Since 1992, the Medicare program has used a resource-based fee schedule to pay for physician services in the traditional FFS Medicare program. The physician fee schedule includes three components: the relative value for the service, a geographic adjustment, and a conversion factor. The relative value for a service compares the resources involved in performing one service with those of other services. There are more than 7,000 physician services in the fee schedule and each one is assigned a relative value. The geographic adjustment was designed to ensure that fees appropriately reflect the geographic variation in costs associated with operating a medical practice. Finally, the fee schedule uses a conversion factor expressed in dollars to determine the payment rate for a particular physician service. The conversion factor is updated annually based on the SGR formula, which is set by law. The SGR is a spending target system designed to control growth in spending attributable to increases in the number of services, known as volume, and to the services’ complexity and costliness, known as intensity. Although the SGR formula has called for negative physician fee updates in recent years, Congress has mandated either no change or a positive update that has been less than growth in the estimated cost to physicians for providing their services. Beginning in 2010, physician fees are projected to be reduced by 21 percent, according to the Congressional Budget Office (CBO). Medicare generally pays physicians a predetermined amount for each service provided. Physicians who “accept assignment” are those who agree to accept Medicare’s fee as payment in full. The fee includes the coinsurance amount (usually 20 percent) paid by the beneficiary. Physicians who sign Medicare participation agreements—referred to as participating physicians—must accept assignment for all Medicare- covered services that they provide to beneficiaries. Physicians who do not sign participation agreements—referred to as nonparticipating physicians—can either opt to accept assignment on a service-by-service basis or not at all. When a nonparticipating physician accepts assignment, the fee schedule amount, also known as the Medicare-approved amount, is reduced by 5 percent. Medicare pays the physician 80 percent of the reduced amount; the beneficiary pays 20 percent of the reduced amount. When a nonparticipating physician does not accept assignment, the Medicare-approved amount is also reduced by 5 percent, but the physician may collect from beneficiaries a portion of the difference between his or her charge and the Medicare-approved amount—a practice known as balance billing. Several recent surveys of Medicare beneficiary access to physician services have not identified major access issues. For example, a 2008 Medicare Payment Advisory Commission (MedPAC) survey, a 2007 Center for Studying Health System Change (HSC) survey, a 2007 Commonwealth Fund survey, and a 2007 AARP survey all concluded that Medicare beneficiaries had few problems obtaining physician services. MedPAC found that most beneficiaries were able to schedule timely routine appointments and find a new physician when needed. Additionally, Medicare beneficiaries reported similar or better access to physician services compared to individuals covered by private insurance, according to MedPAC, HSC, Commonwealth Fund, and AARP surveys. Both the Commonwealth Fund and AARP also found that Medicare beneficiaries are more likely than those with private insurance to report high levels of satisfaction with their health care and access to physicians. Physician spending under the Medicare program has historically grown at a rapid pace, at times reaching double-digit increases, but these increases may not mean better health care or better outcomes for beneficiaries. Specifically, some of the higher volume and intensity that drive spending growth may not be medically necessary. Physicians have a financial incentive to perform as many services as possible because Medicare pays them a fee for each service provided, with little accountability for quality or efficiency. The Senate Finance Committee has stated that the combination of high health care spending and lagging quality is unsustainable for both the government and patients. Several studies of geographic variation in Medicare spending have concluded that some utilization may not be warranted. A February 2008 CBO report found that per capita Medicare spending varied substantially among states, ranging in 2004 from $4,000 in Utah to $6,700 in Massachusetts. CBO found that the price paid for health care services and severity of illness were important factors, but cited research indicating that these two factors together likely account for less than half of the geographic variation in spending. CBO also found that patient preferences and income appear to explain little of the variation and concluded that some variation in medical practice may be attributable to differences in the supply of medical resources, such as specialist physicians. Several studies from Dartmouth have found that Medicare beneficiaries living in areas with high levels of health care spending and utilization do not experience better health outcomes or quality of care. One Dartmouth study noted that Medicare spending would fall by 29 percent if spending levels in the lowest decile of areas were realized in all higher spending regions. Dartmouth researchers concluded that geographic variation in Medicare spending can be attributed to how physicians respond to technology, capital, and other resources under FFS. For example, physicians in higher-spending regions were more likely than those in lower-spending regions to recommend discretionary services and more resource-intensive services. Clinical decisions are associated with physician discretion when the evidence does not point clearly to a correct action in a specific clinical situation. In a review of 2,500 treatments for a variety of medical conditions, more than half were subject to physician discretion. Congress has recently shown an interest in varying annual Medicare physician payment updates by geographic area. In the Deficit Reduction Act of 2005, Congress directed MedPAC to examine alternatives to the current payment system, including options that varied payment updates by geographic areas. In a 2007 study, MedPAC found that setting fee update amounts by geographic area would