[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Appendices]
[Appendix E. Medicare Reimbursement to Physicians ]
[From the U.S. Government Printing Office, www.gpo.gov]






 
[1996 Green Book] APPENDIX E. MEDICARE REIMBURSEMENT TO PHYSICIANS

                                CONTENTS

Physician Payment Reform
Medicare Fee Schedule
Medicare Volume Performance Standards; Conversion Factor 
        Updates
  Medicare Volume Performance Standards
  Conversion Factor Updates
Limits on Beneficiary Liability
Medical Care Outcomes and Effectiveness Research
Impact of Medicare Fee Schedule
Selected Fee Schedule Issues
  Conversion Factor
  Resource-Based Practice Expense and Malpractice Relative 
            Values
  Five-Year Review of Work Relative Values
  Fee Schedule Payment Areas
Historical Data
  Assignment Rate Experience
  Participating Physician Program Data
  Participation, Assignment, and Charge Reductions
  Distribution of Physician Services
References

                        PHYSICIAN PAYMENT REFORM

    The Omnibus Budget Reconciliation Act of 1989 (OBRA 1989) 
provided for the implementation, beginning January 1, 1992, of 
a new payment system for physicians' services paid for by 
Medicare. This fee schedule payment system replaced the 
previous reasonable charge payment system. The new system was 
enacted in response to two principal concerns. The first was 
the rapid escalation in program payments. The second was that 
the use of the reasonable charge payment had led, in many 
cases, to payments which were not directly related to the 
resources used.
    Under the current system, payments are made under a fee 
schedule which is based on a resource-based relative value 
scale (RBRVS). Annual updates to the payment amounts are based, 
in part, on a comparison of actual physician spending in a base 
period compared to an expenditure goal known as the Medicare 
volume performance standard (MVPS). Use of the MVPS was 
intended to moderate the rate of growth in physician 
expenditures. The law also places limits on amounts that 
physicians can bill in excess of Medicare's approved payment 
amount.

                         MEDICARE FEE SCHEDULE

    The Secretary of DHHS is required to establish a fee 
schedule before January 1 of each year that sets payment 
amounts for all physicians' services furnished in all fee 
schedule areas for the year. The fee schedule amount for a 
service is equal to the product of:
  --The relative value for the service;
  --The geographic adjustment factor (GAF) for the service for 
        the fee schedule area; and
  --The national dollar conversion factor for the year.
Relative value unit
    The relative value unit (RVU) for each service, the first 
factor used to calculate the fee schedule, has three 
components:
  --The physician work component reflects physician time and 
        intensity, including activities before and after 
        patient contact;
  --The practice expense or overhead component includes all 
        categories of practice expenses (exclusive of 
        malpractice liability insurance costs). Included are 
        office rents, employee wages, physician compensation, 
        and physician fringe benefits; and
  --The malpractice expense component reflects costs of 
        obtaining malpractice insurance.
    The proportion that each component represents of the total 
RVU varies by service.
Geographic adjustment factor
    The second factor used in calculation of the fee schedule 
is the geographic adjustment factor (GAF) for the fee schedule 
area. There are currently 211 fee schedule areas nationwide.
    The GAF is designed to account for geographic variations in 
the costs of practicing medicine and obtaining malpractice 
insurance as well as a portion of the difference in physicians' 
incomes that is not attributable to these factors.
    The GAF is the sum of three indices. Separate geographic 
practice cost indices (GPCIs) have been developed for each of 
the three components of the RVU, namely a work GPCI, a practice 
expense or overhead GPCI, and a malpractice GPCI. In effect, a 
separate geographic adjustment is made for each component. 
However, as required by law, only one-quarter of the geographic 
variation in physician work resource costs is taken into 
account in the formula. (Table E-24 at the end of this chapter 
shows the GAF values for each of the 211 fee schedule areas 
nationwide.)
    The three GPCI-adjusted RVU values are summed to produce an 
indexed RVU for each locality.
Conversion factor
    The conversion factor, which is the third fee schedule 
factor, is a dollar multiplier which converts the 
geographically adjusted relative value for a service to an 
actual payment amount for the service. The law initially 
required the establishment of a single conversion factor. 
Beginning in 1993, two conversion factors applied--one for 
surgical services and one for nonsurgical services. Beginning 
in 1994, there were three conversion factors--one for surgical, 
one for primary care, and one for nonsurgical services. The 
1996 conversion factors are $40.80 for surgical services, 
$35.42 for primary care services, and $34.63 for other 
nonsurgical services. Thus, the payment for a surgical service 
with an adjusted relative value of two is $81.60; the payment 
for a primary care service with an adjusted value of two is 
$70.84; the payment for a nonsurgical service with an adjusted 
relative value of two is $69.26. Anesthesiologists are paid 
under a separate fee schedule which uses base and time units. A 
separate conversion factor ($15.28 in 1996) applies.
Payment formula
    The payment for each service is calculated as follows:

        Payment = CF  x  [(RVUwork  x  GPCIwork)

                   + (RVUpractice expense  x  
GPCIpractice expense)

                   + (RVUmalpractice  x  
GPCImalpractice)]

    Where:
    CF = conversion factor;
    RVUwork = physician work relative value units for the 
service;
    GPCIwork = geographic practice cost index value for 
physician work in the locality (the value reflects only one-
quarter of the variation in physician work as required by law);
    RVUpractice expense = practice expense or overhead 
relative value units for the service;
     GPCIpractice expense = geographic practice cost index 
value for practice expense or overhead applicable in the 
locality;
    RVUmalpractice = malpractice relative value units for 
the service; and
    GPCImalpractice = geographic practice cost index value 
for malpractice applicable in the locality.

    MEDICARE VOLUME PERFORMANCE STANDARDS; CONVERSION FACTOR UPDATES

    A key element of the fee schedule is the conversion factor. 
One consideration in establishing the annual update in the 
conversion factor is whether efforts to stem the annual rate of 
growth in physician payments have succeeded. This growth is 
measured by the Medicare volume performance standards (MVPSs).

                 Medicare Volume Performance Standards

    The law requires the calculation of annual MVPSs, which are 
standards for the rate of expenditure growth. The purpose of 
these standards is to provide an incentive for physicians to 
get involved in efforts to stem expenditure increases. The 
relationship of actual expenditures to the MVPS is one factor 
used in determining the annual update in the conversion factor.
    Implementation of the MVPS provision began in fiscal year 
1990. As modified by subsequent legislation, there are three 
separate MVPS rates of increase--one for surgical care, one for 
primary care, and one for nonsurgical services.
    The law contains a formula for calculating the annual 
update in the MVPS. However, Congress may modify the update 
that would otherwise apply. The Secretary of DHHS is required 
to make a recommendation to the Congress by April 15 each year. 
In making the recommendation, the Secretary is to consider 
inflation, changes in the number of part B enrollees, changes 
in technology, appropriateness of care, and access to care. The 
Physician Payment Review Commission (PPRC), a Congressional 
advisory body, is required to review the Secretary's 
recommendation and submit its own recommendation by May 15.
    The Congress may establish the standard rates of increase. 
If the Congress does not specify the MVPS, however, the rates 
of increase are determined based on the default formula. The 
default standard is the product of four factors reduced by a 
performance standard factor of four percentage points. The four 
factors are:
  --The Secretary's estimate of the weighted average percentage 
        increase in physicians' fees for services for the 
        portions of the calendar years included in the fiscal 
        year involved;
  --The Secretary's estimate of the percentage change from the 
        previous year in the number of part B enrollees;
  --The Secretary's estimate of the average annual percentage 
        growth in volume and intensity of physicians' services 
        for the preceding 5 fiscal years; and
  --The Secretary's estimate of the percentage change in 
        physician expenditures in the fiscal year (not taken 
        into account above) which will result from changes in 
        law or regulations.
    The MVPS for fiscal year 1996 is a decrease of 0.5 percent 
for surgical services and 0.6 percent for other nonsurgical 
services (see table E-1).

       TABLE E-1.--MEDICARE VOLUME PERFORMANCE STANDARDS, 1990-96       
------------------------------------------------------------------------
                                                       Primary          
         Fiscal year           Surgical  Nonsurgical    care       All  
------------------------------------------------------------------------
1990.........................     (\1\)        (\1\)     (\2\)       9.1
1991.........................       3.3          8.6     (\2\)       7.3
1992.........................       6.5         11.2     (\2\)      10.0
1993.........................       8.4         10.8     (\2\)      10.0
1994.........................       9.1          9.2      10.5       9.4
1995.........................       9.2          4.4      13.8       7.5
1996.........................      -0.5          0.6       9.3       1.8
------------------------------------------------------------------------
\1\ Separate performance standards for surgical and nonsurgical services
  not required for fiscal year 1990.                                    
\2\ Separate performance standards for primary care services not        
  required for fiscal years 1990-93.                                    
                                                                        
Source: O'Sullivan (1996).                                              

                       Conversion Factor Updates

    Annual updates in payments under the fee schedule are made 
by updating the dollar conversion factor. The law contains a 
formula for calculating the annual updates. However, the 
Congress may modify the updates that would otherwise apply.
    In April of each year (beginning in 1991), the Secretary of 
DHHS is required to recommend to the Congress the updates in 
the conversion factors for the following year. In making the 
update recommendations, the Secretary is required to consider a 
number of factors including the percentage change in actual 
expenditures in the preceding fiscal year compared to the MVPS 
for that year, changes in volume and intensity of services, 
beneficiary access to care, and the increase in the Medicare 
economic index (MEI). The MEI is a percentage figure which is 
revised annually; it has been used in the program to limit 
annual increases in recognized fees. The MEI is generally 
intended to reflect annual increases in the costs of operating 
a medical practice; however, for several years the MEI 
percentage was set by the Congress. The PPRC is required to 
review the Secretary's update recommendation and submit its own 
recommendation to Congress by May 15 of each year.
    The Congress either specifies the updates to the conversion 
factor or a default formula, specified in law, applies. The 
default fee update is equal to the Secretary's estimate of the 
MEI increased or decreased by the percentage difference between 
the increase in actual expenditures and the MVPS for the second 
preceding fiscal year. (Thus, the 1996 updates reflect actual 
fiscal year 1994 experience.) However, the law specifies a 
lower limit on the default update. The maximum downward 
adjustment in the update is 5.0 percentage points. There is no 
restriction on upward adjustments to the MEI.
    Table E-2 shows the 1992-96 fee schedule updates. This 
table shows what the MEI was for each year, the impact of the 
MVPS calculation (i.e., the ``performance adjustment''), 
legislative modification (if any), and the resulting update 
percentage. The table also shows the conversion factors for 
each year.

               TABLE E-2.--CONVERSION FACTORS: CALCULATION OF UPDATES AND ANNUAL FACTORS, 1992-96               
----------------------------------------------------------------------------------------------------------------
                                                              Calculation of update (in percent)                
                                                        ---------------------------------------------           
                     Calendar year                        Medicare                                    Conversion
                                                          economic  Performance  Legislative  Update    factor  
                                                           index     adjustment   adjustment                    
----------------------------------------------------------------------------------------------------------------
Calendar year 1992:                                                                                             
    All services.......................................        3.2        -0.9         -0.4      1.9     $31.00 
Calendar year 1993:                                                                                             
    Surgical...........................................        2.7         0.4   ...........     3.1      31.96 
    Nonsurgical........................................        2.7        -1.9   ...........     0.8      31.25 
Calendar year 1994:                                                                                             
    Surgical...........................................        2.3        11.3         -3.6     10.0      35.16 
    Primary care.......................................        2.3         5.6          0.0      7.9      33.72 
    Other nonsurgical..................................        2.3         5.6         -2.6      5.3      32.90 
Calendar 1995:                                                                                                  
    Surgical...........................................        2.1        12.8         -2.7     12.2      39.45 
    Primary care.......................................        2.1         5.8          0.0      7.9      36.38 
    Other nonsurgical..................................        2.1         5.8         -2.7      5.2      34.62 
Calendar year 1996:                                                                                             
    Surgical...........................................        2.0         1.8   ...........     3.8      40.80 
    Primary care.......................................        2.0        -4.3   ...........    -2.3      35.42 
    Other nonsurgical..................................        2.0        -1.6   ...........     0.4      34.63 
----------------------------------------------------------------------------------------------------------------
Source: O'Sullivan (1996).                                                                                      

    Over time, implementation of the default formula update 
would have the effect of lowering the conversion factors. This 
is in part attributable to the fact that the default MVPS 
includes an automatic 4 percentage point reduction from the 
historical growth rate trend. CBO estimates that under current 
law, the primary care conversion factor would drop to $35.06 in 
2002, the surgical conversion factor would drop to $35.73 and 
other nonsurgical services would decline to $30.39.

                    LIMITS ON BENEFICIARY LIABILITY

    Medicare pays 80 percent of the fee schedule amount after 
the beneficiary has met the $100 deductible for the year. The 
beneficiary is responsible for the remaining 20 percent, known 
as coinsurance. If a physician does not accept assignment on a 
claim, the beneficiary may be liable for additional charges 
known as balance billing charges. However, the law places 
certain limits on these balance billing charges.
Assignment/participation
    A physician is able to choose whether to accept assignment 
on a claim paid under the fee schedule. In the case of an 
assigned claim, the physician bills the program directly and is 
paid an amount equal to 80 percent of the fee schedule amount 
(less any unmet deductible). The physician may not charge the 
beneficiary more than the applicable deductible and coinsurance 
amounts. In the case of nonassigned claims, the physician still 
bills the program directly; however, Medicare payment is made 
to the beneficiary. In addition to the deductible and 
coinsurance amounts, the beneficiary is liable for the 
difference between the fee schedule amount and the physician's 
actual charge, subject to certain limits. This is known as the 
balance billed amount.
    A physician may become a ``participating physician'' by 
voluntarily entering into an agreement with the Secretary of 
DHHS to accept assignment on all claims for the forthcoming 
year. Medicare patients of these physicians never face balance 
billing charges.
    The law includes a number of incentives for physicians to 
become participating physicians, chief of which is higher 
recognized fee schedule amounts. The fee schedule amount for a 
nonparticipating physician is only 95 percent of the recognized 
amount for a participating physician.
    The law specifies that physicians are required to accept 
assignment on all claims for persons who are dually eligible 
for Medicare and Medicaid. This includes ``qualified Medicare 
beneficiaries'' (QMBs); these are persons with incomes below 
poverty for whom Medicaid is required to pay Medicare premiums 
and cost-sharing charges.
Balance billing limits
    Nonparticipating physicians may charge beneficiaries more 
than the fee schedule amount on nonassigned claims; these 
balance billing charges are subject to certain limits. The 
limit is 115 percent of the fee schedule amount for 
nonparticipating physicians. The nonparticipating physicians 
fee schedule payment level is 95 percent of the participating 
physicians level. Thus, the balance billing limit is only 9.25 
percent higher than the level recognized for participating 
physicians (95 percent  115 percent).

            MEDICAL CARE OUTCOMES AND EFFECTIVENESS RESEARCH

    OBRA 1989 created a new agency, the Agency for Health Care 
Policy and Research, which replaced the then existing National 
Center for Health Services Research in the Public Health 
Service. The mission of the new agency was to enhance the 
quality, appropriateness and effectiveness of health care 
services and access to such services. These goals were to be 
accomplished by establishing a broad base of scientific 
research and promoting improvements in the clinical practice of 
medicine and the organization, financing, and delivery of 
health care services.
    Specifically, the agency was directed to conduct and 
support research, demonstration projects, evaluations, 
training, guideline development, and the dissemination of 
information on health care services and delivery systems, 
including activities on: (1) the effectiveness, efficiency, and 
quality of health care services; (2) the outcomes of health 
care services and procedures; (3) clinical practice, including 
primary care and practice-oriented research; (4) health care 
technologies, facilities, and equipment; (5) health care costs, 
productivity, and market forces; (6) health promotion and 
disease prevention; (7) health statistics and epidemiology; and 
(8) medical liability.

