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$1 million for each physician – Medicare Payments

On Wednesday, in response to years of pressure from media outlets and consumer groups, CMS released detailed data about payments it made in 2012 to Medicare participating providers. Overall, the data shows $77 billion in billing by 880,000 doctors and indicates that Medicare paid nearly 4,000 physicians in excess of $1 million each in 2012. The data does not indicate what providers billed private insurance carriers.

The data has raised numerous questions about the high amounts some physicians and some medical specialties in general have received. The top three providers in terms of payment are all under official federal fraud scrutiny and one of the three is awaiting trial on Medicare fraud charges. But high numbers do not necessarily mean wrong-doing. The amounts listed in the report only reflect a physician’s payments from Medicare, not their actual costs. Overhead in physician practices can be substantial, particularly in some specialty areas. Some high service payments can also be explained by the high costs of both prescription drugs and medical devices associated with treatment. For example, if a doctor is paid $1,000 for a procedure that includes a $750 medical device, the report just notes the procedure performed and the $1,000 payment. It does not show that the $1,000 paid normally reflects both the doctor’s time and the cost of the device used. Furthermore, one doctor’s billing number may have been used by many in a practice for billing purposes and errors in the data are also possible. “Using the assumptions that Medicare and the AMA make when setting payment rates, only 23 of the 4,000 biggest billers personally earned $1 million or more, according to a Washington Post analysis.”

But what does this unprecedented data really mean for consumers anyway? CMS officials noted their goal in finally releasing the information publicly was to help detect fraud, inform consumers and help promote improvements to care. Given that Medicare is our nation’s single largest insurance program; any increase in transparency is likely to spillover to the regular private market. Furthermore, analysts thoroughly reviewing the data are expected to find a treasure trove of information about what is actually driving medical care costs at least among the senior population, which could have widespread provider payment and cost ramifications for all consumers. Exposing the data could also lead to Medicare payment reforms, particularly concerning the way Medicare reimburses for certain drugs and services. The program has long been criticized as incentivizing providers to prescribe more expensive drugs and services than necessary, and the release of this data will help determine the overall validity of that charge. Furthermore, consumer groups have noted that making the data public could help individual consumers learn valuable information about their specific providers. For example, a very thorough consumer checking up on their doctor could determine exactly how many times the physician has performed certain procedures, which might be important to them given that experience is often an outcome indicator.

Bottom line, the data is enormously detailed and probably won’t be terribly helpful for the average Joe. However, we expect that the kind of health nerds who can actually perform higher math will have a field day with this information. While this is not our personal kind of health nerdity, we greatly respect the skills of others and expect their work with this information will have far-reaching cost reduction implications in the future.