recognize that practice patterns differ regionally and therefore have different contributions to overall growth in volume and spending. MedPAC suggested that regional updates would improve equity across the nation and could help reduce geographic variation over time. Congress has also held hearings on revising the method used to update physician payments, and the Chairman of the Senate Finance Committee has stated that reforming physician payment is an important component of health care reform. Together, the three types of indicators we reviewed show that Medicare beneficiaries experienced few problems accessing physician services. Small percentages of Medicare beneficiaries reported never easily obtaining appointments; measures of beneficiaries receiving physician services increased nationwide from 2000 to 2008; and indicators of physician willingness to serve Medicare beneficiaries and to accept Medicare fees as payment in full also increased from 2000 to 2008. Few Medicare beneficiaries reported major difficulties accessing physician services in 2007 and 2008. (See table 1.) Specifically, among those who needed routine care, very small percentages of beneficiaries reported that it was never easy to schedule an appointment as soon as they felt they needed it—2.5 percent in 2007 and 2.4 percent in 2008. Similarly, in both 2007 and 2008, 2.1 percent of beneficiaries who needed to see a specialist reported that it was never easy to get appointments with specialists when needed. Nationwide, the percentages of beneficiaries who reported major difficulties accessing routine or specialist care were the same for those living in urban areas and in rural areas in 2008—2.4 percent for routine care and 2.1 percent for specialist care. Within every state and the District of Columbia, less than 5 percent of the beneficiaries reported major difficulties accessing physician services in 2008. For example, the proportion of beneficiaries who reported never being able to easily schedule an appointment with a specialist in 2008 ranged from 0.3 percent in North Dakota to 4.7 percent in New Mexico. The proportion of beneficiaries who reported it was never easy to promptly schedule an appointment for routine care ranged from 1.5 percent in Oregon to 4.0 percent in Alaska. In general, the proportion of beneficiaries who received physician services rose during the period covered by our review. (See fig. 1.) Specifically, from 2000 to 2008, the proportion of beneficiaries receiving services during the month of April rose from about 46 percent to about 50 percent. Although the proportion of beneficiaries receiving physician services increased from 2000 to 2008, the rate of increase was not constant. The measure declined slightly in April 2003, but the proportion of beneficiaries receiving services remained about one percentage point higher than in April 2000, and the upward trend resumed in 2004. Nationwide, this measure increased in both urban and rural areas. Specifically, the proportion of beneficiaries receiving services rose from about 47 percent in April 2000 to about 51 percent in April 2008 in urban areas and from about 42 percent in April 2000 to about 45 percent in April 2008 in rural areas. From 2000 through 2008, the proportions of beneficiaries receiving services in April varied by state urban and rural areas. For example, in April 2000, the proportion of beneficiaries served ranged from 28.4 percent in rural Alaska to 51.8 percent in urban Pennsylvania. In April 2008, the proportion of beneficiaries served ranged from 32.7 percent in rural Alaska to 57.5 percent in urban Florida. Within 88 of the 99 urban and rural areas we examined, the proportion of beneficiaries receiving services increased from April 2000 to April 2008. (See fig. 2.) The largest increase in the percentage of beneficiaries receiving services was 7.9 percentage points in rural Maryland. There was a slight decline—less than 1 percentage point—in six areas: rural California, rural Colorado, rural Idaho, urban Maine, rural Montana, and rural Oregon. The largest decline in the proportion of beneficiaries served—about 2 percentage points—occurred in rural New Hampshire and rural Hawaii. From April 2000 to April 2008, an increasing number of services were provided to beneficiaries who were treated by a physician. (See fig. 3.) Specifically, in that period, the average number of services provided per 1,000 beneficiaries who were treated increased by about 15 percent—from about 3,400 to about 3,900. From April 2000 through April 2008, the number of services provided per 1,000 beneficiaries who were treated was lower in rural areas relative to urban areas. However, in percentage terms, the urban and rural areas experienced similar increases in the number of services per 1,000 treated beneficiaries—about a 17 percent increase in urban areas (from about 3,500 in April 2000 to about 4,100 in April 2008) and about a 13 percent increase in rural areas (from about 3,200 in April 2000 to about 3,600 in April 2008). The number of services provided also varied among states’ urban areas and rural areas. For example, in April 2000, the number of services per 1,000 beneficiaries served ranged from about 2,800 in rural Utah to about 3,900 in urban Texas. In April 2008, the number of services per 1,000 beneficiaries served ranged from about 3,100 in rural Hawaii to about 4,500 in urban Florida. Within every state’s urban and rural areas, there was an increase from April 2000 to April 2008 in the average number of services provided for each beneficiary who was treated by a physician. (See fig. 4.) In 59 of the 99 areas we examined, the number of services provided per 1,000 beneficiaries increased by about 12 percent or more. Among the 51 urban areas we examined, the percentage increase in the number of services provided per 1,000 beneficiaries ranged from about 5 percent in Vermont to about 24 percent in New York. Among the 48 rural areas, the increase ranged from about 1 percent in Alaska to about 23 percent in Connecticut. The average number of physician office visits—an indicator of beneficiary access to the typical entry point into the health care system and most basic level of physician services—rose for Medicare beneficiaries from April 2000 to April 2008. (See fig. 5.) The number of office visits increased during that period from about 29 to 31 (about 7 percent) per 1,000 Medicare beneficiaries for new patients and from about 