                    IMPACT OF MEDICARE FEE SCHEDULE

    The Medicare Fee Schedule was designed to remove many of 
the inequities of the previous payment system by shifting 
payment away from tests and procedures toward evaluation and 
management services. Because the fee schedule was intended to 
be implemented in a budget-neutral fashion, total outlays under 
the new system were expected to match the outlays that would 
have occurred under the previous payment system. In general, 
under the new payment system, primary care physicians were 
expected to receive higher payments per service, and specialty 
physicians were expected to receive lower payments per service. 
Payment levels in rural areas were also expected to increase 
relative to metropolitan areas.
    The overall payment level under the Medicare Fee Schedule 
is established through the conversion factor. In effect, the 
conversion factor translates the relative value units for 
individual services into actual dollar payments. Increases or 
decreases in the overall level of payments are accomplished by 
adjusting the level of the conversion factor.
    Using data from 1991, 1992, and 1993, PPRC examined the 
initial impact of the Medicare Fee Schedule on physicians. From 
1991 to 1993, physicians' payments per service declined by 4 
percent. Surgical specialties had about an 8-percent reduction 
in payment per service compared with the 2-percent increase for 
medical specialties. Specialties that predominantly provide 
evaluation and management services fared better. Payments to 
general and family practitioners increased by 17 percent over 
the 2-year period, while those to internists rose by 2 percent. 
Pathologists and thoracic surgeons had the largest reduction of 
16 percent, followed by gastroenterologists, radiologists, and 
cardiologists with reductions ranging from 10 to 12 percent.
    The total Medicare payment a physician receives depends not 
only on the payment per service but also on changes in the 
number and intensity of services billed. Although physicians 
had about a 4-percent reduction in payment overall from 1991 to 
1993, a 6-percent increase in the number and intensity of 
services per physician led to about a 4-percent increase in 
total Medicare payment per physician over the 2-year period.
    PPRC analyzed Medicare claims data from the first 6 months 
of 1994 and 1995 to measure changes in physician payment 
patterns. Across all services, Medicare payment per service 
went up 3.8 percent, on average, between 1994 and 1995 (table 
E-3). This increase, combined with a 4.1-percent rise in volume 
and intensity of services per physician, drove up Medicare 
payment per physician by 8.0 percent. Medicare revenue per 
physician, consisting of Medicare payments on all claims and 
balance billing up to charge limits on unassigned claims, 
increased by 7.9 percent. Growth in revenue per physician was 
slightly lower than growth in payment per physician because of 
declines in balance billing.
    There are marked differences in payment changes across 
service families and physician specialties. The 9.0-percent 
rise in payment per service for primary care was higher than 
the increase for all other types of services (table E-3). 
Payment levels for evaluation and management services other 
than primary care went up by 6.7 percent and those for surgical 
services increased by 5.0 percent, while payment rates for 
other nonsurgical services fell by 0.4 percent.
    Changes in payment per service by specialty reflect the mix 
of services each specialty actually provided. For example, 
family and general practice physicians, who furnish a large 
share of primary care services, experienced one of the largest 
average service payment growth rates, at 7.5 percent (table E-
3). Except for ophthalmologists, surgeons also received payment 
increases of 5.2 percent or more. Specialists, such as 
cardiologists and gastroenterologists, who provide a relatively 
large share of other nonsurgical services saw little growth in 
payment levels; in fact, average payment levels actually fell 
by 1.4 percent for cardiologists.
    Payment levels grew faster in rural than in metropolitan 
areas (table E-3). They went up by 4.8 to 6.6 percent in rural 
areas, but only 3.5 to 3.8 percent in metropolitan areas. These 
patterns are consistent with the Medicare Fee Schedule's 
expected shift of payments toward rural areas.
    Changes in volume and intensity do not appear to be highly 
correlated with those in payment levels, either by service type 
or physician specialty. Most specialties had increases in the 
volume and intensity of services per physician as well as in 
total payments and revenue per physician (table E-3). One 
exception was radiologists, among whom volume and intensity per 
physician decreased by 1.5 percent, mostly in the area of 
routine diagnostic radiology services. Gastroenterologists also 
had decreases in volume and intensity per physician, as well as 
in Medicare payments and revenue. This was due largely to 
reductions in volume and intensity of colorectal endoscopy 
procedures like sigmoidoscopy.

     TABLE E-3.--CHANGE IN MEDICARE PAYMENT AND VOLUME BY TYPE OF SERVICE, LOCATION, AND SPECIALTY, 1994-95     
                                               [Percentage change]                                              
----------------------------------------------------------------------------------------------------------------
                                                               Volume                                           
                                                   Medicare     and        Medicare       Medicare    Percentage
     Type of service, location, and specialty       payment  intensity   payment per    revenue per     of 1995 
                                                      per       per     physician \1\  physician \2\   Medicare 
                                                    service  physician                                 payments 
----------------------------------------------------------------------------------------------------------------
All services.....................................       3.8        4.1          8.0            7.9        100.0 
Evaluation and management services:                                                                             
    Primary care.................................       9.0        3.1         12.4           12.2         20.0 
    Other........................................       6.7        0.3          6.9            6.9         16.5 
Surgical services................................       5.0        4.5          9.7            9.6         23.2 
Other nonsurgical services.......................      -0.4        5.9          5.4            5.4         40.3 
Location:                                                                                                       
    Metropolitan areas:                                                                                         
        >1 million...............................       3.5        2.8          6.4            6.4         53.0 
        <1 million...............................       3.8        5.6          9.6            9.5         34.5 
    Rural counties:                                                                                             
        >25,000..................................       4.8        7.1         12.2           12.1         10.1 
        <25,000..................................       6.6        1.4          8.1            7.9          2.5 
Specialty:                                                                                                      
    Cardiology...................................      -1.4        3.5          2.1            2.0          8.4 
    Family/general practice......................       7.5       -0.1          7.4            7.2         10.1 
    Gastroenterology.............................       1.2       -2.6         -1.5           -1.6          2.9 
    Internal medicine............................       5.0        5.1         10.4           10.2         16.7 
    Other medical specialties....................       5.7        8.0         14.2           14.2          8.2 
    General surgery..............................       6.1        7.5         14.1           14.0          5.6 
    Dermatology..................................       7.8        4.2         12.3           12.1          2.1 
    Ophthalmology................................       1.1        2.2          3.4            3.3          9.0 
    Orthopedic surgery...........................       5.7        3.8          9.7            9.5          4.8 
    Thoracic surgery.............................       5.2        4.2          9.6            9.5          2.4 
    Urology......................................       5.9        5.8         12.0           11.9          4.1 
    Other surgical...............................       5.8        2.4          8.3            8.2          3.2 
    Radiology....................................       1.6       -1.5          0.1            0.0          7.9 
    Pathology....................................      -1.6        2.3          0.7            0.6          1.2 
    Other........................................       2.5        4.8          7.4            7.5        13.4  
----------------------------------------------------------------------------------------------------------------
\1\ Medicare payments are allowed charges.                                                                      
\2\ Medicare revenue is allowed charges on assigned claims and submitted charges on unassigned claims not in    
  excess of charge limits.                                                                                      
                                                                                                                
 Source: Physician Payment Review Commission (1996).                                                            

    The fact that primary care services had the highest payment 
growth may appear surprising, given that these services 
received a 7.9-percent conversion factor update in 1995, 
whereas surgical services got a 12.2-percent update. To analyze 
the effects of policy changes on Medicare payment per service, 
changes in payment rates were separated into those caused by 
changes in, respectively, relative value units, geographic 
adjustment factors (GAF), and conversion factors (table E-4). 
Changes not explained by these three policy elements are the 
result of the transition from historical to fee schedule 
payments, which is difficult to measure explicitly. Payment 
increases due to high conversion factor updates for surgical 
services were offset somewhat by the continued transition away 
from historical payment levels to fee schedule amounts. Primary 
care services, on the other hand, realized payment increases 
from both the conversion factor update and ongoing transition, 
and so had higher net growth than surgical services.
    Predictably, 1995 conversion factor updates had the largest 
effects on payment per service for all services (table E-4). 
The updates ranged from a high of 12.2 percent for surgical 
services to 7.9 percent for primary care and 5.2 percent for 
other services.
    Relative value unit changes dampened the effects of the 
conversion factor updates (table E-4). An across-the-board 
reduction of 1.1 percent was made to all RVUs to offset the 
effect of fee schedule and other payment policy changes on 
total expenditures. Practice expense RVU adjustments were also 
made, as required by the Omnibus Budget Reconciliation Act of 
1993 (OBRA 1993). The RVU changes for 1995 ranged from -1.0 
percent for primary care to -3.7 percent for surgical services.
    Geographic adjustment factor changes were intended to be 
budget neutral overall and were, in fact, quite small (table E-
4). These changes were primarily due to the use of more current 
information in computing the geographic practice cost indexes 
that make up the GAFs for Medicare payment localities, along 
with some technical improvements in the calculation of the 
GPCIs. The updates appear to have reduced rural area GAFs by 
0.2 to 0.3 percent, on average. Similar-sized changes will 
occur in 1996 when the new GAFs are phased in completely.
    Residual changes affecting Medicare payment per service 
varied from 2.5 percent for evaluation and management services 
other than primary care to -4.1 percent for other nonsurgical 
services (table E-4). These changes reflect the continued 
transition away from the customary, prevailing, and reasonable 
(CPR) charge system to fee schedule payments. The final year in 
which CPR policies affected payments was 1995. Starting in 
1996, payments will be based entirely on the fee schedule. 
Compared with others, medical specialties generally experienced 
smaller transition effects in 1995. By contrast, the 
combination of transition effects and RVU changes, along with 
relatively low conversion factor updates, led to reductions in 
average payment per service for cardiologists and pathologists 
of 1.4 and 1.6 percent, respectively.

                     TABLE E-4.--EFFECT OF POLICY CHANGES ON FEE SCHEDULE PAYMENTS, 1994-95                     
                                               [Percentage change]                                              
----------------------------------------------------------------------------------------------------------------
                                                            Total                   Change due to               
                                                           change  ---------------------------------------------
                                                             in                                                 
        Type of service, location, and specialty          Medicare  Relative  Geographic  Conversion  Transition
                                                           payment    value   adjustment    factor      to fee  
                                                             per      unit       factor     updates    schedule 
                                                           service   changes    changes                         
----------------------------------------------------------------------------------------------------------------
All services............................................       3.8      -1.9        0.1         7.5        -1.9 
Evaluation and management services:                                                                             
    Primary care........................................       9.0      -1.0        0.0         7.9         2.1 
    Other...............................................       6.7      -1.0        0.0         5.2         2.5 
Surgical services.......................................       5.0      -3.7        0.0        12.2        -3.5 
Other nonsurgical services..............................      -0.4      -1.6        0.1         5.2        -4.1 
Location:                                                                                                       
    Metropolitan areas:                                                                                         
        >1 million......................................       3.5      -1.8        0.1         7.4        -2.2 
        <1 million......................................       3.8      -2.0        0.1         7.7        -2.0 
    Rural counties:                                                                                             
        >25,000.........................................       4.8      -1.9       -0.2         7.7        -0.8 
        <25,000.........................................       6.6      -1.4       -0.3         7.4         0.9 
Specialty:                                                                                                      
    Cardiology..........................................      -1.4      -2.6        0.0         5.7        -4.5 
    Family/general practice.............................       7.5      -1.1       -0.1         7.2         1.5 
    Gastroenterology....................................       1.2      -1.9        0.1         5.7        -2.7 
    Internal medicine...................................       5.0      -1.1        0.1         6.4        -0.4 
    Other medical.......................................       5.7      -1.0        0.1         5.6         1.0 
    General surgery.....................................       6.1      -1.4        0.0         9.9        -2.4 
    Dermatology.........................................       7.8      -1.0        0.1        10.5        -1.8 
    Ophthalmology.......................................       1.1      -5.7        0.1        10.0        -3.3 
    Orthopedic surgery..................................       5.7      -3.0        0.0        10.5        -1.8 
    Thoracic surgery....................................       5.2      -1.4        0.0        11.2        -4.6 
    Urology.............................................       5.9      -1.2        0.1        10.1        -3.1 
    Other surgical......................................       5.8      -2.0        0.1        10.0        -2.3 
    Radiology...........................................       1.6      -1.0        0.0         5.3        -4.8 
    Pathology...........................................      -1.6      -1.6        0.1         5.2        -5.3 
    Other...............................................       2.5      -0.8        0.1         7.3        -4.1 
----------------------------------------------------------------------------------------------------------------
Note.--Changes due to the transition to fee-schedule-based payments are calculated as the difference between    
  total payment changes and the sum of changes attributable to relative value changes, geographic adjustment    
  factor changes, and conversion factor updates.                                                                
                                                                                                                
Source: Physician Payment Review Commission (1996).                                                             

                      SELECTED FEE SCHEDULE ISSUES

    The Medicare Fee Schedule is based on a relative value 
scale (RVS) and a conversion factor. The RVS is composed of 
three components representing physician work, practice expense, 
and malpractice expense. The RVS is adjusted for differences in 
costs across geographic areas. The conversion factor translates 
the relative value units into payments for services. Issues 
arise in each of these aspects of the MFS.

                           Conversion Factor

    There are three limitations in the methodology that 
determines the conversion factor. First, determining separate 
performance standards and updates for different categories of 
service leads to distortions in relative payments, which then 
no longer reflect the fee schedule's resource-based relative 
values. By applying different updates to each category, RVUs in 
different categories are not worth the same amount. This 
violates the basic principle underlying the resource-based 
relative value scale, namely that each RVU should be worth the 
same amount regardless of the patient or service to which the 
RVU is attached.
    Second, the formula for the performance standard takes a 
fixed deduction of 4 percentage points from the historical 
trend in volume and intensity growth for the prior 5-year 
period. This approach will lead to unrealistic performance 
standards over time because no matter how much physicians 
restrain the number and intensity of services, they must 
achieve a further reduction of 4 percentage points each year or 
receive lower updates.
    Finally, annual adjustments to the conversion factors are 
based on whether actual expenditure growth met the standards 2 
years earlier. This approach fails to capture shortfalls and 
surpluses that occur during the intervening years and thus does 
not fully account for all Medicare spending for physician 
services.

    Resource-Based Practice Expense and Malpractice Relative Values

    Although the Omnibus Budget Reconciliation Act of 1989 
incorporated resource-based payment for physician work into the 
Medicare Fee Schedule, the practice expense and malpractice 
expense components of the relative value scale remained charge-
based. As required by 1994 technical amendments to the Social 
Security Act, HCFA is taking steps to develop resource-based 
practice expense values to be implemented in 1998. The 
Secretary of Health and Human Services is required to devise a 
methodology that reflects the staff, equipment, and supplies 
necessary to provide medical and surgical services in various 
settings and report to the Congress by June 30, 1996.
    In November 1994, HCFA released a request for proposals 
(RFP) to develop the database necessary to calculate resource-
based practice expense relative values. According to the RFP, 
HCFA is interested in exploring a variety of approaches to 
creating relative values and thus asked for proposals to 
develop a comprehensive database. The agency expects to let 
additional contracts to support development of several 
approaches once the database is complete, originally scheduled 
for spring 1996. Although these steps should improve the 
practice expense component of the fee schedule, the malpractice 
relative values will remain charge based.

                Five-Year Review of Work Relative Values

    The Health Care Financing Administration is required to 
conduct a review of the entire relative value scale every 5 
years. Because the Medicare Fee Schedule was first used in 
1992, the initial revision must be completed by 1997. This 
revision is being confined to the work relative values because 
practice expense and malpractice expense relative values remain 
charge based.
    The 5-year review process began in December 1994, when HCFA 
invited public comments on all work relative values. After 
reviewing the comments received, HCFA referred a subset of 
these work values to the American Medical Association/Specialty 
Society Relative Value Scale Update Committee (RUC) for 
evaluation.
    The RUC met in August 1995 and February 1996, and made 
recommendations to HCFA on more than 1,100 current procedural 
terminology (CPT) codes. The committee recommended increases in 
the work relative values for some 300 codes, decreases for 
about 100, and no change for more than 650 codes. 
Recommendations to HCFA on a few codes, including the 
anesthesia work relative values, are still pending. 
Additionally, the RUC referred some codes to the CPT editorial 
panel for possible coding changes before their relative values 
were reviewed. The work relative value changes recommended by 
the committee seem to reflect both refinement of values 
believed to be assigned incorrectly at the inception of the 
relative value scale and corrections to accommodate changes in 
the work of individual services since that time.
    HCFA is reviewing these recommendations with its carrier 
medical directors and will publish proposed values in a Notice 
of Proposed Rulemaking. After HCFA reviews comments from the 
public and makes final revisions, the new work relative values 
will be issued in the fall of 1996. They will be used for 
payment beginning in January 1997.

