthesia services was $658.
Medicare payments varied less than private payments across the 41  payment localities. In 2004, average Medicare payments for the set of  seven anesthesia services ranged from $177 to $303 across the 41 payment  localities, a range of 71 percent. In contrast, average private payments for  the same set of seven anesthesia services in that same year ranged from  $472 to over $1,300 across these localities, a range of 177 percent.
section_title: Overall Supply of Anesthesiologists and CRNAs Combined Was Not Correlated with Payment Differences for Anesthesia Services or Concentration of Medicare Beneficiaries
paragraphs: In 2004, there was no correlation between the overall supply of anesthesia  practitioners—that is, the total number of both anesthesiologists and  CRNAs per 100,000 people—and either the difference between Medicare  and private payments for anesthesia services or the concentration of  Medicare beneficiaries in the Medicare payment localities included in our  analyses. However, when we examined the supply of anesthesiologists  and CRNAs separately, we found correlations between practitioner supply  and payment differences and practitioner supply and beneficiary  concentration. Specifically, we found that in 2004, the supply of CRNAs  tended to decrease as the difference between Medicare and private  payments for anesthesia services increased in 41 Medicare payment  localities. We also found that in 2004, the supply of anesthesiologists  tended to decrease as the concentration of Medicare beneficiaries  increased across 87 Medicare payment localities, while the supply of  CRNAs tended to increase as the concentration of Medicare beneficiaries  increased across these Medicare payment localities.
subsections: section_title: Overall Supply of Anesthesia Practitioners Was Not Correlated with Payment Differences for Anesthesia Services, While Supply of CRNAs Was Related
paragraphs: We found no correlation between the overall supply of anesthesia  practitioners per 100,000 people and the difference in Medicare and  private payments for anesthesia services across 41 of Medicare’s payment  localities in 2004. The supply of anesthesia practitioners varied across the  41 localities independent of the payment differences in these localities and  the payment differences varied independently of the supply of anesthesia  practitioners in the localities. When we considered anesthesiologists and  CRNAs separately, we found a relationship between the supply of CRNAs  and the payment differences for anesthesia services across the 41  Medicare payment localities in 2004. Specifically, there tended to be fewer  CRNAs in the localities with the larger differences between Medicare and  private payments for anesthesia service. For example, on average, there  were about 11.5 CRNAs per 100,000 people in the localities where private  payments exceeded Medicare payments by about 59 percent, while there  were fewer CRNAs—on average, about 7.5 per 100,000 people—in the  localities where private payments exceeded Medicare payments by about  73 percent. In contrast, we did not find an association between the supply  of anesthesiologists and the differences between Medicare and private  payments for anesthesia services across the same 41 localities.
section_title: Overall Supply of Anesthesia Practitioners Was Not Correlated with Concentration of Medicare Beneficiaries, While Supply of Anesthesiologists and CRNAs Was Related
paragraphs: We found no correlation between the overall supply of anesthesia  practitioners and the concentration of Medicare beneficiaries across 87  Medicare payment localities in 2004. The overall supply of anesthesia  practitioners—the number of both anesthesiologists and CRNAs combined  per 100,000 people—varied across the 87 localities independent of the  number of Medicare beneficiaries in these localities.
We found that the supply of anesthesiologists and the supply of CRNAs  were each correlated with the concentration of Medicare beneficiaries  across 87 payment localities in 2004. However, we found the opposite  relationship between the concentration of Medicare beneficiaries and the  supply of anesthesiologists and the supply of CRNAs. We generally found  fewer anesthesiologists in localities with a greater concentration of  Medicare beneficiaries. For example, in 2004, in localities where on  average 17 percent of the population was made up of Medicare  beneficiaries, there were 13 anesthesiologists per 100,000 people. For  localities where, on average, 11 percent of the population was made up of  Medicare beneficiaries, the supply of anesthesiologists was relatively  higher at 16 per 100,000 people. In contrast, we generally found more  CRNAs in localities with higher concentrations of Medicare beneficiaries.  For example, in 2004, on average, there were 14 CRNAs per 100,000 people  in localities where the proportion of Medicare beneficiaries was   17 percent, on average, but half that supply—7 CRNAs per 100,000  people—in localities where 11 percent of the population was Medicare  beneficiaries. The larger supply of CRNAs in localities with greater  concentrations of Medicare beneficiaries appeared to offset the smaller  anesthesiologist supply in these localities so that, in total, there was no  relationship between the overall supply of anesthesia practitioners and the  concentration of Medicare beneficiaries across the 87 localities in 2004.