442 to 504 (about 14 percent) per 1,000 Medicare beneficiaries for established patients. Research indicates that an increased number of emergency room visits above the growth in physician services could signify problems accessing primary care because patients who have difficulties obtaining routine care may instead seek health care in emergency rooms. However, our analysis demonstrates similar increases in emergency room visits, total office visits, and overall physician services from 2000 to 2008. Specifically, emergency room visits rose from about 34 to 39 per 1,000 beneficiaries— about 15 percent—which was approximately equal to the increase in total (new and established patient) office visits and the increase in the overall number of physician services per 1,000 beneficiaries treated. Two additional access-related indicators—the number of physicians billing Medicare for services and the percentage of services for which Medicare’s fees were accepted as payment in full—increased since 2000. (See fig. 6.) Specifically, the number of physicians billing Medicare increased from about 419,000 in April 2000 to about 474,000 in April 2007. The number of physicians continued to increase even as the number of beneficiaries in Medicare FFS declined over the last 2 years. The number of beneficiaries in traditional FFS Medicare decreased from about 33.4 million in 2005 to about 31.9 million in 2007, as more beneficiaries joined Medicare Advantage plans. Increases in the number of physicians billing Medicar the number of physicians billing Medicar in spite of the decline in Medicare FFS beneficiaries, suggest that in the in spite of the decline in Medicare FFS beneficiaries, suggest that in the aggregate, ph aggregate, physicians continued to accept FFS Medicare patients during this period. ysicians continued to accept FFS Medicare patients during this period. From April 2000 to April 2008, the majority of Medicare physician services were performed by physicians who accepted Medicare’s fees as payment in full. (See fig. 7.) In April 2000, about 98 percent of physician services were performed by physicians who accepted Medicare’s fee as paymen t in full (on assignment), and in April 2008, about 99 percent of physician services were paid on assignment. A smaller share of beneficiaries were likely subject to balance billing for physician services in April 2008 tha April 2000, as the percentage of services for which physicians did not n in accept Medicare’s fee as payment in full decreased from about 1.8 percent to about 0.7 percent. The proportion of services provided by participating icipating physicians—that is, physicians who formally agreed to participate in the physicians—that is, physicians who formally agreed to participate in the on assignment—increased from Medicare program and submit all claims Medicare program and submit all claims on assignment—increased from about 95 percent in April 2 about 95 percent in April 2000 to about 97 percent in April 2008. 000 to about 97 percent in April 2008. Physicians may decide on an annual basis whether they will be Medicare participating physicians. Potentially overserved areas tend to be the more densely populated urban regions. Higher population density tended to increase an area’s likelihood of being potentially overserved. Nearly half of the 32 metropolitan divisions—the most densely populated group of areas—were potentially overserved. (See table 2.) Similarly, a little more than a quarter of large MSAs were potentially overserved while among small MSA areas and rural areas, barely 1 in 10 was potentially overserved. Of the 296 geographic areas we examined, about one in four was potentially overserved—that is, they were in the top half of areas in both utilization of physician services in 2000 and growth in utilization of these services from 2000 to 2008. Areas that were in the top half in utilization in 2000 were nearly as likely to be in the top half in growth from 2000 to 2008 as areas that started in the bottom half in utilization. Specifically, of the 148 areas that were in the top half in utilization in 2000, 72 were in the top half in growth from 2000 to 2008. (See table 10 in app. I.) Similarly, of the 148 areas that were in the bottom half in utilization in 2000, 76 were in the top half in growth from 2000 to 2008. Potentially overserved areas and other areas experienced wide differences in utilization. These differences tended to be widest in the more densely populated regions. In 2000, the average number of services per beneficiary who received services was 3.58 in potentially overserved areas versus 3.24 in other areas, or a difference of more than 10 percent. (See app. II for more information on utilization by type of geographic area.) Among areas with the largest populations—the metropolitan divisions and large MSAs— average utilization in 2000 was 9 percent higher in potentially overserved areas, compared with a difference of about 5 percent among small MSA areas and 8 percent among rural areas. The growth in utilization from 2000 to 2008 displayed a similar pattern. Overall, the average increase for potentially overserved areas was nearly 18 percent, while for other areas it was just over 12 percent. The average increase in utilization in potentially overserved metropolitan divisions was 21 percent, compared with 12 percent in other metropolitan divisions. For the less densely populated areas, utilization also grew more rapidly in potentially overserved areas, although the gap in growth rates between potentially overserved and other areas tended to be smaller than it was for the metropolitan divisions. For example, the average increase in utilization was 17 percent in potentially overserved large MSAs, compared with 13 percent for other large MSAs. Our analysis found that areas in states east of the Mississippi River were much more likely to be potentially overserved. (See fig. 8.) Of the 174 areas in states that are east of the Mississippi River, 60 were potentially overserved. For example, nearly the entire states of Alabama, Florida, and Illinois comprised potentially overserved areas. Of the 122 areas in states that are west of the Mississippi River, only 12 were potentially overserved. Beneficiaries residing east of the Mississippi River are much more likely to reside in a potentially overserved area, because the most densely populated areas in the east are more likely to be potentially overserved than