                       Fee Schedule Payment Areas

    The current fee schedule payment areas are based on the 
payment localities carriers established under the charge-based 
payment system that preceded introduction of the fee schedule. 
Carriers had established these localities for a variety of 
economic, political, and administrative reasons, with resulting 
area constructs that showed wide variation in size and 
population nationwide. While many States defined single 
statewide areas, one State had over 30 areas when the fee 
schedule was implemented.
    As part of physician payment reform, Congress asked PPRC to 
study the geographic impact of the fee schedule, including the 
issue of defining payment areas. In its 1991 annual report, the 
Commission recommended that Congress redefine the areas. In 
particular, it recommended subdividing into substate areas only 
those States with a high degree of within-State price 
variation, leaving the rest of the States as statewide areas. 
In States with high price variation, payment areas would be 
defined according to Metropolitan Statistical Area (MSA) 
population categories, so that, for example, a State's MSAs 
with populations between 1 and 3 million defined one payment 
area.
    More recently, HCFA contracted with Health Economics 
Research (HER) to analyze alternative definitions of payment 
areas. Among the options it explored, HER recommended retaining 
only those current payment areas with GAFs that exceed State 
averages by some threshold. The change would create more 
statewide areas and eliminate some payment areas in those 
States that continue to include some substate areas. According 
to HER, this option was recommended because it is based on 
current payment areas, reduces the number of areas, and does an 
acceptable job of tracking local price variation.
    Metropolitan areas that cross State borders pose a 
particular problem with regard to defining payment areas. 
Although boundaries for payment areas do not cross State 
boundaries (except for the Washington, DC area), markets do 
cross those boundaries. The definition of Metropolitan 
Statistical Areas (MSA) is designed to encompass areas that 
function as integrated economic markets. To the extent that an 
MSA is indeed a single market (or a complicated network of 
indistinguishable, overlapping markets), then allowing a State 
line to create an arbitrary payment differential may disrupt 
physician and patient purchasing and care patterns. 
Additionally, some of the data used to develop the GPCIs are 
based on information collected at the MSA level, so dividing 
MSAs along State boundaries and averaging one State's portion 
with other areas of the State can result in geographic 
adjustment factors that differ within the MSA even though the 
underlying data cannot be used to identify price differences 
within the MSA. There are more than 30 border-crossing 
Metropolitan Statistical Areas containing nearly one-tenth of 
the Nation's population.

                            HISTORICAL DATA

                       Assignment Rate Experience

    The total number of assigned claims as a percentage of 
total claims received by Medicare carriers for physicians and 
other medical services is known as the total assignment rate. 
Initially, the net assignment rate was computed in the same 
manner except that it omitted hospital-based physicians and 
group-practice prepayment plans which were considered assigned 
by definition (this distinction is no longer made). The net 
assignment rate declined until the mid-1970s when the rate 
leveled off at about 50 percent. Since 1985, the rate has 
increased significantly rising to 94.2 percent in 1995. This 
increase reflects both the impact of the participating 
physician program as well as the requirement that laboratory 
services must be paid on an assigned basis. Table E-5 shows the 
net assignment rates for fiscal years 1969-93.
    The statistics included in table E-5 are programwide data. 
Assignment rates vary geographically. For example, the 
assignment rate (taken as a percent of dollars) for physician 
services in fiscal year 1995 ranged from a low of 67.0 percent 
in South Dakota to a high of 99.9 percent in Rhode Island. The 
national average assignment rate for physicians services during 
this period was 96.7 percent (see table E-6).

              TABLE E-5.--NET ASSIGNMENT RATES, \1\ 1969-95             
                              [In percent]                              
------------------------------------------------------------------------
                                                                Covered 
                    Fiscal year                       Claims    charges 
------------------------------------------------------------------------
1969..............................................       61.0         NA
1970..............................................       61.2         NA
1971..............................................       60.1         NA
1972..............................................       56.4         NA
1973..............................................       53.4       49.0
1974..............................................       52.2       47.8
1975..............................................       51.9       47.7
1976..............................................       51.0       47.8
1977..............................................       50.5       47.9
1978..............................................       50.6       49.3
1979..............................................       51.1       50.4
1980..............................................       51.4       51.3
1981..............................................       52.2       52.9
1982..............................................       52.8       53.8
1983..............................................       53.5       55.3
1984..............................................       56.4       57.7
1985..............................................       67.7       67.4
1986..............................................       68.0       69.5
1987..............................................       71.7       73.7
1988..............................................       76.3       79.4
1989..............................................       79.3       82.6
1990..............................................       80.9       84.8
1991..............................................       82.5       87.6
1992..............................................       85.5       90.8
1993..............................................       89.2       94.0
1994..............................................       92.1       96.0
1995..............................................       94.2       97.1
------------------------------------------------------------------------
\1\ Both measures of assignment exclude claims from hospital-based      
  physicians and group-practice prepayment plans that are considered    
  assigned by definition.                                               
                                                                        
NA--Not available.                                                      
                                                                        
Source: Health Care Financing Administration, Bureau of Program         
  Operations.                                                           

                  Participating Physician Program Data

    Physician participation rates have increased significantly 
since the inception of the program (see tables E-7 and E-8). 
For the calendar year 1995 participation period, the physician 
participation rate (including limited licensed practitioners) 
had risen to 72.3 percent accounting for 92.6 percent of 
allowed charges for physician services during the period. The 
participation rate rose to 77.5 percent in 1996.
    Table E-9 shows the percentage of participating physicians 
and limited licensed practitioners as a percentage of total 
physicians and limited licensed practitioners for each State. 
The national average of participating physicians and limited 
licensed practitioners continues to increase. By the calendar 
year 1995 participation period, this percentage had risen to 
77.5.

    TABLE E-6.--PHYSICIAN ASSIGNMENT RATES AS PERCENT OF ALLOWED CHARGES BY STATE, SELECTED YEARS 1985-95 \1\   
                                                  [In percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                   Fiscal year                                  
     Census division/State     ---------------------------------------------------------------------------------
                                  1985   1987 \2\    1989     1990     1991     1992     1993     1994     1995 
----------------------------------------------------------------------------------------------------------------
National......................     65.5      70.8     80.6     83.0     86.1     89.4     93.2     95.6     96.8
New England:                                                                                                    
    Maine.....................     81.5      84.3     91.4     92.4     94.4     96.7     98.0     98.6     99.1
    New Hampshire.............     56.5      58.3     67.8     69.9     80.8     89.4     93.9     95.6     96.9
    Vermont...................     64.3      71.7     93.4     94.7     95.9     97.8     98.6     99.0     99.1
    Massachusetts \3\.........     93.7      98.2     99.3     99.5     99.5     99.6     99.7     99.7     99.8
    Rhode Island..............     94.0      95.1     97.1     98.7     99.7     99.7     99.8     99.8     99.9
    Connecticut...............     57.6      62.8     80.4     84.7     87.7     91.7     94.7     96.6     97.6
Middle Atlantic:                                                                                                
    New York..................     70.3      73.9     81.1     81.9     84.4     87.7     90.7     93.2     95.6
    New Jersey................     62.3      63.8     70.4     73.0     76.3     80.5     85.4     89.7     92.6
    Pennsylvania..............     88.1      91.0     94.9     95.7     98.5     99.1     99.4     99.6     99.6
East North Central:                                                                                             
    Ohio......................     50.8      58.8     77.8     82.6     87.3     92.5     97.7     99.5     99.7
    Indiana...................     49.6      59.2     74.7     77.2     81.5     85.7     92.9     95.4     96.5
    Illinois..................     51.7      59.9     72.4     75.9     78.8     83.2     89.2     93.6     98.6
    Michigan..................     88.2      89.7     93.6     94.5     94.4     95.9     97.8     98.6     99.0
    Wisconsin.................     51.7      54.6     65.6     68.2     71.7     78.2     86.8     91.2     94.2
West North Central:                                                                                             
    Minnesota.................     30.6      39.9     46.1     47.6     52.3     57.1     67.1     77.4     86.2
    Iowa......................     46.9      53.2     67.5     69.8     73.4     78.8     85.6     89.9     99.2
    Missouri \4\..............     50.1      61.2     72.3     74.9     78.5     83.7     91.6     95.1     96.7
    North Dakota..............     30.5      36.3     50.3     55.0     67.1     72.1     74.9     87.6     92.9
    South Dakota..............     18.7      26.7     38.7     39.2     40.2     43.3     50.2     57.3     67.0
    Nebraska..................     47.3      43.4     59.6     64.9     70.3     76.8     83.8     87.7     89.6
    Kansas \5\................     72.7      78.7     87.2     88.8     91.9     94.5     96.2     96.8     97.1
South Atlantic:                                                                                                 
    Delaware..................     81.8      81.9     88.1     90.5     92.9     95.2     96.8     97.5     97.8
    Maryland \6\..............     81.6      84.6     91.6     91.4     92.8     94.3     96.7     97.5     98.1
    District of Columbia \7\..     78.1      80.5     86.5     87.5     89.4     92.1     94.1     95.7     96.6
    Virginia \8\..............     66.4      73.4     85.1     87.3     89.6     92.5     95.7     97.4     98.4
    West Virginia.............     66.7      76.9     90.3     93.2     95.5     97.2     98.4     98.8     99.1
    North Carolina............     60.3      66.2     79.2     80.8     83.9     88.8     93.7     95.5     96.7
    South Carolina............     64.9      75.4     85.8     87.1     88.9     91.6     94.4     95.9     97.0
    Grorgia...................     63.9      69.1     80.5     83.5     96.6     90.3     94.0     96.3     97.4
    Florida...................     62.2      68.6     80.3     84.1     87.6     91.0     95.0     97.3     98.4
East South Central:                                                                                             
    Kentucky..................     50.3      63.5     80.8     84.8     88.8     91.9     95.5     97.1     97.9
    Tennessee.................     55.6      65.5     80.9     84.0     89.5     93.1     96.3     97.5     98.3
    Alabama...................     74.6      91.7     90.1     92.3     94.9     96.6     98.0     98.6     98.9
    Mississippi...............     63.5      73.5     85.4     88.1     90.6     93.1     95.6     97.1     97.8
West South Central:                                                                                             
    Arkansas..................     72.6      81.1     90.3     92.0     93.7     95.4     96.6     97.9     98.7
    Louisiana.................     51.0      67.8     84.8     88.0     91.0     93.8     95.2     96.9     98.1
    Oklahoma..................     39.0      48.6     66.0     68.2     72.8     77.8     85.0     90.6     94.2
    Texas.....................     63.0      67.2     78.0     79.9     83.0     87.4     91.6     94.7     96.6
Mountain:                                                                                                       
    Montana...................     42.6      42.9     50.7     53.0     54.8     61.3     72.7     80.6     86.3
    Idaho.....................     25.2      26.4     33.7     36.1     40.2     40.1     54.1     64.5     71.7
    Wyoming...................     33.8      30.4     40.2     43.9     48.9     57.5     69.0     78.2     81.8
    Colorado..................     56.0      56.8     67.6     70.4     74.1     79.7     86.8     91.4     93.5
    New Mexico................     58.3      57.6     71.7     76.1     80.1     84.9     91.5     94.0     95.2
    Arizona...................     52.8      57.1     72.0     76.2     80.3     84.4     89.6     91.7     92.8
    Utah......................     63.1      69.4     79.9     80.4     83.1     88.4     92.8     95.2     96.6
    Nevada....................     81.6      86.8     94.4     96.0     97.4     98.4     99.0     99.2     99.4
Pacific:                                                                                                        
    Washington................     45.5      46.6     50.8     54.8     60.8     69.2     74.3     87.5     93.4
    Oregon....................     38.7      46.9     58.4     59.9     63.2     69.3     82.1     88.0     92.3
    California................     71.3      74.0     87.7     84.4     87.4     90.2     93.8     96.0     97.3
    Alaska....................     54.4      64.3     78.5     79.6     83.2     89.1     93.9     95.4     96.2
    Hawaii....................     61.2      72.0     80.7     82.9     85.8     93.1     96.1     92.8     98.7
----------------------------------------------------------------------------------------------------------------
\1\ Rates reflect covered charges for physician claims processed during the period.                             
\2\ The actual participation period was January 1987 through March 1988, and the participation agreements were  
  in effect for that time.                                                                                      
\3\ Massachusetts enacted a Medicare mandatory assignment provision, effective April 1986. The fact that the    
  assignment rates shown here are not 100 percent may be explained by the inclusion in the data base of billings
  by practictioners other than allopathic and osteopathic physicians, which are included in the Medicare        
  statutory definition of ``physician.''                                                                        
\4\ Starting with fiscal year 1993, includes data for all counties in Missouri plus two counties on the State   
  border located in Kansas.                                                                                     
\5\ Starting with fiscal year 1993, includes data for all counties in Kansas excluding two counties on the State
  border.                                                                                                       
\6\ Starting with fiscal year 1993, includes data for all counties in Maryland excluding two counties on the    
  State border.                                                                                                 
\7\ Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland    
  located on the State border plus a few counties and cities located in Virginia, near the State border.        
\8\ Starting with fiscal year 1993, includes data for all counties in Virginia excluding a few counties and     
  cities near the State border.                                                                                 
                                                                                                                
Source: Health Care Financing Administration, Bureau of Program Operations.                                     


     TABLE E-7.--MEDICARE PHYSICIAN PARTICIPATION RATES: PERCENT OF     
 PHYSICIANS AND LIMITED LICENSED PRACTITIONERS WITH AGREEMENTS AND THEIR
                    SHARE OF ALLOWED CHARGES, 1984-95                   
------------------------------------------------------------------------
                                                           Participating
                                            Percent of      physicians' 
                                            physicians        covered   
          Participation period                signing      charges as a 
                                            agreements      percent of  
                                                             total \1\  
------------------------------------------------------------------------
October 1984-September 1985.............            30.4            36.0
October 1985-April 1986.................            28.4            36.3
April 1986-December 1986 \2\............            28.3            38.7
January 1987-March 1988.................            30.6            48.1
April 1988-December 1988................            37.3            57.9
January 1989-March 1990.................            40.2            62.0
April 1990-December 1990................            45.5            67.2
January 1991-December 1991..............            47.6            72.3
January 1992-December 1992..............            52.2            78.8
January 1993-December 1993..............            59.8            85.5
January 1994-December 1994..............            64.8            89.4
January 1995-December 1995..............            72.3            92.6
January 1996-December 1996..............            77.5              NA
------------------------------------------------------------------------
\1\ Rates reflect covered charges for physician services processed      
  during period.                                                        
\2\ The actual participation period was May through December of 1986,   
  and participation agreements were in effect for that time. However,   
  charge data are generally collected by quarter; thus, the data for the
  last three quarters of 1986 are used as a proxy for the participation 
  period.                                                               
                                                                        
NA--Not available.                                                      
                                                                        
Source: Health Care Financing Administration, Bureau of Program         
  Operations.                                                           

    Table E-10 shows the allowed charges of participating 
physicans as a percent of total allowed charges, by State, for 
several participation periods. This percentage increased 
substantially, rising from 36 percent in the October 1984 to 
September 1985 period to 92.6 percent in the calendar 1995 
participation period.

            Participation, Assignment, and Charge Reductions

    Historically the difference between the physician's billed 
charge and Medicare's approved or reasonable charge was 
referred to as the reasonable charge reduction. Beginning in 
1992, with implementation of the fee schedule, the term 
reasonable charge reduction no longer applies. Instead, the 
term ``charge reduction'' refers to the difference between the 
physicians' billed charge and the fee schedule amount. Charge 
reductions were made on 83.9 percent of unassigned claims in 
fiscal year 1995. The average amount of the reduction was 15.6 
percent of billed charges, or $13.01 per approved claim. 
Beneficiaries were liable for these reduction amounts, although 
it is not known how often physicians actually collected from 
beneficiaries. The total reduced on all unassigned claims was 
$425.4 million in fiscal year 1995.

