PubMed · 49481
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1975-05-17. Editorial: Allocating resources.. https://pubmed.ncbi.nlm.nih.gov/49481/
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On January 1, 1992, the Health Care Financing Administration implemented the 1989 legislation reforming the Medicare payment system for physicians' services. The cornerstone of the new payment reform is the Medicare Fee Schedule (MFS), which is based on the Resource-Based Relative Value Scale (RBRVS). In this article, the major findings of the RBRVS study and its impacts on physician payment are summarized. The authors report the impacts of a RBRVS-based fee schedule on Medicare fees and physicians' income if it were fully implemented, assuming budget neutrality and absence of volume changes in services. Under this scenario, fees for evaluation and management services increase by 15% to 45%, while fees for invasive services and diagnostic tests decrease by 20% to 30%. These changes increase the Medicare income of family practitioners by more than 30% while decreasing the income of most surgical specialties by 10% to 20%.
On January 1, 1992, the Medicare program unveiled a new method for paying physicians known as the Medicare Fee Schedule (MFS). The new fee schedule is a complex system of administrative pricing based on the resource inputs used in producing physician services. The MFS consists of three parts: 1) a Relative Value Scale, which assigns to each medical service a value relative to all other services; 2) a conversion factor, which converts the relative values into dollars; and 3) a geographic adjustment factor, which adjusts payments based on geographic differences in the cost of producing physician services. In this article, the following are addressed: how the relative values were determined; how the geographic adjustment factor was constructed; and how the conversion factor was calculated. In addition, balance billing limits and the Medicare Volume Performance Standards (MVPS) are described. Computer simulations of the impact of the MFS on payments to physicians are presented. The authors found that the MFS will 1) redistribute payments away from surgeons, radiologists, and other procedure-based specialties toward the primary care specialties; 2) redistribute payments away from urban areas toward rural areas; and 3) redistribute payments away from invasive procedures and diagnostic tests toward evaluation and management services. The authors conclude with a discussion of the future refinements of the MFS, its applicability to other payers, and whether it will accomplish its intended purposes.
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