section_title: Compensation of Anesthesia Practitioners Was Reported to Compare Favorably with Other Practitioners, and Anesthesiology Residencies and Nurse Anesthesia Graduates Have Increased
paragraphs: For 2005, compensation for anesthesia practitioners was reported to  compare favorably to that of other physicians and nonphysician  practitioners, according to information from medical group practices from  across the country that responded to a survey of MGMA member  organizations. The 2005 median annual compensation for general  anesthesiologists—approximately $354,240—was over 10 percent higher  than the median annual compensation for specialists and over twice the  compensation for generalists. When compared to other hospital-based  specialists, the MGMA-reported median annual compensation for general  anesthesiologists was higher than that for three categories of pathologists  and less than that for three categories of radiologists. For example, the  MGMA-reported median annual compensation for general  anesthesiologists was approximately 10 percent higher than the MGMA- reported median annual compensation for anatomic and clinical  pathologists. MGMA data also showed that the median annual  compensation for pain management anesthesiologists and pediatric  anesthesiologists exceeded the median annual compensation for general  anesthesiologists and all categories of pathologists and radiologists.  Similarly, for 2005, the MGMA-reported median annual compensation for  CRNAs—approximately $131,400—was higher than the MGMA-reported  median annual compensation for other nonphysician practitioners such as  nurse practitioners, nurse midwives, and physician assistants. For  example, the MGMA-reported median annual compensation for CRNAs  was over 40 percent higher than the MGMA-reported median annual  compensation for either nurse midwives or nurse practitioners and over   35 percent higher than the MGMA-reported median annual compensation  for physician assistants.
The number of anesthesiology residency positions offered through the  NRMP and the number of nurse anesthesia graduates have increased in  recent years. From 2000 to 2006 the number of residency positions  available in anesthesiology through the NRMP increased from 1,005 to  1,311, and the number of these positions that were filled increased from  802 to 1,287. By 2006, the anesthesiology residency match rate—the  percentage of positions that have been filled—was 98 percent. This rate  was higher than the rate for pathologists, radiologists, and all physicians in  2006. In addition, there has been a significant increase in the number of  newly graduated nurse anesthetists. According to the Council on  Certification of Nurse Anesthetists (CCNA), in 1999, nurse anesthesia  programs produced 948 new graduates; in 2005, that number had  increased to 1,790, an overall increase of 89 percent.
section_title: Agency and External Comments and Our Evaluation
paragraphs: We provided a draft of this report to CMS and to two external commenters  that represent anesthesia service practitioners; the AANA and the  American Society of Anesthesiologists (ASA). CMS’s written comments  are reprinted in appendix II.
CMS stated that our study provides a good summary of information  collected from a variety of sources on anesthesia payments and the supply  of anesthesia practitioners but was concerned that our analysis of  payment differences for anesthesia services did not include four of the top  five Medicare anesthesia services in terms of Medicare payments. CMS  noted that private payer rates are not a criterion under the law to  determine whether Medicare physician payments are reasonable and  stated that the Medicare and private payment differences for anesthesia  services do not necessarily indicate a deficiency in Medicare payment  rates. CMS also suggested that the report should mention that the services  of CRNAs in most rural hospitals and critical access hospitals are paid on  a reasonable cost basis—not under the physician fee schedule—and that  payments based on reasonable costs could affect Medicare and private  payment differences for anesthesia services in these areas.
One of the external commenters generally agreed with our findings. The  other external commenter agreed with our finding regarding payment  differences for anesthesia services, but like CMS questioned our choice of  the anesthesia services included in our analysis of payment differences.  This external commenter was also concerned regarding our finding related  to supply of anesthesia practitioners and believed that we overestimated  the supply of anesthesiologists based on analysis of its own association  membership counts. Both external commenters stated that we should have  addressed aspects of payments to anesthesia service practitioners that  were not included in our analysis. Specifically, one external commenter  stated we should have examined the use of stipends by hospitals to  augment anesthesiologists’ compensation. The other external commenter  stated we should have included analysis of Medicare and private  anesthesia service payments to CRNAs, including analysis of anesthesia  services during which CRNAs work with anesthesiologists or provide the  services as the sole anesthesia practitioner.
We carefully considered which anesthesia services to include in our  analysis of Medicare and private payment differences for anesthesia  services, but were not able to include all of the high-volume Medicare  anesthesia services. In order to calculate the difference between Medicare  and private payments for anesthesia services and include the maximum  number of localities in our analysis, it was essential to include anesthesia  services that were high volume for both Medicare and the private sector.  Some anesthesia services that were high volume for Medicare  beneficiaries, for example anesthesia for lens surgery, were not as high  volume for private patients and were not included for that reason. We  agree with CMS that differences between Medicare and private payments  for anesthesia services are not a statutory criterion for determining  Medicare payments for these services and added this clarification to our  report. We also clarified that Medicare payments for CRNA anesthesia  services provided in rural and critical access hospitals could be paid on a  reasonable cost basis and added a statement to the report stating this fact.  However, we did not determine the extent to which Medicare and private  payments to CRNAs practicing in rural and critical access hospitals  differed as this was beyond the scope of our study.
