Physician Charges in the Hospital

Medicare physician payments are growing rapidly. At least 40% of the annual growth is due to volume increases. Reforms passed in 1989 include volume performance standards that attempt to control volume by linking future physician fee increases to volume growth. There is concern that defining the entire nation as the risk pool will result in an unworkable volume performance standard. One way to improve incentives is to create a separate volume performance standard for in-hospital physician services, define bundles of services related to the hospital stay, and place the medical staff of the hospital at risk for volume growth. To forestall the unbundling of services outside the stay, windows could be defined around the stay. This study reports physician services during the stay and in windows around the stay. In so doing, the study creates the knowledge base necessary to design better volume control policies and judge among alternative window definitions. Using 1987 data, this study presents average physician charges by type of service during: 1) the hospital stay; and 2) 1-month windows before and after the stay. For all admissions, 85% of charges occur during the stay and 15% occur during the windows (windows for surgical admissions and medical admissions are 9% and 23%, respectively). Pre- and postwindows are roughly symmetrical and average charges per day gradually increase before the admission and decline after discharge. A small physician panel commented on the clinical appropriateness of the one month windows. The panel indicates that defining in-hospital episodes of physician care is feasible.