                  TABLE E-8.--PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS BY SPECIALTY, FOR SELECTED PARTICIPATION PERIODS, 1985-96                 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Oct. 1985- Jan. 1987- Jan. 1989- Apr. 1990- Jan. 1991- Jan. 1992- Jan. 1993- Jan. 1994- Jan. 1995- Jan. 1996-
                 Specialty                  Apr. 1986  Mar. 1988  Mar. 1990  Dec. 1990  Dec. 1991  Dec. 1992  Dec. 1993  Dec. 1994  Dec. 1995  Dec. 1996
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians (M.D.s and D.O.s):                                                                                                                           
    General practice......................       27.3       25.6       35.8       39.7       44.0       48.0       55.1       59.1       59.9       66.3
    General surgery.......................       33.9       37.2       52.2       55.8       60.5       66.3       73.8       77.6       80.2       85.8
    Otology, laryngology, rhinology.......       24.6       27.0       41.2       45.2       49.6       57.0       66.2       72.2       77.1       82.6
    Anesthesiology........................       21.1       20.3       28.3       30.8       36.5       49.3       64.6       71.5       73.9       81.0
    Cardiovascular disease................       35.6       43.2       55.5       60.6       65.4       72.0       78.7       82.5       81.9       88.3
    Dermatology...........................       34.0       38.1       48.7       53.4       57.0       61.6       69.8       75.8       79.3       83.6
    Family practice.......................       25.5       27.1       39.7       47.2       50.8       57.7       66.1       71.3       74.5       81.4
    Internal medicine.....................       32.5       33.6       45.2       48.8       52.6       57.8       66.2       71.0       73.8       79.8
    Neurology.............................       34.8       39.2       49.2       53.1       56.1       63.8       71.8       76.4       78.9       84.1
    Obstetrics-gynecology.................       29.1       31.5       44.2       48.8       52.6       58.0       65.7       69.9       72.5       71.3
    Ophthalmology.........................       27.3       35.1       50.5       55.6       60.0       66.1       73.2       78.3       81.2       86.2
    Orthopedic surgery....................       29.0       32.6       49.2       53.7       58.4       65.5       74.9       79.2       82.6       86.8
    Pathology.............................       39.6       41.2       50.6       53.4       59.2       65.8       73.3       76.8       78.9       83.1
    Psychiatry............................       30.0       28.6       37.8       41.6       44.1       48.8       53.5       57.8       58.7       64.6
    Radiology.............................       41.3       39.8       49.6       55.6       62.0       68.2       74.7       78.6       82.8       84.9
    Urology...............................       27.8       30.9       45.6       49.6       53.6       61.7       71.8       78.6       83.0       89.3
    Nephrology............................       50.8       49.7       60.0       66.5       71.7       76.3       82.4       84.3       87.0       90.0
    Clinic or other group practice--not                                                                                                                 
     GPPP.................................       33.8       50.6       67.8       68.7       73.9       77.0       75.5       80.5       79.4       84.5
Limited license practitioners (LLP):                                                                                                                    
    Chiropractor..........................       25.4       19.7       24.8       26.2       28.6       31.4       35.6       39.8       42.6       47.3
    Podiatry-surgical chiropody...........       38.2       33.4       52.6       54.0       59.6       64.2       70.9       75.3       79.2       83.3
    Optometrist...........................       44.0       44.1       48.9       54.0       56.9       59.0       62.7       65.6       66.9       70.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration.                                                                                                           


  TABLE E-9.--PHYSICIAN AND LIMITED LICENSED PRACTITIONER PARTICIPATION RATES AS PERCENTAGE OF PHYSICIANS AND LIMITED LICENSED PRACTITIONERS, BY STATE, 
                                                       FOR SELECTED PARTICIPATION PERIODS, 1985-96                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Oct. 1985- Jan. 1987- Jan. 1989- Apr. 1990- Jan. 1991- Jan. 1992- Jan. 1993- Jan. 1994- Jan. 1995- Jan. 1996-
                   State                    Apr. 1986  Mar. 1988  Mar. 1990  Dec. 1990  Dec. 1991  Dec. 1992  Dec. 1993  Oct. 1994  Dec. 1995  Dec. 1996
                                                                                                                                                        
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama...................................       58.2       68.8       75.9       74.6       82.7       83.4       85.1       87.2       90.5       91.8
Alaska....................................       10.4       27.1       38.8       48.0       53.8       55.1       60.4       66.3       77.1       73.5
Arizona...................................       15.4       28.1       41.2       53.5       61.3       64.5       76.2       82.6       87.1       85.2
Arkansas..................................       45.2       42.0       53.1       53.9       59.9       57.8       62.1       64.4       74.8       77.2
California................................       30.0       38.9       54.0       57.7       60.8       62.6       65.9       69.0       74.5       80.5
Colorado..................................       28.1       19.5       28.1       33.9       35.3       48.0       55.7       58.5       65.2       79.5
Connecticut...............................       22.2       17.4       29.3       32.8       40.8       48.1       55.4       57.8       61.8       84.3
Delaware..................................       23.9       31.2       37.5       42.5       43.9       51.9       57.4       60.0       68.0       72.2
District of Columbia......................       30.5       28.0       34.4       37.9       39.8       45.9       50.6       52.8       63.0       65.3
Florida...................................       25.7       24.9       32.8       34.4       36.5       41.5       55.6       62.2       68.0       70.9
Georgia...................................       33.1       25.8       49.7       49.5       53.6       57.2       74.9       82.7       86.3       87.2
Hawaii....................................       20.6       47.8       53.7       56.8       57.3       64.1       75.9       80.4       82.8       83.6
Idaho.....................................       11.0       10.4       16.0       17.3       19.5       22.9       37.1       49.7       54.7       60.1
Illinois..................................       23.1       26.7       40.0       42.3       46.9       50.8       57.6       61.8       73.3       75.6
Indiana...................................       18.2       26.9       40.0       42.6       45.1       49.3       55.8       61.3       72.8       75.7
Iowa......................................       29.7       25.1       45.3       48.1       51.9       58.8       61.8       63.2       81.1       83.6
Kansas....................................       45.4       51.4       61.6       57.1       62.6       70.3       73.2       78.7       84.4       91.1
Kentucky..................................       24.3       34.2       50.5       56.4       59.5       64.0       73.6       69.1       83.4       85.8
Louisiana.................................       18.8       18.1       32.6       34.6       42.9       44.6       44.0       46.7       57.4       61.0
Maine.....................................       35.4       34.2       51.2       48.7       50.3       51.6       52.0       53.6       68.9       72.2
Maryland..................................       30.4       30.1       42.8       45.9       45.3       58.7       72.5       77.3       88.1       89.9
Massachusetts.............................       48.1       43.8       46.9       50.5       50.8       50.0       50.2       48.9       64.7       74.9
Michigan..................................       44.0       32.7       41.7       44.7       53.7       51.7       58.1       62.1       75.3       80.2
Minnesota.................................       18.5       22.4       25.4       27.5       29.3       34.4       44.4       51.3       58.6       70.6
Mississippi...............................       19.1       23.6       33.4       38.0       42.7       47.9       53.6       53.8       59.4       77.3
Missouri..................................       35.2       24.5       39.6       45.7       49.0       51.8       67.5       81.8       87.6       86.7
Montana...................................       24.3       17.0       21.5       23.4       24.8       23.7       54.7       58.7       70.1       77.4
Nebraska..................................       20.0       25.7       42.5       49.2       56.5       61.1       70.6       75.9       82.5       86.3
Nevada....................................       21.7       33.5       57.0       69.8       72.9       75.4       84.9       87.9       91.2       90.8
New Hampshire.............................       26.9       25.9       28.0       30.9       32.7       38.5       43.0       48.0       60.4       77.0
New Jersey................................       18.0       22.7       26.0       27.6       29.6       36.5       42.6       45.9       54.9       60.6
New Mexico................................       17.7       30.8       36.3       45.6       49.7       53.6       66.8       74.2       78.1       80.7
New York..................................       20.8       24.1       29.8       30.4       34.6       36.9       40.7       46.2       59.2       64.2
North Carolina............................       39.1       31.4       54.2       52.9       58.1       68.2       72.8       76.5       77.6       81.0
North Dakota..............................       10.9       20.5       31.7       42.2       43.9       45.8       55.0       77.4       81.8       92.2
Ohio......................................       21.7       28.9       46.8       50.8       52.5       57.3       76.6       83.3       90.5       91.8
Oklahoma..................................       13.8       20.8       31.6       36.4       39.0       44.4       53.9       64.9       72.3       76.1
Oregon....................................       18.5       26.1       36.9       41.7       46.7       51.7       59.2       66.5       79.7       82.1
Pennsylvania..............................       50.8       32.1       39.0       42.1       45.9       53.0       59.7       61.1       67.3       69.3
Rhode Island..............................       46.7       50.8       58.8       67.0       67.8       70.3       80.9       82.2       80.9       66.8
South Carolina............................       17.9       25.3       42.1       55.5       57.9       63.0       67.3       70.2       76.1       82.7
South Dakota..............................        8.0       12.7       20.0       19.6       20.6       23.7       31.6       41.2       51.7       71.4
Tennessee.................................       21.1       43.4       57.6       58.4       63.7       67.6       70.5       76.9       80.6       83.1
Texas.....................................       19.7       19.4       28.9       36.4       38.9       52.9       61.3       68.6       76.9       80.3
Utah......................................       29.3       42.2       54.7       65.1       65.6       69.5       80.3       82.0       85.9       86.8
Vermont...................................       41.5       34.1       40.5       43.8       45.4       54.2       56.5       58.8       68.8       76.1
Virginia..................................       29.6       33.6       40.9       46.0       48.1       49.7       52.2       52.9       55.6       84.3
Washington................................       23.6       26.9       31.4       34.7       46.1       53.1       64.7       73.9       76.2       86.4
West Virginia.............................       22.9       37.5       59.1       63.2       66.3       68.4       75.9       81.9       87.2       89.3
Wisconsin.................................       31.0       35.1       40.0       46.5       46.8       55.5       66.8       73.7       81.2       83.9
Wyoming...................................       18.3       20.3       19.3       34.6       39.1       50.2       53.3       63.0       66.4       81.2
National..................................       28.4       30.6       40.7       44.1       47.6       52.2       59.8       64.8       72.3      77.5 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Program Operations.                                                                             


TABLE E-10.--ALLOWED CHARGES OF PARTICIPATING PHYSICIANS AS A PERCENT OF TOTAL ALLOWED CHARGES BY STATE, FOR SELECTED PARTICIPATION PERIODS, 1984-95 \1\
                                                                      [In percent]                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                              Oct. 1984-  Jan. 1987-  Jan. 1989-  Apr. 1990-  Jan. 1991-   Jan 1992-  Jan. 1993-  Jan. 1994-  Jan. 1995-
            Census division/State             Sept. 1985   Mar. 1988   Mar. 1990   Dec. 1990   Dec. 1991   Dec. 1992   Dec. 1993   Dec. 1994   Dec. 1995
                                                              \2\                                                                                       
--------------------------------------------------------------------------------------------------------------------------------------------------------
National....................................        36.0        48.1        62.0        67.2        72.3        78.8        85.5        89.4        92.6
New England:                                                                                                                                            
    Maine...................................        50.9        64.8        79.4        80.5        84.2        89.9        92.4        93.6        96.2
    New Hampshire...........................        40.1        36.0        42.8        46.2        68.3        80.7        88.1        90.8        93.2
    Vermont.................................        37.3        46.8        81.4        85.9        90.2        93.4        94.8        95.6        96.9
    Massachusetts...........................        70.7        89.1        95.4        95.0        96.7        96.3        95.9        96.4        97.4
    Rhode Island............................        68.7        85.8        88.8        95.2        97.6        98.5        98.9        99.1        99.4
    Connecticut.............................        30.7        45.3        65.9        67.9        76.2        82.4        87.9        92.2        94.1
Middle Atlantic:                                                                                                                                        
    New York................................        31.5        40.8        51.7        58.0        63.7        72.2        77.7        82.5        87.5
    New Jersey..............................        21.5        32.8        42.3        49.6        55.2        61.8        72.6        80.1        84.6
    Pennsylvania............................        71.4        75.1        81.6        87.9        92.3        95.4        98.0        98.6        98.7
East North Central:                                                                                                                                     
    Ohio....................................        24.9        41.5        61.9        70.9        79.1        86.3        94.6        97.0        97.8
    Indiana.................................        18.9        43.3        60.6        65.2        70.2        80.9        89.1        92.4        94.0
    Illinois................................        29.4        42.0        58.1        61.8        66.1        72.2        82.2        87.9        90.7
    Michigan................................        55.4        71.9        85.6        86.0        86.5        92.0        95.1        96.5        97.6
    Wisconsin...............................        31.3        31.7        42.7        48.9        45.6        61.5        76.9        84.0        91.1
West North Central:                                                                                                                                     
    Minnesota...............................         9.9        14.6        20.2        25.4        28.6        35.5        49.5        68.3        80.5
    Iowa....................................        28.5        41.0        54.2        57.8        61.9        71.0        80.8        85.2        90.4
    Missouri \3\............................        26.7        37.5        41.8        40.1        40.4        45.3        67.7        86.9        93.4
    North Dakota............................         6.9        16.0        32.3        45.5        53.2        61.2        65.8        68.1        89.3
    South Dakota............................         3.2        10.4        19.5        21.2        21.1        24.6        36.0        42.6        59.2
    Nebraska................................        30.5        31.8        51.7        54.8        60.3        69.7        79.8        83.8        86.2
    Kansas \4\..............................        48.0          NA        82.5        82.3        86.8        91.3        94.6        94.8        95.3
South Atlantic:                                                                                                                                         
    Delaware................................        57.0        58.5        70.8        76.6        81.7        87.2        93.5        94.6        95.3
    Maryland \5\............................        57.8        67.4        80.4        83.3        85.6        86.4        87.1        87.4        92.9
    District of Columbia \6\................        60.3        66.6        73.9        76.8        80.8        85.4        90.1        92.4        93.8
    Virginia \7\............................        31.0        53.0        69.5        71.2        78.4        84.1        90.9        94.1        96.3
    West Virginia...........................        34.5        59.3        77.5        80.6        85.2        90.0        93.4        95.3        96.3
    North Carolina..........................        34.4        44.9        55.2        63.9        68.3        82.4        87.1        90.7        92.7
    South Carolina..........................        29.9        55.2        68.5        67.6        71.6        79.3        86.6        90.4        62.7
    Georgia.................................        29.3        43.0        50.7        65.9        74.9        82.8        81.6        90.9        94.8
    Florida.................................        30.0        41.9        61.6        68.8        74.9        81.8        89.0        90.1        94.7
East South Central:                                                                                                                                     
    Kentucky................................        22.3        44.7        64.3        72.6        76.9        84.3        90.7        93.4        94.6
    Tennessee...............................        25.1        41.3        57.4        68.5        76.8        86.8        91.8        94.3        95.6
    Alabama.................................        42.5        66.9        81.3        84.9        88.5        91.7        94.9        96.2        97.0
    Mississippi.............................        14.3        44.9        65.3        68.3        73.9        82.1        88.6        91.2        92.8
West South Central:                                                                                                                                     
    Arkansas................................        47.9        68.3        81.0        84.5        86.5        90.0        93.4        95.2        96.4
    Louisiana...............................        16.2        48.2        71.0        76.7        81.2        86.6        89.4        91.3        92.2
    Oklahoma................................        16.6        24.9        39.1        50.0        57.7        62.8        74.0        83.8        91.4
    Texas...................................        26.2        38.9        52.5        56.9        63.6        72.6        81.5        85.9        90.6
Mountain:                                                                                                                                               
    Montana.................................        25.6        23.8        29.9        29.7        34.1        42.7        58.9        67.4  ..........
    Idaho...................................         8.6         9.3        13.2        17.5        21.1        23.5        41.2        54.0        61.6
    Wyoming.................................        15.7        14.1        19.7        25.8        31.9        44.1        61.0        72.1        75.6
    Colorado................................        23.5        34.0        47.7        50.5        55.9        63.5        76.4        82.6        86.1
    New Mexico..............................        34.1        28.1        39.5        51.1        57.8        64.9        78.2        85.0        89.6
    Arizona.................................        32.7        38.3        49.8        60.2        67.8        75.2        83.7        88.9        90.6
    Utah....................................        43.8        58.4        68.9        65.1        75.1        81.8        83.1        91.3        94.7
    Nevada..................................        41.5        63.4        69.9        82.1        87.5        92.3        96.0        97.9        98.4
Pacific:                                                                                                                                                
    Washington..............................        17.5        20.2        26.9        31.8        37.9        45.2        50.7        82.3        90.5
    Oregon..................................        17.3        25.5        34.8        43.3        50.7        59.8        73.6        80.9        87.5
    California..............................        42.2        50.2        67.2        71.2        75.6        80.0        86.6        89.6        93.7
    Alaska..................................        17.2        34.3        50.0        49.3        58.0        70.9        81.3        84.4        85.4
    Hawaii..................................        39.7        53.5        58.6        70.1        74.3        84.7        90.6        94.7        97.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Rates reflect covered charges for physician claims processed during the period.                                                                     
\2\ The actual participation period is January 1987 through March 1988, and the participation agreements were in effect for that time.                  
\3\ Starting with fiscal year 1993, includes data for all counties in Missouri plus two counties on the State border located in Kansas.                 
\4\ Starting with fiscal year 1993, includes data for all counties in Kansas excluding two countries on the State borer.                                
\5\ Starting with fiscal year 1993, includes data for all counties in Maryland excluding two countries on the State border.                             
\6\ Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland located on the State border plus a few     
  counties and cities located in Virginia near the State border.                                                                                        
\7\ Starting with fiscal year 1993, includes data for all counties in Virginia excluding a few counties and cities near the State border.               
                                                                                                                                                        