are those in the west. In 2008 nearly half the beneficiaries who resided in a state east of the Mississippi River were in a potentially overserved area, while in the western part of the country only 1 beneficiary in 10 resided in a potentially overserved area. In terms of population, the largest of the major metropolitan divisions east of the Mississippi River, including New York-White Plains, Chicago-Naperville- Joliet, and Philadelphia, were potentially overserved areas. In contrast, the largest western metropolitan divisions of Los Angeles-Long Beach- Glendale, Dallas-Plano-Irving, and Santa Ana-Anaheim-Irvine were not potentially overserved areas by our measure. Similarly, beneficiaries in five of the six most populous large MSAs in the east were in potentially overserved areas, while beneficiaries in five of the six most populous large MSAs in the west were not. Only a minority of small MSA areas and rural areas in the east were potentially overserved and none of either of these two area types were potentially overserved in the west. (See app. III for a list of all areas.) Potentially overserved areas and other areas are largely similar in characteristics that could drive the use of physician services, including demographic characteristics and the capacity to provide health care services. In contrast, certain types of physician services are performed more frequently in potentially overserved areas than in other areas, suggesting differences in physician practice patterns. Potentially overserved and other areas appear similar in demographic characteristics that could be expected to affect the use of physician services. (See table 3.) For example, in 2006 Medicare beneficiaries in both groups of areas had similar risk scores, meaning they are expected to require similar amounts of Medicare resources because of their health status. Potentially overserved areas and other areas also had a similar racial composition and average income levels, although they differed somewhat in educational attainment. While these local factors are not under the control of the health care delivery system, they could be expected to influence the utilization of health care services. For example, income levels and insurance coverage have been shown to be related to patient preferences and demand for health care. Potentially overserved areas and other areas are also similar in terms of their capacities to provide health care services, as measured by number of beds and physicians per 1,000 people. (See table 4.) Specifically, in 2005, potentially overserved and other areas had a similar number of hospital beds per 1,000 people. In 2004, potentially overserved areas and other areas also had a similar number of physicians per 1,000 people. Studies have demonstrated strong associations between the number of hospital beds and hospital utilization and between physician supply and the rate of physician visits. As table 4 shows, in 2004, potentially overserved areas and other areas had similar numbers of primary care physicians compared to specialists— about a one-to-two ratio. Studies have shown that areas with higher ratios of primary care physicians to specialists have better health outcomes and better meet quality measures, such as administering beta-blockers after a heart attack or performing regular eye exams on diabetic patients. Conversely, studies have demonstrated that areas with more specialty services are associated with higher spending but not better access or health outcomes. Potentially overserved areas and other areas have similar Medicare beneficiary satisfaction, as measured by beneficiary perceptions of health care and health status. (See table 5.) For example, 94 percent of beneficiaries in potentially overserved areas reported having a personal doctor, compared to 93 percent of beneficiaries in other areas. Beneficiaries in both groups of areas also reported similar average health status, and similarly rated their health care and personal doctors highly. This finding is consistent with studies showing that geographic areas with high Medicare spending do not have better outcomes or perceptions of quality of medical care. When we compared types of physician services provided to Medicare beneficiaries, we found that potentially overserved areas and other areas differed in the frequency with which certain categories of physician services are used. (See table 6.) Specifically, we found that in April 2008, potentially overserved areas used substantially more evaluation and management services, minor procedures, and imaging services per 1,000 beneficiaries than other areas. For example, potentially overserved areas had 44 percent more minor procedures—which include services such as ambulatory procedures, eye procedure treatments, and colonoscopies— per 1,000 beneficiaries than other areas. Potentially overserved areas also had 29 percent more laboratory tests and 19 percent more imaging services per 1,000 beneficiaries than other areas. The two groups of areas, however, had similar rates of major procedures. (See app. IV for additional trends in selected physician services in potentially overserved and other areas.) We also found that specific services associated with the exercise of physician discretion are performed more frequently in potentially overserved areas, indicating differences in physician practice patterns. (See table 7.) When there is not a universally accepted treatment approach, the choice of services is subject to physician discretion. Several studies have identified certain services as prone to overuse or misuse for various reasons, including physician discretion. Two of the three physician services identified in the literature as being related to physician discretion were performed substantially more frequently in potentially overserved areas than in other areas in April 2008. Advanced imaging services, which includes computed tomography (CT) and magnetic resonance imaging (MRI), were 16.1 percent more prevalent per 1,000 beneficiaries in potentially overserved areas than in other areas in April 2008. Electrocardiograms (EKG) were performed 30.1 percent more frequently per 1,000 beneficiaries in potentially overserved areas than in other areas. However, the frequency of knee replacements was similar in potentially overserved and other areas. We also found that two of three services identified in the literature as being universally accepted approaches to diagnoses