Physician Billing Behavior in Two State Programs
- Presenter:
Chair: Timothy McBride; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 309
Rationale: Physician billing is treated as exogenous in the academic literature, and has attracted very little econometric attention. A similar disinterest exists among Federal policy makers, with the Government Accountability Office frequently criticizing the reliance on generally weak state oversight and the lack of federal resources overseeing the $174 billion federal dollars contributed to the Medicaid program (2004). This weak oversight regime raises questions about whether a profit maximizing physician would accept their billing decisions as exogenously determined.
In state programs, physician prices are typically set by a fixed price schedule or through negotiations with the payer. Although price is fixed, physicians still have the power to choose the complexity level or billing code for the visit. If oversight is weak and probability of detection low, physicians can be expected to choose higher reimbursement codes or “upcode” on the margin.
Objectives: This study tests (1) whether physicians bill office visits at equal levels of complexity across state programs and (2) whether the billing behavior changes over time (a.k.a. code creep).
Methodology: The study uses 2001-2003 health care claims data (n=680,000) from the South Carolina Medicaid program and SC State Employee Health Plan to estimate a fixed effects ordered probit model of physician office visit billing where the provider assigns one of five complexity levels (billing codes) for the visit. An array of program dummies and physician-specific fixed effects and interaction terms control for physician practice and program wide differences, while an interaction term between the physician fixed effects and the Medicaid dummy test for differential billing between the two programs. Simulations demonstrate the magnitude of the effects on the two programs.
Results: Despite serving different demographics and the presence of 20% co-insurance in one program, physicians participating in both programs bill in a remarkably similar manner; the model found no significant difference between Medicaid and State Health Plan physician billing. Physicians participating in only one program or who bill under separate tax numbers deviated from this pattern and billed at 8% higher complexities. Some individual physicians demonstrated substantial differences between the two programs, with top 10% billing over 75% higher. Finally, all physicians demonstrate substantial annual “code creep”, with billing of higher complexity codes increasing 10% per year.
Conclusions: The results suggest that physicians do have pricing power, but the same results reject the hypothesis of differential billing. Physicians in this sample proved equally aggressive towards both state programs, increasing their diagnosis codes in every year of the sample. With similar billing patterns for both programs, the few outlying physicians billing higher complexities in one program compared to the other merit future attention, with their differential billing behavior meriting some degree of administrative review.