NA--Not available.                                                                                                                                      
                                                                                                                                                        
Source: Health Care Financing Administration, Bureau of Program Operations.                                                                             

    Through 1984, approximately the same proportions of 
assigned and unassigned claims were reduced (see table E-11), 
and were reduced by similar proportions and amounts. From 1984 
to 1995, the proportions of assigned and unassigned claims 
reduced remained about the same, but the percentage and amounts 
of the reductions diverged. The percent and dollar reductions 
on assigned claims continued to increase while the percent and 
dollar reductions of unassigned claims decreased. This pattern 
was due to the imposition of limits on the actual charges of 
nonparticipating physicians, which limited the rate of increase 
in prices for unassigned services relative to the overall 
increase in charges. The substantial growth in the overall 
percentage of services billed on an assigned basis also may 
have contributed to this pattern.
    As a result, total beneficiary liability for charge 
reductions on unassigned claims fell. Total liability peaked in 
1986 at $2.813 billion, and declined to $425.4 million by 1995.
    The impact of charge reductions on unassigned claims was 
spread unevenly across the population. Calendar 1995 data show 
a 15.4-percent national average reduction on unassigned claims 
(see table E-12). Beneficiary liability for these charge 
reductions ranged from a high of $34.5 million in New York to a 
low of $0.0 million in Rhode Island.
    The changing pattern of charge reductions reflects, in 
part, overall changes in participation and assignment rates. As 
shown in table E-13, participating physicians accounted for a 
growing share of total physician charges. During the first 
participation period (fiscal year 1985), participating 
physicians (30.4 percent of all physicians) accounted for 36.0 
percent of all physician charges. In 1995, the proportion of 
physicians participating grew to 72.3 percent, and accounted 
for 92.6 percent of all physician charges. Total covered 
charges represented by unassigned claims declined from 34.5 to 
2.8 percent over the same period. The proportion of charges 
billed by participation and assignment status varies by State; 
these data are shown in table E-14.

                   Distribution of Physician Services

    Tables E-15 to E-23 show the distribution of physicians' 
services for calendar year 1994. These tables provide data from 
the third year of the implementation of the Medicare Fee 
Schedule. As noted earlier, the fee schedule appears to be 
having its intended effect. The projected pattern of 
redistribution from the procedurally oriented specialties to 
the primary care specialties has begun taking place.
    The 1994 data are tabulations from the 1994 National Claims 
History Procedure Summary, which is a summary of all claims 
filed with the Medicare carriers. The totals shown will differ 
from total SMI outlay figures for 1994 shown in the budget for 
several reasons:
    The amounts shown in these tables are allowed amounts, 
rather than reimbursements--that is, they include both 
Medicare's and the enrollee's share of approved changes.

                                TABLE E-11.--CHARGE REDUCTIONS FOR MEDICARE PART B \1\ FOR ASSIGNED AND NOT ASSIGNED CLAIMS, FISCAL YEARS 1975, 1980, AND 1985-95                               
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Fiscal year                                                              
         Charge category and assignment status          ----------------------------------------------------------------------------------------------------------------------------------------
                                                            1975       1980       1985       1986       1987       1988       1989       1990       1991       1992      1993     1994     1995 
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Percentage of claims reduced:                                                                                                                                                                   
    Assigned...........................................       68.3       80.0       81.7       82.5       83.0       85.5       86.3       87.6       86.7       87.0  \2\ 88.                  
                                                                                                                                                                             2     88.1     86.4
    Not assigned.......................................       75.6       83.7       84.6       84.9       82.5       85.7       89.2       89.2       90.7       85.4  \2\ 85.                  
                                                                                                                                                                             5     86.7     83.9
Percentage reduction in charges for covered services:                                                                                                                                           
    Assigned...........................................       16.4       22.5       27.0       28.4       27.9       29.3       30.9       32.6       35.2       39.2     42.1     42.5     41.8
    Not assigned.......................................       16.6       22.3       25.6       26.6       25.5       24.7       25.2       25.3       24.0       19.7     16.9     16.4     15.6
Amount reduced per approved claim:                                                                                                                                                              
    Assigned...........................................     $11.13     $21.81     $33.19     $36.43     $36.98     $39.97     $43.72     $48.22     $54.20     $63.60   $79.49   $71.03   $72.31
    Not assigned.......................................     $13.45     $21.96     $33.12     $33.15     $31.44     $29.47     $29.67     $28.97     $24.84     $18.95   $17.26   $13.45   $13.01
Amount reduced on claims not assigned (in millions)....     $450.1   $1,454.0   $2,571.9   $2,812.5   $2,677.8   $2,312.6   $2,213.7   $2,198.0   $1,948.5   $1,317.0   $797.5   $572.4   $425.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Excludes claims from hospital-based physicians and group-practice prepayment plans.                                                                                                         
\2\ Figure may be slightly overstated due to the possibility of a claim being counted more than once because more than one type of reduction is applied.                                        
                                                                                                                                                                                                
Source: Health Care Financing Administration, Bureau of Program Operations.                                                                                                                     


            TABLE E-12.--CHARGE REDUCTIONS FOR UNASSIGNED CLAIMS BY STATE, \1\ JANUARY-DECEMBER 1995            
                                          [Dollar amounts in millions]                                          
----------------------------------------------------------------------------------------------------------------
                                                                 Covered charges \2\      Percent               
                                                             --------------------------  reduction      Amount  
                    Census division/State                                                    in        reduced, 
                                                                 Total      Unassigned   unassigned   unassigned
                                                                                          charges    charges \2\
----------------------------------------------------------------------------------------------------------------
National....................................................    $95,843.6     $2,543.2         15.4       $392.3
New England:                                                                                                    
    Maine...................................................        389.8          2.6         12.8          0.3
    New Hampshire...........................................        295.7          7.4         13.1          1.0
    Vermont.................................................        138.7          1.2         11.9          0.1
    Massachusetts \3\.......................................      2,518.5          4.1          8.4          0.3
    Rhode Island............................................        413.5          0.4          5.4          0.0
    Connecticut.............................................      1,466.0         28.3         12.9          3.7
Middle Atlantic:                                                                                                
    New York................................................      6,946.4        253.1         13.7         34.5
    New Jersey..............................................      3,359.2        188.9         13.6         25.6
    Pennsylvania............................................      6,097.8         21.1          9.4          2.0
East North Central:                                                                                             
    Ohio....................................................      3,898.5         11.4         11.1          1.3
    Indiana.................................................      1,690.4         59.1         17.0         10.0
    Illinois................................................      3,236.4        130.6         15.2         19.9
    Michigan................................................      3,563.5         40.2         18.9          7.6
    Wisconsin...............................................      1,329.5         69.3         15.0         10.4
West North Central:                                                                                             
    Minnesota...............................................        859.4        110.5         14.5         16.1
    Iowa....................................................        750.0         45.0         14.0          6.3
    Missouri \4\............................................      1,891.3         53.9          9.2          2.8
    North Dakota............................................        221.3         15.7         15.3          2.4
    South Dakota............................................        179.5         50.7         15.0          7.5
    Nebraska................................................        391.7         39.9         14.9          6.0
    Kansas \5\..............................................        584.9         15.3         12.6          1.9
South Atlantic:                                                                                                 
    Delaware................................................        286.2          5.0         11.9          0.6
    Maryland \6\............................................      1,390.4         22.6         14.4          3.3
    District of Columbia \7\................................      1,143.2         32.8         16.1          5.3
    Virginia \8\............................................      1,408.6         20.3         13.0          2.6
    West Virginia...........................................        597.2          4.9         12.8          0.6
    North Carolina..........................................      2,677.4         67.5         13.7          9.3
    South Carolina..........................................        987.1         25.5         12.7          3.2
    Georgia.................................................      2,167.7         44.8         12.9          5.8
    Florida.................................................      7,791.8        107.9         23.2         25.0
East South Central:                                                                                             
    Kentucky................................................      1,308.1         21.1         12.5          2.6
    Tennessee...............................................      1,898.4         27.1         12.7          3.5
    Alabama.................................................      1,563.2         15.8         15.0          2.4
    Mississippi.............................................        760.7         13.6         13.2          1.8
West South Central:                                                                                             
    Arkansas................................................        864.4         10.6         16.2          1.6
    Louisiana...............................................      1,397.5         21.2         13.3          2.8
    Oklahoma................................................        840.5         36.3         13.7          5.0
    Texas...................................................      4,903.3        134.3         14.5         19.5
Mountain:                                                                                                       
    Montana.................................................        172.1         19.0         16.8          3.2
    Wyoming.................................................         57.2          9.3         13.8          1.3
    Idaho...................................................        178.8         44.1         15.3          6.7
    Colorado................................................        628.4         35.3         15.7          5.6
    New Mexico..............................................        268.4         12.0         13.1          1.6
    Arizona.................................................      1,044.6         66.7         13.5          9.0
    Utah....................................................        284.2          8.3         13.7          1.1
    Nevada..................................................        478.5          2.7         13.2          0.3
Pacific:                                                                                                        
    Washington..............................................      1,113.2         60.2         14.6          8.8
    Oregon..................................................        515.3         39.6         15.0          5.9
    California..............................................      7,946.8        187.5         15.8         29.6
    Alaska..................................................         56.7          1.9         15.0          0.3
    Hawaii..................................................        240.8          2.6         16.2          0.5
----------------------------------------------------------------------------------------------------------------
\1\ Rates reflect covered charges for physician claims processed during the period. National data exclude data  
  for Puerto Rico, the Virgin Islands, the Railroad Retirement Board, and Parenteral and Enteral Claims. As a   
  result of report changes effective April 1, 1992, charge reductions include: reasonable charge medical        
  necessity and global fee/rebundling.                                                                          
\2\ Amounts in millions.                                                                                        
\3\ Massachusetts enacted a Medicare mandatory assignment provision, effective April 1986. The fact that the    
  assignment rates shown here are not 100 percent may be explained by the inclusion in the database of billings 
  by practitioners other than allopathic and osteopathic physicians, which are included in the Medicare         
  statutory definition of ``physician.''                                                                        
\4\ Starting with fiscal year 1993, includes data for all counties in Missouri plus two counties on the State   
  border located in Kansas.                                                                                     
\5\ Starting with fiscal year 1993, includes data for all counties in Kansas excluding two counties on the State
  border.                                                                                                       
\6\ Starting with fiscal year 1993, includes data for all counties in Maryland excluding two counties on the    
  State border.                                                                                                 
\7\ Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland    
  located on the State border plus a few counties and cities located in Virginia, near the State border.        
\8\ Starting with fiscal year 1993, includes data for all counties in Virginia excluding a few counties and     
  cities near the State border.                                                                                 
                                                                                                                
Source: Health Care Financing Administration, Bureau of Program Operations.                                     

    The amounts shown are for services rendered during calendar 
year 1994; budget figures are for payments made during the 
fiscal year regardless of when the services were rendered.
    The amounts shown are only for services reimbursed by 
carriers under the fee schedule; hence, they do not include 
part B payments to hospital outpatient departments or to risk-
based prepaid medical plans.

    TABLE E-13.--DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY PARTICIPATION STATUS OF PHYSICIAN AND   
                                     ASSIGNMENT STATUS OF CLAIM, 1984-95 \1\                                    
                                                  [In percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                                              Nonparticipants   
                          Time period                              Total    Participants -----------------------
                                                                                           Assigned   Unassigned
----------------------------------------------------------------------------------------------------------------
Oct. 1984-Sept. 1985..........................................       100.0         36.0         29.5        34.5
Oct. 1985-Mar. 1986...........................................       100.0         36.3         29.4        34.3
Apr. 1986-Dec. 1986 \2\.......................................       100.0         39.1         28.0        32.9
Jan. 1987-Mar. 1988 \3\.......................................       100.0         48.1         25.2        26.7
Apr. 1988-Dec. 1988...........................................       100.0         57.9         21.0        21.1
Jan. 1989-Mar. 1990...........................................       100.0         62.0         19.0        18.5
Apr. 1990-Dec. 1990...........................................       100.0         67.2         16.7        16.1
Jan. 1991-Dec. 1991...........................................       100.0         72.3         14.6        13.1
Jan. 1992-Dec. 1992...........................................       100.0         78.8         11.6         9.7
Jan. 1993-Dec. 1993...........................................       100.0         85.5          8.5         6.0
Jan. 1994-Dec. 1994...........................................       100.0         89.4          6.6         4.0
Jan. 1995-Dec. 1995...........................................       100.0         92.6          4.6         2.8
----------------------------------------------------------------------------------------------------------------
\1\ Rates reflect covered charges for physician claims processed during the period.                             
\2\ The actual participation period was May through December 1986, and the participation agreements were in     
  effect for that time.                                                                                         
\3\ The actual participation period is January 1987 through March 1988, and the participation agreements are in 
  effect for that time.                                                                                         
                                                                                                                
Source: Health Care Financing Administration, Bureau of Program Operations.                                     

    Further, the amounts shown underestimate what they are 
supposed to represent by a small amount because some claims for 
services rendered in 1994 had not been processed by carriers at 
the time the 1994 files were submitted to HCFA, and because 
some claims recorded had to be eliminated due to recording 
errors.
    Table E-15 illustrates that in 1994, 76.9 percent of 
allowed amounts under the fee schedule were for physicians' 
services, and another 3.1 percent were for the services of 
limited license practitioners--psychologists, podiatrists, 
optometrists, audiologists, chiropractors, dentists, and 
physical therapists. About 4.2 percent went to independent 
laboratories in 1994, while 15.8 percent went to suppliers of 
medical equipment, prosthetics, and ambulance services.
    About 28 percent of all allowed amounts were for hospital 
inpatient services, and about 37 percent of allowed amounts for 
physicians' services were inpatient. The share of physicians' 
services that are inpatient has dropped in recent years, from 
nearly 64 percent in 1981.