In response to the external commenter’s concern regarding the accuracy  of our estimate of the supply of anesthesiologists, we believe the AMA  data that we used to calculate the supply of anesthesiologists represent  the most complete and accurate data source for analyzing physician  supply, and that the external commenter estimates of supply based on  association membership counts may underestimate supply because it is  likely that some anesthesiologists do not belong to the association.  Additionally, we checked our calculations regarding the supply of  anesthesiologists and verified that we had removed inactive and  nonpracticing anesthesiologists from our supply estimates. We did not  include a discussion of stipends paid by hospitals to anesthesia service  practitioners. Stipends are reported to be paid to a variety of specialists,  including anesthesiologists, for several reasons, including to compensate  specialists for treating a high proportion of Medicare beneficiaries, 24- hour coverage of trauma units, and to help cover costs associated with  treating uninsured patients. As our study focused on Medicare and private  payments for anesthesia services and overall compensation for anesthesia  practitioners, it was beyond the scope of our study to examine this issue in  further detail. We agree with the external commenter that it would have  been preferable to include payments for CRNA anesthesia services in our  analysis, but were not able to do this due to data limitations.
The external commenters provided us with technical comments and  clarifications, which we incorporated as appropriate.
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section_title: Appendix I: Scope and Methodology
paragraphs: This appendix describes in detail the data and methods we used to  calculate differences in Medicare and private anesthesia service payments,  anesthesia practitioner supply, and Medicare beneficiary concentration. It  also describes the correlation analyses we conducted to determine the  relationship between anesthesia practitioner supply measures, differences  in anesthesia service payments, and Medicare beneficiary concentration.  Finally, this appendix addresses data reliability issues and limitations  related to our studies.
subsections: section_title: Difference in Medicare and Private Payments for Anesthesia Services
paragraphs: To examine the extent to which Medicare payments for anesthesia  services were lower than private payments across Medicare payment  localities in 2004, we used anesthesia service claims data from two billing  companies that bill and track payments from private payers and Medicare  and calculated payments by payer for services provided by  anesthesiologists alone at the Medicare payment locality level. This  provided us with average Medicare and private payments for a set of  anesthesia services. We then calculated payment differences—that is, the  percentage by which Medicare payments were lower than private  payments, calculated as the difference between average private and  Medicare payments as a percent of average private payments—for each of  the localities included in our analysis.
To calculate the difference between Medicare and private payments for  anesthesia services, we used 2004 anesthesia service claims data from two  companies that bill private payers and Medicare on behalf of anesthesia  practitioners. We obtained names of several billing companies from  interviews with industry experts who were knowledgeable about industry  billing practices. We chose to use anesthesia service claims data from  billing companies because such data contain claims from many different  insurers in an area. The two billing companies from which we obtained  claims data together provided billing services on behalf of over 10 percent  of all anesthesiologists in the country in 2004. Although the anesthesia  service claims data from the two companies may not be generalizeable to  all anesthesia services provided by anesthesiologists, billing company  officials stated that their claims data were generally representative of  other companies that provided billing for anesthesia services and that  anesthesia practioner groups that did not use billing services were not that  different from groups that did use billing services.
The billing companies provided us with claims data for anesthesia services  provided in 2004, including payment information for the 27 highest- expenditure anesthesia services paid for by Medicare in 2003, which  accounted for approximately 70 percent of Medicare anesthesia service  expenditures in 2003. The specific information the billing companies  provided included data on the type of payer; the anesthesia service code;  payment modifiers that specified the type of anesthesia practitioner  involved; total minutes of time required to perform the service; payments,  including insurer and beneficiary payments; and the Medicare payment  locality in which the service was provided. Due to the proprietary nature  of the data and concerns about identification of providers or beneficiaries,  the billing companies could not provide payment information at a smaller  geographic level. Therefore, Medicare payment localities were the smallest  areas for which we could examine payments for anesthesia services. Only  claims for which fee-for-service Medicare was the payer were included in  our calculation of Medicare payments. For our calculation of private  payments for these services, we included fee-for-service, preferred  provider organization, and managed care claims from all commercial  payers. Average payments included payments made by insurers as well as  patient obligations such as deductibles and coinsurance payments.  Because our study compared Medicare and private payments only, we  excluded the billing companies’ claims from other payers of anesthesia  services, such as Medicaid and workers’ compensation funds. We also  excluded any claims for which we could not definitively identify the payer.