or having low rates of inappropriate use were performed at similar frequencies in the two groups of areas in April 2008. Specifically, hip surgery for hip fracture and cataract removal were performed at similar frequencies in the two groups of areas. However, colonoscopy for cancer screening—another procedure identified in the literature as effective and strongly supported by evidence—was performed 10.8 percent more often per 1,000 beneficiaries in potentially overserved areas than in other areas in the United States. Although concerns have been raised that Congress’s efforts to control spending on physician services could limit beneficiary access to those services, our analysis suggests that beneficiary access generally remained the same or increased from 2000 to 2008. These findings are consistent with our earlier work. However, we also found that some geographic areas of the country experienced much higher levels of utilization of physician services and much greater increases in utilization compared to the rest of the nation—which may indicate excessive care not driven by medical need. Our definition of areas that are potentially overserved was based on both levels of service and growth rates, while past research has generally concentrated on levels of service. Nevertheless, our findings are consistent with past research—they underscore the importance of geography in the utilization of physician services and can help inform ongoing discussions regarding Medicare physician payment reform. Medicare’s SGR, which is used to help control spending on physician services, does not account for geographic differences in utilization rates. As Congress considers options for revising the SGR and other payment reforms, the issue of geographic differences will likely continue to be part of this discussion. In written comments on a draft of this report, CMS noted the agency’s longstanding practice of monitoring the effect of policy changes on beneficiary access to Medicare services, and stated that this report would help in that effort. We have reprinted CMS’s letter in appendix IX. We obtained oral comments on a draft of our report from an official representing the American Medical Association (AMA). The AMA official shared two overall observations. First, the AMA official said that the rate of growth in per beneficiary utilization of physician services had declined each year since 2004. While the growth rate has not been uniform, our report finds that an increasing number of services were provided to beneficiaries who were treated by a physician from April 2000 to April 2008. Second, the AMA official said that beneficiaries could face access problems that would not appear in our analysis of survey and claims data. The AMA official explained, for example, that physicians could increase the number of claims they submit, while seeing fewer patients or could be accepting fewer Medicare beneficiaries seeking new appointments. However, the three overall indicators we constructed to measure access trends—from both the beneficiary and physician perspective— demonstrated sustained beneficiary access to services. As we reported in our draft, we found very few beneficiaries reporting major access difficulties in 2007 and 2008, the utilization of services increased nationwide from April 2000 to April 2008, and physician participation in Medicare also rose over this period. The AMA official also shared technical comments with us, which we incorporated into our report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At the time, we will send copies to the Acting Administrator of CMS and interested congressional committees. The report also will be available at no charge on GAO’s 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 this report. GAO staff who made major contributions to this report are listed in appendix X. This appendix explains the scope and methodology that we used to address our reporting objectives. Specifically, we wanted to (1) determine how beneficiary access to physician services has changed from 2000 to 2008; (2) identify areas of the country where Medicare beneficiaries are potentially overserved by physicians; and (3) describe characteristics that distinguish potentially overserved areas from other areas in the nation. To determine how beneficiary access to physician services changed from 2000 to 2008, we constructed three types of indicators to measure beneficiary access to physician services: beneficiary perceptions about access, utilization of physician services, and indicators of physicians’ willingness to participate in Medicare and serve Medicare beneficiaries. To measure beneficiary perceptions of access, we analyzed 2007 and 2008 responses to the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey conducted by the Centers for Medicare & Medicaid Services (CMS). We used CAHPS survey data that asked beneficiaries to describe their experiences with the Medicare fee-for- service (FFS) program. These annual surveys are a nationally representative source of Medicare beneficiary perceptions of their access to health care that would enable comparisons over time among states and between urban and rural areas. Respondents were asked about their experiences in the 6 months before the survey. CMS surveyed approximately 431,000 FFS beneficiaries in the spring of 2007 and approximately 306,000 in the spring of 2008. We excluded responses from beneficiaries residing outside the 50 states and the District of Columbia from our analysis. The number of FFS beneficiaries residing in the areas that were part of our analysis who completed the survey was 199,000 in 2007 and 163,000 in 2008. We focused on two CAHPS questions that were related to beneficiary access to physician services. The questions, reproduced in table 8, asked about the ease of scheduling prompt appointments for routine care and beneficiary ability to gain access to specialists. For each question, we included only the responses from those beneficiaries who could have encountered an access problem—that is, those who reported trying to schedule an appointment with any doctor and those who attempted to make an appointment to see a specialist. For example, we include responses to the specialist access question only for those beneficiaries who answered in a prior survey question that they needed to see a specialist in the past 6 months. We calculated the proportion of respondents who responded the most