  TABLE E-14.--DISTRIBUTION OF ALLOWED CHARGES FOR SERVICES BILLED BY STATE, PARTICIPATION STATUS OF PHYSICIAN, 
                            AND ASSIGNMENT STATUS OF CLAIM, JANUARY-DECEMBER 1995 \1\                           
                                                  [In percent]                                                  
----------------------------------------------------------------------------------------------------------------
                                                                                            Nonparticipating    
                                                                         Participating          physician       
                   Census division/State                       Total       physician   -------------------------
                                                                                          Assigned    Unassigned
----------------------------------------------------------------------------------------------------------------
National..................................................        100.0          92.6           4.6          2.8
New England:                                                                                                    
    Maine.................................................        100.0          96.2           3.1          0.7
    New Hampshire.........................................        100.0          93.2           4.1          2.7
    Vermont...............................................        100.0          96.9           2.3          0.8
    Massachusetts.........................................        100.0          97.4           2.4          0.2
    Rhode Island..........................................        100.0          99.4           0.5          0.1
    Connecticut...........................................        100.0          94.1           3.6          2.3
Middle Atlantic:                                                                                                
    New York..............................................        100.0          87.5           8.7          3.8
    New Jersey............................................        100.0          84.6           8.6          6.8
    Pennsylvania..........................................        100.0          98.7           1.0          0.4
East North Central:                                                                                             
    Ohio..................................................        100.0          97.8           1.9          0.3
    Indiana...............................................        100.0          94.0           2.9          3.2
    Illinois..............................................        100.0          90.7           5.2          4.1
    Michigan..............................................        100.0          97.6           1.5          0.9
    Wisconsin.............................................        100.0          91.1           3.9          5.0
West North Central:                                                                                             
    Minnesota.............................................        100.0          80.5           7.3         12.3
    Iowa..................................................        100.0          90.4           3.8          5.8
    Missouri \2\..........................................        100.0          93.4           3.6          3.0
    North Dakota..........................................        100.0          89.3           3.7          7.0
    South Dakota..........................................        100.0          59.2          10.5         30.3
    Nebraska..............................................        100.0          86.2           3.8         10.0
    Kansas \3\............................................        100.0          95.3           1.9          2.8
South Atlantic:                                                                                                 
    Delaware..............................................        100.0          95.3           2.7          2.0
    Maryland \4\..........................................        100.0          92.9           5.3          1.8
    District of Columbia \5\..............................        100.0          93.8           3.0          3.2
    Virginia \6\..........................................        100.0          96.3           2.2          1.5
    West Virginia.........................................        100.0          96.3           2.9          0.9
    North Carolina........................................        100.0          92.7           4.2          3.1
    South Carolina........................................        100.0          92.7           4.5          2.8
    Georgia...............................................        100.0          94.8           2.9          2.3
    Florida...............................................        100.0          94.7           3.9          1.4
East South Central:                                                                                             
    Kentucky..............................................        100.0          94.6           3.5          1.9
    Tennessee.............................................        100.0          95.6           2.8          1.5
    Alabama...............................................        100.0          97.0           1.9          1.1
    Mississippi...........................................        100.0          92.8           5.2          2.0
West South Central:                                                                                             
    Arkansas..............................................        100.0          96.4           2.4          1.2
    Louisiana.............................................        100.0          92.2           6.1          1.7
    Oklahoma..............................................        100.0          91.4           3.7          4.9
    Texas.................................................        100.0          90.6           6.4          3.1
Mountain:                                                                                                       
    Montana...............................................        100.0          83.1           6.3         10.6
    Wyoming...............................................        100.0          75.6           7.2         17.2
    Idaho.................................................        100.0          61.6          11.7         26.7
    Colorado..............................................        100.0          86.1           7.7          6.2
    New Mexico............................................        100.0          89.6           5.8          4.6
    Arizona...............................................        100.0          90.6           2.1          7.3
    Utah..................................................        100.0          94.7           2.3          3.0
    Nevada................................................        100.0          98.4           1.0          0.6
Pacific:                                                                                                        
    Washington............................................        100.0          90.5           3.8          5.7
    Oregon................................................        100.0          87.5           5.5          7.0
    California............................................        100.0          93.7           3.8          2.5
    Alaska................................................        100.0          85.4          11.0          3.6
    Hawaii................................................        100.0          97.2           1.7          1.1
----------------------------------------------------------------------------------------------------------------
\1\ Rates reflect charges for physician claims processed during the period.                                     
\2\ For fiscal year 1993, includes data for all counties in Missouri plus two counties on the State border      
  located in Kansas.                                                                                            
\3\ Starting with fiscal year 1993, includes data for all counties in Kansas excluding two counties on the State
  border.                                                                                                       
\4\ Starting with fiscal year 1993, includes data for all counties in Maryland excluding two counties on the    
  State border.                                                                                                 
\5\ Starting with fiscal year 1993, includes data for the District of Columbia plus two counties in Maryland    
  located on the State border plus a few counties and cities located in Virginia, near the State border.        
\6\ Starting with fiscal year 1993, includes data for all counties in Virginia excluding a few counties and     
  cities near the State border.                                                                                 
                                                                                                                
Source: Health Care Financing Administration, Bureau of Program Operations.                                     


    TABLE E-15.--ALLOWED AMOUNTS FOR CLAIMS BY TYPE OF PROVIDER, 1994   
------------------------------------------------------------------------
                                        Allowed                         
          Type of provider              amounts   Percent of    Percent 
                                      (millions)     total     inpatient
------------------------------------------------------------------------
Physicians..........................   $39,222.0        76.9        36.5
Limited license practitioners \1\...     1,584.0         3.1         1.4
Laboratories........................     2,155.0         4.2         0.2
Medical suppliers \2\...............     8,033.0        15.8         0.7
                                     -----------------------------------
      All providers \3\.............    50,994.0       100.0        28.2
------------------------------------------------------------------------
\1\ Includes psychology, podiatry, optometry, audiology, chiropractic,  
  dentistry, and physical therapy.                                      
\2\ Includes suppliers of medical equipment, prosthetics, and ambulance 
  services.                                                             
\3\ Total does not include charges for hospital outpatient department   
  facility fees or for risk-based prepaid medical plans since these are 
  not reimbursed under the CPR system.                                  
                                                                        
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    Table E-16 shows the distribution of spending for 
physicians' services by specialty. (It excludes limited license 
practitioners, labs, and suppliers.) In 1994, generalists 
accounted for 26.4 percent of spending, nonsurgical specialists 
for 26.7 percent, and surgical specialists for 30.4 percent. 
Radiologists, anesthesiologists, and pathologists together 
accounted for 11.8 percent of allowed amounts. Radiation 
oncologists, osteopathic manipulative therapists, intensivists, 
emergency medicine physicians, and other physician specialties 
accounted for less than 5 percent of total allowed amounts for 
physicians' services.
    The major physician specialties treating the Medicare 
population, in descending order of importance as measured by 
total allowed amounts, were general internists (13.7 percent of 
allowed amounts), ophthalmologists (9.8 percent), cardiologists 
(8.4 percent), radiologists (7.3 percent), and family 
practitioners (6.2 percent).
    The share of services provided on an inpatient basis varied 
by specialty, generally increasing with specialization. About 
32 percent of the services of generalists were inpatient in 
1994. The inpatient share for nonsurgical specialists was 42 
percent and 38 percent for surgical specialists.

TABLE E-16.--ALLOWED AMOUNTS FOR PHYSICIANS' SERVICES BY SPECIALTY, 1994
------------------------------------------------------------------------
                                   Allowed                              
           Specialty               charges     Percent of      Percent  
                                 (millions)       total       inpatient 
------------------------------------------------------------------------
Generalists:                                                            
    General practice..........       1,163.0           3.0          17.8
    Family practice...........       2,449.0           6.2          24.3
    Internal medicine.........       5,380.0          13.7          36.9
    Pediatrics................          45.0           0.1          19.0
    Clinics...................       1,321.0           3.4          37.5
                               -----------------------------------------
      All generalists.........      10,359.0          26.4          31.8
                               =========================================
Nonsurgical specialists:                                                
    Allergy/immunology........          94.0           0.2           3.4
    Cardiology................       3,507.0           8.9          53.8
    Dermatology...............         847.0           2.2           0.9
    Gastroenterology..........       1,113.0           2.8          43.2
    Neurology.................         596.0           1.5          44.2
    Psychiatry................         866.0           2.2          33.7
    Physical medicine and                                               
     rehabilitation...........         286.0           0.7          55.5
    Pulmonary disease.........         801.0           2.0          66.0
    Nuclear medicine..........          65.0           0.2          20.6
    Geriatric medicine........          72.0           0.2          29.8
    Nephrology................         648.0           1.7          50.3
    Infectious disease........         164.0           0.4          75.0
    Endocrinology.............         160.0           0.4          34.1
    Rheumatology..............         221.0           0.6          13.5
    Peripheral vascular                                                 
     disease..................          25.0           0.1          58.2
    Hematology/oncology.......         808.0           2.1          18.9
    Medical oncology..........         217.0           0.6          18.4
                               -----------------------------------------
      All nonsurgical                                                   
       specialists............      10,490.0          26.7          41.9
                               =========================================
Surgical specialists:                                                   
    General surgery...........       1,957.0           5.0          63.0
    Otolaryngology............         457.0           1.2          14.4
    Neurosurgery..............         331.0           0.8          83.6
    Gynecology/obstetrics.....         305.0           0.8          39.3
    Ophthalmology.............       3,848.0           9.8           2.3
    Orthopedic surgery........       1,902.0           4.8          58.8
    Plastic and reconstructive                                          
     surgery..................         191.0           0.5          30.4
    Colorectal surgery........          79.0           0.2          33.8
    Thoracic surgery..........         677.0           1.7          89.5
    Urology...................       1,605.0           4.1          26.3
    Hand surgery..............          24.0           0.1          18.7
    Vascular surgery..........         244.0           0.6          72.4
    Cardiac surgery...........         263.0           0.7          96.3
    Surgical oncology.........          26.0           0.1          56.3
                               -----------------------------------------
      All surgical specialists      11,909.0          30.4          37.5
                               =========================================
Radiology.....................       2,872.0           7.3          28.9
Radiation oncology............         420.0           1.1           5.1
Anesthesiology................       1,227.0           3.1          67.8
Pathology.....................         540.0           1.4          41.9
Manipulative therapy..........          19.0  ............          18.7
Critical care (intensivists)..          52.0           0.1          78.7
Emergency medicine............         592.0           1.5           4.0
Other physician specialties...         743.0           1.9          23.1
                               -----------------------------------------
      Total--all physicians...      39,222.0         100.0          36.5
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    Table E-17 shows the distribution of spending for 
physicians' services by type of service. About 39.3 percent of 
spending was for medical care (nonsurgical) in 1994. About 32.7 
percent of spending was for surgical procedures in total, 
adding together the amounts for surgeons, assistant surgeons, 
and anesthesiologists. About 10.8 percent was for diagnostic 
laboratory tests, which would include not only blood chemistry 
analysis and urinalysis, but also tests such as EKGs. About 9.2 
percent of spending was for radiology, and 5.1 percent was for 
consultations.

    TABLE E-17.--ALLOWED AMOUNTS FOR PHYSICIANS' SERVICES BY TYPE OF    
                              SERVICE, 1994                             
------------------------------------------------------------------------
                                     Allowed                            
         Type of service             charges     Percent of    Percent  
                                    (millions)     total      inpatient 
------------------------------------------------------------------------
Medical care.....................    $15,427.0         39.3         32.3
Surgery..........................     11,299.0         28.8         48.7
Assistance at surgery............        232.0          0.6         93.2
Anesthesia.......................      1,287.0          3.3         66.4
Diagnostic laboratory tests......      4,218.0         10.8         20.1
Diagnostic radiology.............      2,898.0          7.4         23.7
Therapeutic radiology............        689.0          1.8          4.8
Consultations \1\................      1,990.0          5.1         58.9
Mammography......................         52.0          0.1          0.5
Pneumococcal vaccine.............         91.0          0.2             
Other \2\........................      1,038.0          2.6          0.3
                                  --------------------------------------
      All services...............     39,222.0        100.0         36.5
------------------------------------------------------------------------
\1\ Includes first and second opinions for surgery.                     
\2\ Includes treatment for renal patients, pneumococcal vaccine, and    
  medical supplies, among other things.                                 
                                                                        
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    Table E-18 lists the top 20 individual services, ranked by 
total allowed amounts on claims submitted by selected 
physicians for 1994. The most important exclusion is amounts 
for the services of anesthesiologists, since there would 
typically be a charge for anesthesiology for the surgical 
procedures. The amounts for surgical procedures include claims 
by both the primary surgeon and any assistant surgeons, but not 
the amounts for anesthesiologists.
    The top 20 services (out of more than 7,000) accounted for 
37.6 percent of all spending for all physicians' services in 
1994. Cataract extraction with implantation of an intraocular 
lens was the highest ranked surgical procedure, accounting by 
itself for 4.9 percent of total allowed amounts for physicians' 
services. Most of the services in the top 20 were evaluation 
and management services (that is, visits and consultations).
    Table E-19 presents total allowed amounts for selected 
groups of generic services, and shows the percent of total 
allowed amounts for all physicians' services accounted for by 
each group. As in table E-18, certain physicians' services--
most notably for anesthesiologists--are not included in the 
allowed amounts for each service group. No attempt was made to 
define and rank all possible service groups, so that there may 
be other important service groups that do not appear in the 
table. For example, diagnostic radiology accounts for 7.4 
percent of allowed amounts for physicians' services (from table 
E-17), but radiological services do not appear in table E-19.

 TABLE E-18.--TOP 20 SERVICES BILLED BY PHYSICIANS UNDER MEDICARE, 1994 
------------------------------------------------------------------------
                                                     Allowed            
  Rank order    Service         Description          charges     Percent
                  code                              (millions)  of total
------------------------------------------------------------------------
 1.               99213  Office/outpatient visit,     $2,609.0       6.7
                          EST.                                          
 2.               66984  Remove cataract, insert       1,928.0       4.9
                          lens.                                         
 3.               99232  Subsequent hospital care      1,546.0       3.9
 4.               99214  Office/outpatient visit,      1,472.0       3.8
                          EST.                                          
 5.               99231  Subsequent hospital care        930.0       2.4
 6.               99233  Subsequent hospital             720.0       1.8
                          care--comprehensive.                          
 7.               99212  Office/outpatient visit,        697.0       1.8
                          EST.                                          
 8.               99223  Initial hospital care...        527.0       1.3
 9.               99215  Office/outpatient visit,        502.0       1.3
                          EST.                                          
10.               93307  Echo exam of heart......        457.0       1.2
11.               99254  Initial inpatient               433.0       1.1
                          consult.                                      
12.               90844  Psychotherapy 45-50             425.0       1.1
                          minutes.                                      
13.               99285  Emergency room visit....        344.0       0.9
14.               66821  After cataract laser            327.0       0.8
                          surgery.                                      
15.               92014  Eye, exam and treatment.        327.0       0.8
16.               99238  Hospital discharge pay..        324.0       0.8
17.               99255  Initial inpatient               307.0       0.8
                          consult.                                      
18.               27447  Total knee replacement..        300.0       0.8
19.               99222  Initial hospital care...        299.0       0.8
20.               99244  Office consultation.....        291.0       0.7
                                                  ----------------------
                         Total...................    $14,765.0     37.6 
------------------------------------------------------------------------
\1\ Amounts for surgical procedures include fees for primary and        
  assistant surgeons, but not for anesthesiologists.                    
                                                                        
 Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy.                                                         

    The 21 service groups shown in table E-19 accounted for 
44.3 percent of all allowed amounts for all physicians' 
services in 1994. The single most costly group was office 
visits (accounting for 15.5 percent of total allowed amounts 
for physicians' services), followed by hospital visits (11.2 
percent). Cataract surgery of all types accounted for 5.0 
percent of total allowed amounts for physicians' services. It 
should also be noted that the amount for hemodialysis includes 
only physician services and does not include the much larger 
amounts for the facility charges for hemodialysis that were not 
billed under the fee-for-service reimbursement system.
    In recent years, there have been many changes in the 
delivery of health care services. Some of the more significant 
changes affecting Medicare services have been in the delivery 
of surgical services. First, there has been significant growth 
in the amount of surgical care provided by some specialties. 
Second, there has been a dramatic shift in the place of 
surgical care; that is, surgical care is now frequently 
provided in outpatient settings, whereas previously, most 
surgical care was provided in inpatient settings.