Although both billing companies provided claims data, one company  provided information at the individual claims level while the other  company provided claims information summarized to the case level. For  the individual claims-level data, we excluded claims from the analysis if  the average anesthesia service payment was greater than or less than 3  standard deviations from the log of the average anesthesia service  payment, specific to each anesthesia service, Medicare payment locality,  and payer. We applied similar criteria to anesthesia service conversion  factors (which we calculated as the total payment for the service divided  by the sum of the base and time units associated with the service) in the  individual claims-level data. Because data from the other company were  summarized, we were not able to apply similar exclusion criteria. Instead,  prior to providing the claims data to us, the billing company excluded  claims if an individual Medicare or private anesthesia service payment was  less than 10 percent of the Medicare allowable payment for the locality in  which the service was provided or if the receivable was greater than $50.  We excluded claims paid by Medicare from the data provided by either  billing company if the Medicare anesthesia conversion factor did not  match any of the Centers for Medicare & Medicaid Services’ (CMS)  established conversion factors, based on the localities present in the data.  We examined descriptive statistics for both data sets after all exclusions  were applied and determined that it would be appropriate to merge the  two data sets to calculate payment differences.
After applying these and other exclusion criteria, we ranked the anesthesia  service codes in order of prevalence across the Medicare payment  localities represented in the billing companies’ claims data. Based on the  rankings and prevalence across localities, we identified a set of seven  anesthesia services that were most prevalent and well represented across  the Medicare payment localities included in the claims data. We balanced  the need for maximizing the number of localities with having a set of  anesthesia services that were prevalent in all of the localities chosen. In  our final data set we retained billing company claims data for all seven of  these anesthesia services in 41 different Medicare payment localities.  These seven anesthesia services were services provided by  anesthesiologists only. We did not have a sufficient volume of claims for  anesthesia services provided by certified registered nurse anesthetists  (CRNAs) alone to include data from CRNA-performed services in our  analysis. We also did not include data for anesthesia services provided by  anesthesiologists with the involvement of other anesthesia practitioners  because the billing data for these services from the two billing companies  were not consistent and we therefore determined them to be not reliable.
Medicare and private payments were both weighted to account for the  relative national expenditures for each of the seven anesthesia services by  Medicare in 2003 (see table 1). For example, because anesthesia services  for intraperitoneal procedures in the upper abdomen including  laparoscopy accounted for approximately one-third of Medicare  expenditures for the seven selected codes combined, approximately one- third of the overall average payment we calculated for each locality was  based on payments for this service. There were far fewer Medicare  expenditures associated with anesthesia for hernia repairs in the lower  abdomen, not otherwise specified and therefore payments for these  services had a much smaller weight in overall average payment  calculations. Over 136,000 Medicare and private anesthesia service cases  were included in our calculation of payment differences.
Using the weighted average Medicare and private payments, we calculated  payment differences for each of the 41 Medicare payment localities  included in our analysis. We also calculated an overall average payment  difference inclusive of data from all 41 localities.
To examine a payment variable that was not influenced by variation in  time, we examined the difference in conversion factors for Medicare and  private anesthesia services, using the seven services provided by  anesthesiologists in the 41 Medicare payment localities. The average  difference in conversion factors was 69 percent, an amount very similar to  the difference in Medicare and private payments. Therefore, we focused  our analyses on the difference in Medicare and private payments.
section_title: Supply of Anesthesia Practitioners
paragraphs: To estimate anesthesia practitioner supply at the locality level, we used  data from the American Medical Association (AMA), the American  Association of Nurse Anesthetists (AANA), the U.S. Census Bureau, and  CMS. Only active anesthesiologists and CRNAs practicing in the 50 states  and the District of Columbia were included in our analysis. We assigned  anesthesia practitioners and the number of total U.S. general population  residents to 87 Medicare payment localities.10,,11 12 To determine supply per  100,000 people, we divided the number of anesthesia practitioners in each  locality by the total resident population in the same locality, multiplied by  100,000. (See table 2).
section_title: Concentration of Medicare Beneficiaries
paragraphs: To estimate the concentration of Medicare beneficiaries at the locality  level, we used CMS and U.S. Census Bureau data. Using a geographic  crosswalk file, we assigned the number of beneficiaries enrolled in  Medicare and the number of total U.S. general population residents to  Medicare payment localities. We then computed the percentage of  Medicare beneficiaries in the general population to estimate the  concentration of Medicare beneficiaries in each Medicare payment  locality. (See table 3).
section_title: Correlation Analysis
paragraphs: To measure the relationship between the supply of anesthesia  practitioners, the difference in average Medicare and private payments,  and the concentration of Medicare beneficiaries at the locality level, we  performed correlation analyses. A correlation coefficient measures the  strength and direction of linear association between two variables without  controlling for the effects of other characteristics as in a multivariate  analysis.
