Medicare Cost-Saving Moves Can Backfire

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Dr. Robert A. Berenson, a senior fellow at the Urban Institute in Washington, D.C., and a member of the Medicare Payment Advisory Commission, which advises Congress, said there is great concern that fee-for-service incentives are causing physicians to over-recommend services or over-induce patient demand.

CMS does not experiment with physician payment rates to induce shifts in care from the hospital to the outpatient setting, as the authors suggest, he explained. The 2005 payment change likely responded to urologists' requests for an update of rates that were found to be undervalued, he said.

"The whole statutory basis for how to pay physicians is to determine what the underlying resource costs are for producing the service, whether or not it's a good value," Berenson explained. "And so some of us have actually recommended that CMS should have the authority to do just what those authors suggested, but CMS doesn't have the authority to do that."

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Nevertheless, he said the new study adds to growing evidence that physicians are able to induce demand for services, although it remains unclear in this case whether that demand is justified or not. "The premise was wrong, but the findings still raise a very important point," Berenson said.

For the study, Hemani, Taneja and colleagues reviewed 1,341 endoscopic bladder surgeries, including 764 office procedures and 577 hospital procedures, performed from 2002 through 2007.

After 2005, when Medicare increased in-office rates, if patients had a cystoscopy, they were twice as likely to undergo an office-based procedure, such as biopsy or "fulguration" -- the use of an electric current to destroy a tumor or other lesion -- than prior to 2005.

Patients were 2.29 times more likely to have such a procedure in the office than the hospital after 2005 compared with the prior period.

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