Prospective Payment to Medical Staffs: A Proposal

Prologue: The issue that troubles analysts more than any other when the prospect of a Medicare physician fee schedule is discussed is its likely inability to control increases in the volume and intensity of Part B services. Over the past decade, increases in volume and intensity of services have accounted for about half of the rise in Medicare payments to physicians per beneficiary. Price increases have accounted for the other half. In this paper; economist Pete Welch proposes to moderate the growth of Part B physician spending by paying doctors prospectively through hospital medical staffs. As he points out, such an approach would deal with the volume and intensity issue in an explicit fashion. Welch holds a doctorate in economics from the University of Colorado. He served on the faculty of the University of Pittsburgh for seven years (1977-1984), at which point he joined the staff of the President's Office of Management and Budget (OMB). While working in the OMB's budget review division, Welch devoted his attention to Medicare, Medicaid, the veterans' medical care program, and the Federal Employee Health Benefits Program. Welch joined the Urban Institute in 1987 as a senior research associate. At the institute, he has worked largely on projects funded by the Health Care Financing Administration, including capitation payment and development of a geographic price index that would lessen the wide variations in Medicare payments to physicians by relating payment to the cost of practice in the area.