We calculated correlations between three measures of anesthesia  practitioner supply—anesthesiologists, CRNAs, and total  (anesthesiologists and CRNAs combined)—and differences in payments in  41 Medicare payment localities. We also calculated correlations between  the three supply measures and the concentration of Medicare beneficiaries  in 87 Medicare payment localities. (See tables 4 and 5 below.)
section_title: Data Reliability and Study Limitations
paragraphs: We used a variety of data sources in our analysis, including anesthesia  service claims data from two billing companies, the AMA, the AANA, the  U.S. Census Bureau, CMS, the National Resident Matching Program  (NRMP), and the Medical Group Management Association (MGMA). We  tested the internal consistency and reliability of all our data sources and  determined they were adequate for our purposes. The files containing the  billing company data, which were used by the two companies to record  bills and payments, were subjected to various internal controls, including  spot checks, batch totals, and balancing controls as reported by the two  companies. Although we did not review these internal controls, we did  assess the reliability of the billing company data. We conducted extensive  interviews with representatives from both companies to gain an  understanding of the completeness and accuracy of the data the  companies provided. We also reviewed all information provided to us  concerning the data, including data dictionaries and file layouts.
Additionally, we examined the data for errors, missing values, and values  outside of expected range and computed payment differences from each  company’s data separately and found them to be comparable. Finally, we  determined that our calculation of anesthesia service payment differences  was comparable with the results of a MedPAC-sponsored study. We also  assessed the reliability of median compensation information reported by  MGMA. Although multiple compensation surveys are available, we chose  to use MGMA as our data source because it has been used as a source in a  number of peer-reviewed articles, and it contains comprehensive  information on various aspects of physician compensation. Through  interviews with MGMA officials, we learned of the steps taken by MGMA  to ensure the reliability of the data the association published on median  compensation, including comparisons with other industry studies on  physician and nonphysician compensation and year-to-year analyses of  respondents.
We identified several potential limitations of our analyses. First, while we  used payment data from 41 different Medicare payment localities, we do  not know if the payment data are representative of all 89 of Medicare’s  payment localities. Second, we did not have sufficient payment  information to calculate payment differences for anesthesia services  provided by anesthesiologists working with other anesthesia practitioners  or anesthesia services provided solely by CRNAs. As a result, we do not  know if payment differences for services provided in these ways would  have been different than payment differences for anesthesia services  provided by anesthesiologists alone. Third, we limited our analyses to  determining whether the supply of anesthesia practitioners was linearly  associated with payment differences or Medicare beneficiary  concentration. However, practitioners’ decisions on where to locate could  be influenced by many other factors not included in our analyses. We also  identified potential limitations with MGMA’s compensation data. The data  were based on a survey of MGMA member organizations which are  reported to overrepresent large medical groups. In addition, the MGMA  survey response rate of 16 percent raises the possibility that their  compensation data may not be representative of the compensation of all  physician and nonphysician practitioners. We performed our work from  September 2004 through May 2007 in accordance with generally accepted  government auditing standards.
section_title: Appendix II: Comments from the Centers for Medicare & Medicaid Services
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: Acknowledgments
paragraphs: In addition to the contact named above, Christine Brudevold, Assistant  Director; Stella Chiang; Krister Friday; Jawaria Gilani; and Ba Lin made  key contributions to this report.
section_title: Related GAO Products
paragraphs: Medicare Physician Services: Use of Services Increasing Nationwide  and Relatively Few Beneficiaries Report Major Access Problems.   GAO-06-704. Washington, D.C.: July 21, 2006.
Federal Employees Health Benefits Program: Competition and Other  Factors Linked to Wide Variation in Health Care Prices. GAO-05-856.  Washington, D.C.: August 15, 2005.
Medicare Physician Fees: Geographic Adjustment Indices Are Valid in  Design, but Data and Methods Need Refinement. GAO-05-119.  Washington, D.C.: March 11, 2005.
Physician Workforce: Physician Supply Increased in Metropolitan and  Nonmetropolitan Areas but Geographic Disparities Persisted.   GAO-04-124. Washington, D.C.: October 31, 2003.