negatively—those who responded that they were “never” able to schedule an appointment as soon as they thought they needed it. We also examined whether these responses varied by state or between urban and rural areas nationwide. To analyze Medicare beneficiary access to physician services based on their utilization of services, we used Medicare Part B claims data from the National Claims History (NCH) files. We constructed data sets for 100 percent of Medicare claims for physician services performed by physicians in the first 28 days of April of 2000 through 2008, which yielded more than 60 million claims per year. These claims represent an annual snapshot of beneficiary access to physician services for each of the 9 years. We selected April to allow time for the annual fee updates to be implemented beginning January 1 and for physician behavior to adjust to the new fees. To avoid “calendar bias”—that is, the occurrence of more weekdays in April in one year compared to another—and to create an equal number of weekdays in each year’s data set, we limited each year’s claims to services performed within the first 28 days of the month. These data encompass several periods: 2 years in which fee increases were greater than the increase in the estimated cost of providing services (2000 and 2001), 1 year in which fees decreased (2002), and 6 years in which fee increases were less than the growth in the estimated cost of providing services (2003 through 2008). We established a consistent cutoff date (the last Friday in September of each year) for each year’s data file and only included those claims for April services that had been processed by that date. Because claims continue to accrete in the data files, this step was necessary to ensure that earlier years were not more complete than later years. To determine the number of FFS beneficiaries, we used the April enrollment data from the Denominator file—a database that contains enrollment data and entitlement status for all Medicare beneficiaries enrolled, entitled, or both in each month in a given year. In addition, on the basis of beneficiary location, we associated each service with an urban or rural location, using the Office of Management and Budget (OMB) classification of metropolitan statistical areas (MSA). We constructed multiple utilization measures to determine whether Medicare beneficiaries experienced changes in their access to physician services; these indicators included the percentage of Medicare FFS beneficiaries obtaining services in April of each year and the number of physician services per 1,000 beneficiaries who received services. We analyzed these utilization measures nationally, for urban and rural areas within each state, and for specific services, such as office visits for new and established patients and emergency room visits. Using MSAs, we classified the nation’s counties as urban or rural, consolidated the urban counties and rural counties in each state and the District of Columbia, and created 99 geographic areas to analyze access at a subnational level. To indicate physicians’ willingness to participate in Medicare, we determined the number of physicians billing Medicare from 2000 through 2007, whether services were performed by participating or nonparticipating physicians, and whether claims for physician services were paid on assignment or not on assignment. We did not adjust the data for factors that could affect the provision and use of physician services, such as incidence of illness or coverage of new benefits. To identify areas of the country where Medicare beneficiaries are potentially overserved by physicians, we identified areas of the country where utilization of physician services in Medicare is potentially excessive. Because policymakers have expressed concerns about both the level and growth of services in the Medicare program, we incorporated both factors in our measure of potential overservice. Specifically, we identified areas that were both relatively high in their level of utilization and relatively high in their growth in utilization. We analyzed one of our access indicators, services per beneficiary served, to measure potential overutilization. Using the U.S. Census Bureau and OMB classifications, we divided states into urban and rural areas and made additional distinctions among urban areas, allowing us to classify counties into one of four types of areas, as shown in table 9. We did not allow areas to cross state lines, so a metropolitan division or MSA that crossed state lines was subdivided into separate areas for each state. We examined a total of 296 areas, ranking them by their level of utilization in 2000 and their change in utilization from 2000 to 2008. To determine an area’s utilization status, we designated areas in the top half of both measures as “potentially overserved” and the rest as “other” areas. (See table 10.) This method resulted in 72 of the 296 areas being designated as potentially overserved. To describe characteristics that distinguish potentially overserved areas from other areas in the nation, we reviewed literature to identify characteristics that could drive the use of physician services. Using the most recently available data sources, we constructed several area-level characteristics and compared them between potentially overserved areas and all other areas. Specifically we compared various demographic characteristics and compared the capacity to provide health care services—both of which are factors that could drive the use of physician services. We also compared beneficiary satisfaction with their health care and the types of physician services provided in the two types of areas. We examined the provision of physician services broadly. However, our review of clinical and economic studies in the literature suggested that certain services might be or might not be prone to overuse and thus we also compared the utilization of these services for both potentially overserved and other areas. We obtained demographic data on mortality, race, and education as well as data on health services capacity from the Area Resource File (ARF), a national county-level health resource information database produced by the Health Resources and Services Administration of the Department of Health and Human Services; population and income data from the U.S. Census Bureau; beneficiary age and enrollment data from the Denominator file; and risk score data from the