October 1995 AAOS Report

Academy to participate in Medicare practice cost studies

The Academy is participating in the Health Care Financing Administration's (HCFA) study of physician practice costs - one of three factors used in setting fees for physicians under Medicare. The purpose of the HCFA study is to develop resource-based payments for the factor by January 1998. Currently, only the physician work factor of the Medicare payment system is resource-based (i.e., based on an actual study of the work involved in physician services). Payments for the practice cost factor and the third factor, malpractice insurance expenses, are currently based on a formula that uses historical payments. Payments for the practice cost factor that accounts for more than 40 percent of total Medicare payments to physicians could be altered significantly depending on the results of the study. To help ensure the integrity of the HCFA study, the Academy is involved in a coalition with 33 other medical and surgical specialty societies. In September, members of the Practice Cost Coalition met with HCFA officials to discuss methodological concerns. More meetings of the coalition and HCFA are likely to take place at various stages of the study. The Academy and a number of other surgical specialty societies also are involved in an American College of Surgeons (ACS) practice cost study. ACS would like to use the results of its study to supplement the results of the HCFA study. The HCFA study will be taking place throughout 1996 and part of 1997. The ACS study should be completed by next summer.

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