     TABLE E-19.--ALLOWED AMOUNTS FOR SELECTED GROUPS OF PHYSICIANS'    
                             SERVICES, 1994                             
------------------------------------------------------------------------
                                                    Allowed             
                 Service group                      charges      Percent
                                                (millions) \1\  of total
------------------------------------------------------------------------
Hospital visits (99221-99238).................       $4,388.0       11.2
Office visits (99201-99215)...................        6,082.0       15.5
Cataract surgery (66830-66985)................        1,956.0        5.0
EKGs (93000-93018, 93015-26)..................          667.0        1.7
Transurethal surgery (52602)..................          131.0        0.3
Coronary artery bypass (33510-33516)..........          193.0        0.5
Hip arthroplasty (27130-27132)................          157.0        0.4
Cardiac catheterization (93501-93553).........          581.0        1.5
Colonoscopy (45378-45385, 44388-44393, 45355).          548.0        1.4
Hemodialysis/CAPD (90935-90947)...............          167.0        0.4
Thromboendarterectomy (35301-35381)...........          118.0        0.3
Knee arthroplasty (27446, 27447, 29881).......          336.0        0.9
Pacemaker inplant/removal (33200-33214, 33233-                          
 33237).......................................          101.0        0.3
Vein bypass (35501-35587).....................           75.0        0.2
Emergency room visits (99281-99285)...........          907.0        2.3
SNF visits (99301-99313)......................          675.0        1.7
Nursing home visits (99321-99333).............           37.0        0.1
Home visits (99341-99353).....................           82.0        0.2
Prostatectomy (55801-55845)...................           59.0        0.2
EEGs (95816-95827, 95950, 95955)..............           43.0        0.1
Pacemaker tests (93731-93736).................           81.0        0.2
                                               -------------------------
      Total...................................       17,383.0       44.3
------------------------------------------------------------------------
\1\ Amounts for surgical procedures include fees for primary and        
  assistant surgeons, but not for anesthesiologists.                    
                                                                        
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    As shown in table E-20, the most significant shift in site 
of surgical care between 1980 and 1994 was out of inpatient 
settings and into other settings. Outpatient hospital settings 
benefited most from this shift, growing from only 3.3 percent 
of all surgical charges in 1980 to 25.6 percent in 1994. The 
proportions of surgery taking place in a physician's office and 
in other nonhospital settings also grew somewhat. In 1994 the 
proportion of all surgical care provided in inpatient settings 
had dropped to 46.4 percent.

  TABLE E-20.--CHARGES SUBMITTED TO MEDICARE FOR ALL PHYSICIAN SURGICAL 
          SERVICES BY PLACE OF SERVICE, 1980, 1990 AND 1992-94          
------------------------------------------------------------------------
                                             Surgical charges \1\       
                                     -----------------------------------
                                                              As percent
      Year and place of service        Amount in  Percent of   of total 
                                       millions    surgical    settings 
                                                    charges     charges 
------------------------------------------------------------------------
1980:                                                                   
      Total.........................      $3,828       100.0        31.8
                                     -----------------------------------
Office..............................         445        11.6        12.2
Outpatient hospital.................         129         3.3        29.5
Inpatient hospital..................       3,231        84.4        44.1
Other \2\...........................          23         0.6         3.7
                                     ===================================
1990:                                                                   
      Total.........................      11,048       100.0        33.3
                                     -----------------------------------
Office..............................       2,004        18.1        16.2
Outpatient hospital \1\.............       2,867        26.0        54.3
Inpatient hospital..................       5,563        50.4        40.6
Ambulatory surgical center..........         488         4.4        51.2
Other \2\...........................         127         1.1        14.5
                                     ===================================
1992:                                                                   
      Total.........................      10,958       100.0        31.3
                                     -----------------------------------
Office..............................       2,103        19.2        14.8
Outpatient hospital \1\.............       2,791        25.5        50.3
Inpatient hospital..................       5,249        47.9        39.2
Ambulatory surgical center..........         622         5.7        90.3
Other \2\...........................         193         1.8        16.6
                                     ===================================
1993:                                                                   
      Total.........................      10,777       100.0        30.0
                                     -----------------------------------
Office..............................       2,128        19.7        14.1
Outpatient hospital \1\.............       2,731        25.3        48.4
Inpatient hospital..................       5,085        47.2        38.4
Ambulatory surgical center..........         697         6.5        90.5
Other \2\...........................         136         1.3        11.1
                                     ===================================
1994:                                                                   
      Total.........................      11,904       100.0        29.5
                                     -----------------------------------
Office..............................       2,379        20.0        14.0
Outpatient hospital \1\.............       3,046        25.6        47.9
Inpatient hospital..................       5,518        46.4        38.5
Ambulatory surgical center..........         798         6.7        91.0
Other \2\...........................         162         1.4         8.7
------------------------------------------------------------------------
\1\ May include some services rendered in an ambulatory surgical center.
\2\ Includes homes, nursing homes, and other places of service.         
                                                                        
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    Table E-21 shows the percent of total surgical charges by 
specialty in 1980 and 1994. In 1980, three specialties 
(ophthalmology, general surgery, and orthopedic surgery) 
accounted for nearly half of all Medicare surgical care. These 
same three specialties accounted for close to 44 percent of 
total surgical care in 1994. The shares among these specialties 
changed. While ophthalmologists accounted for only 13.6 percent 
in 1980, by 1994 their share had increased to 20.9 percent due 
primarily to the substantial growth in cataract surgery during 
the 1980s. For gastroenterologists, surgical care represented 
much larger proportions of their total Medicare practice in 
1994 than in 1980. On the other hand, surgical charges for 
urologists represented much smaller proportions of their total 
Medicare practice in 1994 than in 1980.

  TABLE E-21.--SUBMITTED SURGICAL CHARGES AS A SHARE OF TOTAL SURGICAL  
CHARGES AND AS A PERCENT OF TOTAL PRACTICE CHARGES BY MEDICAL SPECIALTY,
                              1980 AND 1994                             
------------------------------------------------------------------------
                                        Percent        Surgical charges 
                                    distribution of     as a percent of 
                                   surgical charges     total practice  
            Specialty            --------------------       charges     
                                                     -------------------
                                    1980      1994      1980      1994  
------------------------------------------------------------------------
      All physicians............     100.0     100.0      31.8      29.5
                                 ---------------------------------------
Ophthalmology...................      13.6      20.9      62.1      64.8
General surgery.................      22.1      11.6      71.6      70.7
Orthopedic surgery..............      13.0      11.3      73.6      70.9
Urology.........................      10.7       5.9      75.6      43.5
Thoracic surgery................       8.0       4.7      82.2      81.9
Clinic and other group practice.       4.7       2.4      25.8      21.9
Internal medicine...............       4.2       2.7       6.9       5.9
Cardiovascular disease..........       2.7       7.1      22.4      24.2
Podiatry........................       3.0       4.7      53.5      65.0
Gastroenterology................       1.7       5.8      45.9      62.3
Dermatology.....................       2.4       4.9      60.9      69.3
Neurological surgery............       2.9       2.2      70.2      78.1
Othology, laryngology, rhinology       1.9       1.7      49.7      43.5
Plastic surgery.................       1.3       1.4      88.1      84.5
Other...........................       8.4      12.7  ........       9.2
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         

    As shown in table E-22, many different medical specialties 
participated in the shift to outpatient surgery. In 1980, only 
two specialties (dermatology and podiatry) performed the 
majority of their surgical services in outpatient settings; in 
these cases, the care was generally provided in the physician's 
office. In 1994, eight specialties provided a majority of their 
surgical care in outpatient settings: ophthalmology, podiatry, 
gastroenterology, dermatology, ENT, internal medicine, plastic 
surgery, and urology. Podiatrists and dermatologists continued 
primarily to work in their offices; internists split their 
noninpatient work between office and outpatient settings, while 
most of the other specialties provided their surgical services 
in outpatient hospital and ambulatory surgical facilities. Most 
surgical specialties, such as general, orthopedic, 
cardiovascular, neurological, and thoracic surgeons, remained 
closely tied to inpatient hospital settings.
    In 1994, ophthalmologists provided most (41.8 percent) of 
the surgery done in outpatient hospital settings (see table E-
23). The predominance of ophthalmologists in this setting is 
due to cataract surgery. Dermatologists accounted for the 
largest proportion of office surgical charges, 24.0 percent. 
However, ophthalmologists and podiatrists also represented 
significant percentages of office surgical charges, 21.1 and 
16.5 percent respectively. In inpatient settings, the 
traditional surgical specialties--general surgery, orthopedic 
surgery, cardiovascular surgery, thoracic surgery, and urology 
accounted for 65.3 percent of all surgical charges.
    Table E-24 summarizes the practice cost indices for 
geographical areas in 1996.

                     TABLE E-22.--SUBMITTED SURGICAL CHARGES UNDER MEDICARE BY MEDICAL SPECIALTY AND PLACE OF SERVICE, 1980 AND 1994                    
                                                                      [In percent]                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          1980                                                        1994                              
                                 -----------------------------------------------------------------------------------------------------------------------
        Medical specialty            All              Inpatient  Outpatient                All              Inpatient   Outpatient                      
                                  settings   Office    hospital   hospital   Other \1\  settings   Office    hospital  hospital \2\   ASC \3\  Other \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
      All physicians............     100.0      11.6       84.4        3.3         0.5     100.0      20.0       46.4        25.6         6.7        1.4
                                 -----------------------------------------------------------------------------------------------------------------------
General surgery.................     100.0       4.4       92.6        2.9         0.1     100.0       5.3       70.9        22.1         1.4        0.2
Cardiovascular disease..........     100.0       1.7       97.9        0.4       (\4\)     100.0       2.0       82.9        14.0         0.1        1.0
Dermatology.....................     100.0      94.6        4.0        0.9         0.6     100.0      97.2        0.2         1.9         0.4        0.3
Gastroenterology................     100.0      12.0       75.6       12.3         0.1     100.0       7.4       36.2        48.8         7.5        0.1
Internal medicine...............     100.0      17.5       76.6        5.7         0.2     100.0      24.7       43.2        29.7         2.1        0.4
Neurological surgery............     100.0       1.1       98.5        0.5       (\4\)     100.0       1.1       95.0         3.7         0.1        0.0
Obstetrics/gynecology...........     100.0  ........  .........  ..........  .........     100.0      14.7       72.3        11.9         1.0        0.1
Otology, laryngology, rhinology.     100.0      12.6       83.7        3.7       (\4\)     100.0      33.0       25.4        37.1         4.1        0.4
Ophthalmology...................     100.0       7.9       87.1        5.0         0.1     100.0      20.1        3.2        51.1        25.3        0.3
Orthopedic surgery..............     100.0       6.3       90.2        3.4         0.1     100.0       8.0       76.3        14.1         1.4        0.1
Plastic surgery.................     100.0      13.0       67.2       19.7         0.1     100.0      21.9       31.7        38.7         7.2        0.4
Thoracic surgery................     100.0       0.8       98.7        0.5       (\4\)     100.0       0.7       96.3         2.8         0.1        0.0
Urology.........................     100.0       8.0       90.6        1.4         0.1     100.0      26.1       49.8        22.2         1.8        0.2
Podiatry........................     100.0      71.3       13.5        0.9        14.3     100.0      69.4        1.3         4.9         1.6       22.8
Clinic and other group practice.     100.0      10.1       85.3        4.5         0.1     100.0      11.8       60.3        25.1         2.6        0.2
Other...........................     100.0  ........  .........  ..........  .........     100.0      12.5       64.7        21.2         1.3       0.4 
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Includes homes, nursing homes, and other places of service.                                                                                         
\2\ May include some services rendered in an ASC.                                                                                                       
\3\ Ambulatory surgical center.                                                                                                                         
\4\ Less than 0.05.                                                                                                                                     
                                                                                                                                                        
Source: Health Care Financing Administration, Bureau of Data Management and Strategy.                                                                   


    TABLE E-23.--PERCENT DISTRIBUTION OF ALLOWED SURGICAL CHARGES BY    
        SELECTED SPECIALTIES AND SELECTED PLACE OF SERVICE, 1994        
------------------------------------------------------------------------
                       Place of service                          Percent
------------------------------------------------------------------------
Inpatient hospital:                                                     
    General surgery...........................................      17.8
    Orthopedic surgery........................................      18.7
    Thoracic surgery..........................................       9.7
    Urology...................................................       6.3
    Cardiovascular disease....................................      12.8
    Clinic and other group practice...........................       3.1
    Gastroenterology..........................................       4.6
    Internal medicine.........................................       2.5
    Ophthalmology.............................................       1.4
    Neurological surgery......................................       4.5
    Other medical and surgical specialties....................      18.6
                                                               ---------
      Total...................................................     100.0
                                                               =========
Office:                                                                 
    Ophthalmology.............................................      21.1
    Dermatology...............................................      24.0
    Podiatry..................................................      16.5
    Urology...................................................       7.7
    Internal medicine.........................................       3.3
    General surgery...........................................       3.1
    Orthopedic surgery........................................       4.6
    Gastroenterology..........................................       2.2
    Family Practice...........................................       3.5
    Clinic and other group practice...........................       1.4
    Other medical and surgical specialties....................      12.6
                                                               ---------
      Total...................................................     100.0
                                                               =========
Outpatient hospital:                                                    
    Ophthalmology.............................................      41.8
    Gastroenterology..........................................      11.1
    General surgery...........................................      10.0
    Orthopedic surgery........................................       6.2
    Internal medicine.........................................       3.1
    Urology...................................................       5.1
    Clinic and other group practice...........................       2.3
    Otology, larynology, rhinology............................       2.4
    Plastic surgery...........................................       2.1
    Other medical and surgical specialties....................      15.9
                                                               ---------
      Total...................................................     100.0
------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management 
  and Strategy.                                                         