CMS Medicare Advantage rate calculation data for 2009. We obtained data on beneficiary perceptions and satisfaction with care from the 2008 CAHPS survey. We used Medicare Part B claims to obtain physician services utilization data. As part of our analysis we found that potentially overserved areas were more likely to be urban—that is, have greater population density—than other areas. Therefore, when comparing various characteristics of potentially overserved areas and other areas, we accounted for this difference in population density by weighting the data from other areas to reflect the same proportion of urbanization found in potentially overserved areas. We also analyzed the utilization of specific types of physician services in potentially overserved and other areas. This analysis was based on the Berenson-Eggers Type of Service (BETOS) code assigned to each physician service in the Part B claims data. According to CMS, the BETOS coding system consists of readily understood clinical categories, is stable over time, and is relatively immune to minor changes in technology or practice patterns. We compared the number of services per 1,000 Medicare FFS beneficiaries in potentially overserved and other areas for selected service categories. We collapsed data on other services and procedures into summary categories. We took several steps to ensure that the CAHPS, Medicare claims and enrollment, U.S. Census Bureau, and ARF data were sufficiently reliable for our analysis. For the CAHPS survey data, we examined the accuracy and completeness of the data by testing for implausible values and internal consistency and reviewed relevant documentation. In addition, we interviewed experts at CMS about whether the CAHPS data could appropriately be used as we intended. We concluded that the data were sufficiently reliable for the purpose of this analysis. Our analysis of the proportion of beneficiaries reporting major difficulties accessing physician services was limited to beneficiaries who needed an appointment for either routine or specialist care; it does not refer to the entire population of Medicare beneficiaries. Medicare claims data, which are used by the Medicare program as a record of payments made to health care providers, are closely monitored by both CMS and the Medicare carriers—contractors that process, review, and pay claims for Part B-covered services. The data are subject to various internal controls, including checks and edits performed by the carriers before claims are submitted to CMS for payment approval. Although we did not review these internal controls, we did assess the reliability of the NCH data. First, we reviewed existing information about the data, including the data dictionary and file layouts. We also interviewed knowledgeable CMS officials about the data. We examined the data files for obvious errors, missing values, values outside of expected ranges, and dates outside of expected time frames. We found the data to be sufficiently reliable for the purposes of this report. We assessed the reliability of the U.S. Census Bureau and ARF data by reviewing relevant documentation and examining the data for obvious errors. We conducted this performance audit from May 2008 through August 2009 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We classified geographic areas of the country by type of area and utilization status. Our measure of utilization—services per beneficiary served—is based on Medicare claims data for services performed in the first 28 days of April 2000 and April 2008. An area was designated as potentially overserved if it was in both the top half of all areas in number of services per beneficiary served in 2000 and in the top half of the growth rate in services per beneficiary served from 2000 to 2008. Table 11 presents information, by geographic area type and utilization status, on the average number of services per beneficiary in 2000 and 2008, and the average change in the number of services per beneficiary from 2000 to 2008. We identified potentially overserved areas of the country by classifying U.S. counties into one of four types of geographic areas: metropolitan divisions, large MSAs, small MSA areas, and rural areas. This classification process yielded 296 areas across the United States. We measured utilization in each of these areas by examining the number of services per beneficiary who received services in April 2000 and April 2008, and ranked them by their level of utilization in 2000 and changes in utilization from 2000 to 2008. To determine an area’s utilization status, we designated areas in the top half of both measures as potentially overserved areas and designated the rest as other areas. Across all areas, the median number of services per beneficiary served was 3.28 in 2000 and 3.71 in 2008. The median percentage change in services per beneficiary served from 2000 to 2008 was 13.7. (See table 12.) Using the BETOS code to which each procedure code in our claims data was assigned, we reviewed specific categories of physician services. We collapsed data on other services and procedures into summary categories. We classified geographic areas of the country by type of area and utilization status. Our measure of utilization—services per beneficiary served—is based on Medicare claims data for services performed in the first 28 days of April 2000 and April 2008. An area was designated as potentially overserved if it was in both the top half of all areas in number of services per beneficiary served in 2000 and in the top half of the growth rate in services per beneficiary served from 2000 to 2008. Table 13 shows the specific service categories we reviewed, the change in the number of services provided per 1,000 FFS beneficiaries from April 2000 to April 2008, and the number of and difference in services provided in potentially overserved and other areas. Medicare designates 87 distinct physician payment localities across the 50 states and the District of Columbia to adjust physician payments for the geographic difference in the costs of operating a private medical practice. We measured utilization in each of the Medicare physician payment localities by examining the number of services per beneficiary who received services in April 2000 and April 2008, and ranked each payment locality by the level of utilization in 2000 and the change in utilization from 2000 to 2008. To determine a locality’s utilization status, we