 TABLE E-24.--1996 GEOGRAPHIC PRACTICE COST INDICES BY MEDICARE CARRIER 
                              AND LOCALITY                              
------------------------------------------------------------------------
                                                   Cost indices         
Carrier  Locality                       --------------------------------
 number   number       Locality name               Practice             
                                           Work     expense  Malpractice
------------------------------------------------------------------------
00510..        05  Birmingham, AL......     0.994     0.912       0.927 
00510..        04  Mobile, AL..........     0.975     0.858       0.927 
00510..        02  North Central,                                       
                    Alabama............     0.973     0.850       0.927 
00510..        01  Northwest, Alabama..     0.990     0.873       0.927 
00510..        06  Rest of Alabama.....     0.964     0.818       0.927 
00510..        03  Southeast Alabama...     0.970     0.858       0.927 
01020..        01  Alaska..............     1.064     1.155       1.617 
01030..        05  Flagstaff, AZ.......     0.971     0.936       1.321 
01030..        01  Phoenix, AZ.........     1.004     0.963       1.321 
01030..        07  Prescott, AZ........     0.971     0.912       1.321 
01030..        99  Rest of Arizona.....     0.989     0.948       1.321 
01030..        02  Tucson, AZ..........     0.978     0.942       1.321 
01030..        08  Yuma, AZ............     0.984     0.925       1.321 
00520..        13  Arkansas............     0.954     0.853       0.427 
02050..        26  Anaheim/Santa Ana,                                   
                    CA.................     1.037     1.205       0.752 
00542..        14  Bakersfield, CA.....     1.023     0.992       0.686 
00542..        11  Fresno/Madera, CA...     1.000     0.977       0.596 
00542..        13  Kings/Tulare, CA....     0.987     0.954       0.596 
02050..        18  Los Angeles (1st of                                  
                    8).................     1.056     1.207       0.752 
02050..        19  Los Angeles (2nd of                                  
                    8).................     1.056     1.207       0.752 
02050..        20  Los Angeles (3rd of                                  
                    8).................     1.056     1.207       0.752 
02050..        21  Los Angeles (4th of                                  
                    8).................     1.056     1.207       0.752 
02050..        22  Los Angeles (5th of                                  
                    8).................     1.056     1.207       0.752 
02050..        23  Los Angeles (6th of                                  
                    8).................     1.056     1.207       0.752 
02050..        24  Los Angeles (7th of                                  
                    8).................     1.056     1.207       0.752 
02050..        25  Los Angeles (8th of                                  
                    8).................     1.056     1.207       0.752 
00542..        03  Marin/Napa/Solano,                                   
                    CA.................     1.015     1.180       0.596 
00542..        10  Merced/surrounding                                   
                    counties,                                           
                    California.........     1.002     0.988       0.596 
00542..        12  Monterey/Santa Cruz,                                 
                    CA.................     1.008     1.143       0.596 
00542..        01  Northeast coastal                                    
                    counties,                                           
                    California.........     1.003     1.090       0.596 
00542..        02  Northeast rural,                                     
                    California.........     0.982     0.953       0.596 
00542..        07  Oakland/Berkeley, CA     1.042     1.215       0.596 
00542..        27  Riverside, CA.......     1.011     1.059       0.667 
00542..        04  Sacramento/                                          
                    surrounding                                         
                    counties,                                           
                    California.........     1.020     1.069       0.596 
00542..        15  San Bernadino/east                                   
                    central counties...     1.015     1.056       0.749 
02050..        28  San Diego/Imperial,                                  
                    CA.................     1.017     1.077       0.618 
00542..        05  San Francisco, CA...     1.068     1.330       0.596 
00542..        06  San Mateo, CA.......     1.049     1.300       0.596 
02050..        16  Santa Barbara, CA...     1.016     1.119       0.686 
00542..        09  Santa Clara, CA.....     1.064     1.289       0.596 
00542..        08  Stockton/surrounding                                 
                    counties,                                           
                    California.........     1.001     1.041       0.596 
02050..        17  Ventura, CA.........     1.028     1.192       0.686 
00824..        01  Colorado............     0.989     0.951       0.827 
10230..        04  Eastern, Connecticut     1.033     1.132       1.001 
10230..        01  Northwest and north                                  
                    central Connecticut     1.049     1.159       1.001 
10230..        03  South central                                        
                    Connecticut........     1.056     1.226       1.001 
10230..        02  Southwest                                            
                    Connecticut........     1.055     1.275       1.001 
00570..        01  Delaware............     1.021     1.032       0.792 
00580..        01  District of Columbia                                 
                    plus Maryland/                                      
                    Virginia suburbs...     1.051     1.192       0.980 
00590..        03  Fort Lauderdale, FL.     0.998     1.036       1.867 
00590..        04  Miami, FL...........     1.016     1.087       2.456 
00590..        02  North/north central                                  
                    Florida cities.....     0.978     0.952       1.417 
00590..        01  Rest of Florida.....     0.971     0.914       1.417 
01040..        01  Atlanta, GA.........     1.007     1.030       0.902 
01040..        04  Rest of Georgia.....     0.965     0.856       0.902 
01040..        02  Small Georgia cities                                 
                    02.................     0.981     0.917       0.902 
01040..        03  Small Georgia cities                                 
                    03.................     0.966     0.884       0.902 
01120..        01  Hawaii/Guam.........     0.999     1.220       0.921 
05130..        12  North Idaho.........     0.957     0.864       0.588 
05130..        11  South Idaho.........     0.963     0.887       0.588 
00621..        10  Champaign-Urbana, IL     0.952     0.884       1.008 
00621..        16  Chicago, IL.........     1.028     1.080       1.382 
00621..        03  De Kalb, IL.........     0.953     0.873       0.780 
00621..        11  Decatur, IL.........     0.962     0.864       0.880 
00621..        12  East St. Louis, IL..     0.988     0.929       1.202 
00621..        06  Kankakee, IL........     0.959     0.881       0.901 
00621..        08  Normal, IL..........     0.969     0.893       0.731 
00621..        01  Northwest, IL.......     0.951     0.842       0.731 
00621..        05  Peoria, IL..........     0.980     0.906       0.731 
00621..        07  Quincy, IL..........     0.946     0.824       0.731 
00621..        04  Rock Island, IL.....     0.972     0.858       0.731 
00621..        02  Rockford, IL........     0.978     0.941       0.813 
00621..        13  Southeast Illinois..     0.946     0.814       0.731 
00621..        14  Southern Illinois...     0.946     0.822       0.822 
00621..        09  Springfield, IL.....     0.981     0.936       0.946 
00621..        15  Suburban Chicago, IL     1.007     1.093       1.159 
00630..        01  Metropolitan,                                        
                    Indiana............     0.989     0.937       0.363 
00630..        03  Rest of Indiana.....     0.973     0.872       0.346 
00630..        02  Urban, Indiana......     0.974     0.896       0.346 
00640..        00  Iowa................     0.960     0.877       0.679 
00740..        05  Kansas City, KS.....     0.989     0.949       1.191 
00650..        01  Rest of Kansas......     0.958     0.877       1.191 
00740..        04  Suburban Kansas                                      
                    City, KS...........     0.989     0.949       1.191 
00660..        01  Lexington and                                        
                    Louisville, KY.....     0.989     0.904       0.819 
00660..        03  Rest of Kentucky....     0.957     0.821       0.819 
00660..        02  Small cities (city                                   
                    limits), Kentucky..     0.960     0.850       0.819 
00528..        07  Alexandria, LA......     0.958     0.864       0.911 
00528..        03  Baton Rouge, LA.....     0.984     0.894       0.911 
00528..        06  Lafayette, LA.......     0.971     0.857       0.911 
00528..        04  Lake Charles, LA....     0.974     0.901       0.911 
00528..        05  Monroe, LA..........     0.958     0.867       0.911 
00528..        01  New Orleans, LA.....     0.999     0.946       0.997 
00528..        50  Rest of Louisiana...     0.965     0.850       0.913 
00528..        02  Shreveport, LA......     0.971     0.889       0.911 
21200..        02  Central Maine.......     0.961     0.929       0.759 
21200..        01  Northern Maine......     0.964     0.920       0.759 
21200..        03  Southern Maine......     0.980     1.034       0.759 
00901..        01  Baltimore/                                           
                    surrounding                                         
                    counties, Maryland.     1.021     1.036       1.115 
00901..        03  South and Eastern                                    
                    Shore Maryland.....     0.985     0.972       0.862 
00901..        02  Western Maryland....     0.982     0.930       0.862 
00700..        02  Massachusetts                                        
                    suburbs/rural                                       
                    cities.............     1.015     1.101       0.978 
00700..        01  Urban Maine.........     1.030     1.167       0.978 
00623..        01  Detroit, MI.........     1.043     1.038       3.051 
00623..        02  Michigan, not                                        
                    Detroit............     0.998     0.935       1.844 
00720..        00  Minnesota (Blue                                      
                    Shield)............     0.990     0.965       0.594 
10240..        00  Minnesota                                            
                    (Travelers)........     0.990     0.965       0.594 
10250..        01  Rest of Mississippi.     0.950     0.813       0.726 
10250..        02  Urban Mississippi...     0.964     0.868       0.726 
00740..        03  Kansas City (Jackson                                 
                    County), MO........     0.989     0.949       1.207 
00740..        02  North Kansas City                                    
                    (Clay/Platte), MO..     0.989     0.949       1.204 
11260..        03  Rest of Missouri....     0.944     0.810       1.159 
00740..        06  Rural north west                                     
                    counties, MO.......     0.950     0.835       1.159 
11260..        02  Small eastern                                        
                    cities, Missouri...     0.940     0.809       1.159 
00740..        01  St. Joseph, MO......     0.952     0.850       1.159 
11260..        01  St. Louis/large                                      
                    eastern cities, MO.     0.983     0.921       1.193 
00751..        01  Montana.............     0.952     0.864       0.756 
00655..        00  Nebraska............     0.951     0.872       0.444 
01290..        03  Elko and Ely                                         
                    (Cities), NV.......     0.984     0.986       0.887 
01290..        01  Las Vegas, et al.                                    
                    (Cities), NV.......     1.012     1.022       0.887 
01290..        02  Reno, et al.                                         
                    (Cities), NV.......     0.997     1.049       0.887 
01290..        99  Rest of Nevada......     0.997     1.013       0.887 
00780..        40  New Hampshire.......     0.988     1.034       0.916 
00860..        02  Middle New Jersey...     1.032     1.137       0.762 
00860..        01  Northern New Jersey.     1.059     1.215       0.762 
00860..        03  Southern New Jersey.     1.024     1.082       0.762 
01360..        05  New Mexico..........     0.975     0.903       0.792 
00801..        01  Buffalo/surrounding                                  
                    counties, New York.     1.003     0.936       0.821 
00803..        01  Manhattan, NY.......     1.095     1.359       1.546 
00801..        03  North central                                        
                    cities, New York...     1.005     0.967       0.821 
00803..        02  New York City                                        
                    suburbs/Long                                        
                    Island, NY.........     1.068     1.235       1.759 
00803..        03  Poughkeepsie/north                                   
                    New York City                                       
                    suburbs, NY........     1.011     1.081       1.218 
14330..        04  Queens, NY..........     1.058     1.240       1.686 
00801..        04  Rest of New York....     0.989     0.937       0.821 
00801..        02  Rochester/                                           
                    surrounding                                         
                    counties, NY.......     1.012     0.992       0.821 
05535..        00  North Carolina......     0.971     0.918       0.435 
00820..        01  North Dakota........     0.951     0.860       0.617 
16360..        00  Ohio................     0.991     0.940       1.049 
01370..        00  Oklahoma............     0.970     0.882       0.481 
01380..        02  Eugene, et al.                                       
                    (cities), Oregon...     0.959     0.938       0.637 
01380..        01  Portland, et al.                                     
                    (cities), Oregon...     0.997     1.000       0.637 
01380..        99  Rest of Oregon......     0.962     0.907       0.637 
01380..        03  Salem, et al.                                        
                    (cities), Oregon...     0.965     0.929       0.637 
01380..        12  Southwestern cities                                  
                    (city limits),                                      
                    Oregon.............     0.967     0.954       0.637 
00865..        02  Large Pennsylvania                                   
                    cities.............     1.006     1.002       0.936 
00865..        01  Philadelphia/                                        
                    Pittsburgh medical                                  
                    schools/hospitals,                                  
                    Pennsylvania.......     1.027     1.040       1.213 
00865..        04  Rest of Pennsylvania     0.973     0.899       0.719 
00865..        03  Small Pennsylvania                                   
                    cities.............     0.983     0.917       0.736 
00973..        20  Puerto Rico.........     0.883     0.739       0.268 
00870..        01  Rhode Island........     1.019     1.074       1.569 
00880..        01  South Carolina......     0.976     0.899       0.361 
00820..        02  South Dakota........     0.936     0.856       0.443 
05440..        35  Tennessee...........     0.976     0.899       0.524 
00900..        29  Abilene, TX.........     0.960     0.851       0.827 
00900..        26  Amarillo, TX........     0.975     0.883       0.827 
00900..        31  Austin, TX..........     0.987     0.986       0.827 
00900..        20  Beaumont, TX........     0.993     0.893       1.428 
00900..        09  Brazonia, TX........     0.993     0.966       1.428 
00900..        10  Brownsville, TX.....     0.955     0.848       0.827 
00900..        24  Corpus Christi, TX..     0.983     0.898       0.827 
00900..        11  Dallas, TX..........     1.012     1.012       0.893 
00900..        12  Denton, TX..........     0.968     0.952       0.827 
00900..        14  El Paso, TX.........     0.973     0.893       0.893 
00900..        28  Fort Worth, TX......     0.989     0.972       0.893 
00900..        15  Galveston, TX.......     0.989     0.966       1.428 
00900..        16  Grayson, TX.........     0.959     0.874       0.827 
00900..        18  Houston, TX.........     1.021     1.005       1.428 
00900..        33  Laredo, TX..........     0.957     0.851       0.827 
00900..        17  Longview, TX........     0.973     0.863       0.827 
00900..        21  Lubbock, TX.........     0.955     0.894       0.827 
00900..        19  McAllen, TX.........     0.961     0.837       0.827 
00900..        23  Midland, TX.........     0.991     0.900       0.827 
00900..        02  Northeast rural,                                     
                    Texas..............     0.960     0.857       0.827 
00900..        13  Odessa, TX..........     0.991     0.900       0.827 
00900..        25  Orange, TX..........     0.993     0.893       0.827 
00900..        30  San Angelo, TX......     0.948     0.844       0.827 
00900..        07  San Antonio, TX.....     0.978     0.926       0.827 
00900..        03  Southeast rural,                                     
                    Texas..............     0.963     0.872       0.889 
00900..        06  Temple, TX..........     0.968     0.884       0.827 
00900..        08  Texarkana, TX.......     0.955     0.872       0.827 
00900..        27  Tyler, TX...........     0.971     0.894       0.827 
00900..        32  Victoria, TX........     0.983     0.868       0.827 
00900..        22  Waco, TX............     0.966     0.877       0.827 
00900..        04  Western, TX.........     0.956     0.818       0.827 
00900..        34  Wichita Falls, TX...     0.950     0.857       0.827 
00910..        09  Utah................     0.978     0.891       0.644 
00780..        50  Vermont.............     0.974     0.988       0.452 
00973..        50  Virgin Islands......     0.966     0.978       1.023 
10490..        04  Rest of Virginia....     0.976     0.876       0.504 
10490..        01  Richmond and                                         
                    Charlottesville, VA     1.004     0.991       0.511 
10490..        03  Smalltown/industrial                                 
                    Virginia...........     0.974     0.897       0.517 
10490..        02  Tidewater and                                        
                    northern Virginia                                   
                    counties...........     0.990     0.965       0.530 
01390..        03  East central and                                     
                    northern Washington     0.985     0.943       0.748 
01390..        02  Seattle (King                                        
                    County), WA........     1.006     1.077       0.748 
01390..        01  West and southeast                                   
                    Washington                                          
                    (excluding Seattle)     0.982     0.968       0.748 
16510..        16  Charleston, WV......     0.980     0.881       1.004 
16510..        18  Eastern Valley, WV..     0.960     0.899       1.004 
16510..        19  Ohio River Valley,                                   
                    WV.................     0.959     0.833       1.004 
16510..        20  Southern Valley, WV.     0.952     0.815       1.004 
16510..        17  Wheeling, WV........     0.957     0.840       1.004 
00951..        13  Central Wisconsin...     0.959     0.849       1.160 
00951..        40  Green Bay                                            
                    (northeast), WI....     0.976     0.894       1.160 
00951..        54  Janesville (south                                    
                    central), WI.......     0.966     0.895       1.160 
00951..        19  La Crosse (west                                      
                    central), WI.......     0.972     0.879       1.160 
00951..        15  Madison (Dane                                        
                    County), WI........     0.990     1.000       1.160 
00951..        46  Milwaukee suburbs                                    
                    (southeast), WI....     0.990     0.959       1.160 
00951..        04  Milwaukee, WI.......     1.001     0.978       1.160 
00951..        12  Northwest Wisconsin.     0.961     0.850       1.160 
00951..        60  Oshkosh (east                                        
                    central), WI.......     0.973     0.886       1.160 
00951..        14  Southwest Wisconsin.     0.959     0.850       1.160 
00951..        36  Wausau (north                                        
                    central), WI.......     0.962     0.866       1.160 
00825..        21  Wyoming.............     0.968     0.881      0.811  
------------------------------------------------------------------------
Note.--Work geographic practice cost index (GPCI) is the 1/4 work GPCI  
  required by Section 1848(e)(1)(A)(iii) of the Social Security Act.    
                                                                        
 Source: Federal Register (1995).                                       

                               REFERENCES

Federal Register. (1995, December 8). Medicare program; 
        Physician fee schedule for calendar year 1996; Payment 
        policies and relative value unit adjustments; Final 
        rule and notice. 60(236). pp. 63350-53.
O'Sullivan, J. (1996, August 5). Medicare: Payments to 
        physicians (96-666 EPW). Washington, DC: Congressional 
        Research Service.
Physician Payment Review Commission. (1996). Annual report to 
        Congress. Washington, DC: Author.