designated Medicare physician payment localities in the top half of both measures as potentially overserved payment localities and designated the rest as other payment localities. Across all Medicare physician payment localities, the median number of services per beneficiary served was 3.34 in 2000 and 3.81 in 2008. The median percentage change in services per beneficiary served from 2000 to 2008 was 13.4 percent. (See table 14.) Using the BETOS code to which each procedure code in our claims data was assigned, we reviewed specific categories of physician services. We collapsed data on other services and procedures into summary categories. We classified Medicare physician payment localities by utilization status. Our measure of utilization—services per beneficiary served—is based on Medicare claims data for services performed in the first 28 days of April 2000 and April 2008. A Medicare physician payment locality was designated as potentially overserved if it was in both the top half of all areas in number of services per beneficiary served in 2000 and in the top half of the growth rate in services per beneficiary served from 2000 to 2008. Table 15 shows the specific service categories we reviewed, the change in the number of services provided per 1,000 FFS beneficiaries from April 2000 to April 2008, and the number of and difference in services provided in potentially overserved and other Medicare physician payment localities. Hospital referral regions (HRR) are the 306 distinct geographic regions designated by Dartmouth researchers to represent regional health care markets for tertiary medical care. Each HRR contains at least one hospital that performs major cardiovascular procedures and neurosurgery. We measured utilization in each of the HRRs by examining the number of services per beneficiary who received services in April 2000 and April 2008, and ranked each HRR by level of utilization in 2000 and change in utilization from 2000 to 2008. To determine an HRR’s utilization status, we designated HRRs in the top half of both measures as potentially overserved HRRs and designated the rest as other HRRs. Across all HRRs, the median number of services per beneficiary served was 3.26 in 2000 and 3.72 in 2008. The median percentage change in services per beneficiary served from 2000 to 2008 was 13.7 percent. (See table 16.) Using BETOS code to which each procedure code in our claims data was assigned, we reviewed specific categories of physician services. We collapsed data on other services and procedures into summary categories. We classified HRRs by utilization status. Our measure of utilization— services per beneficiary served—is based on Medicare claims data for services performed in the first 28 days of April 2000 and April 2008. An HRR was designated as potentially overserved if it was in both the top half of all areas in number of services per beneficiary served in 2000 and in the top half of the growth rate in services per beneficiary served from 2000 to 2008. Table 17 shows the specific service categories we reviewed, the change in the number of services provided per 1,000 FFS beneficiaries from April 2000 to April 2008, and the number of and difference in services provided in potentially overserved and other HRRs. In addition to the contact named above, Jessica Farb, Assistant Director; Todd Anderson; Krister Friday; Jenny Grover; Jessica T. Lee; Richard Lipinski; and Sarabeth Zemel made major contributions to this report.

Summary: Congress, policy analysts, and groups representing physicians have raised questions about beneficiary access to Medicare physician services. At the same time, high levels of spending for health care in some parts of the country, and rapid increases in spending for physician services, have been identified as factors that threaten the long-term fiscal sustainability of the Medicare program. GAO was asked to assess beneficiary access to physician services and to identify indicators of potential overutilization of physician services. In this report, GAO (1) examines whether, from 2000 through 2008, beneficiaries had problems accessing physician services; (2) identifies areas of the country in which Medicare beneficiaries are potentially overserved by physicians; and (3) describes characteristics that distinguish the potentially overserved areas from other areas in the nation. GAO analyzed the most recent data available from several sources, including an annual Centers for Medicare & Medicaid Services (CMS) survey of fee-for-service (FFS) Medicare beneficiaries, Medicare physician claims for services provided in April of each year from 2000 through 2008, the Health Resources and Services Administration's Area Resource File, and the U.S. Census Bureau. GAO found that Medicare beneficiaries experienced few problems accessing physician services during its period of study. Very small percentages of Medicare beneficiaries--less than 3 percent--reported major difficulties accessing physician services in 2007 and 2008. The proportion of beneficiaries who received physician services and the number of services per beneficiary served increased nationwide from April 2000 to April 2008. Indicators of physician willingness to serve Medicare beneficiaries and to accept Medicare fees as payments in full also rose from 2000 to 2008. Potentially overserved areas--areas that were in the top half in both the level and growth in utilization of physician services--tend to be in the more densely populated urban regions and the eastern part of the United States. Large metropolitan areas were much more likely to be potentially overserved than rural and small metropolitan areas. Areas east of the Mississippi River were also more likely to be potentially overserved than those in the west. Potentially overserved and other areas are similar in demographic characteristics and the capacity to provide health care services. The two groups are also similar in Medicare beneficiary satisfaction with health care. In contrast, certain types of physician services, such as advanced imaging and minor procedures, are performed more frequently in potentially overserved areas relative to other areas, suggesting differences in physician practice patterns. In commenting on a draft of this report, CMS noted the agency's longstanding practice of monitoring the effect of policy changes on beneficiary access to Medicare services, and stated that this report would help in that effort.