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CMS reports spike in Medicare spending on physician services

The AMA attributes the rise to pressure to provide more preventive care and aggressive treatments.

By David Glendinning, amednews staff. April 18, 2005.

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Washington -- Some of the most basic services that physicians provide are coming under scrutiny as large spending increases on the outpatient side of Medicare are helping to put the program in a sticky financial situation.

From 2003 to 2004, Medicare expenditures under the physician fee schedule increased 15.2% -- a figure that is roughly twice as high as the largest growth percentage in recent years. The Centers for Medicare & Medicaid Services launched an investigation into the root causes of the spike and released preliminary data from the effort last month.

An unexpected increase in the number and intensity of office visits accounted for nearly 30% of the jump, followed closely by minor medical procedures at 26%. Within the latter category, the administration of outpatient drug treatments and physical therapy constituted a large portion of the spending boost. A rise in the number of beneficiaries and legislation to update physician reimbursements had little effect on the overall expenditure figure, CMS found.

Agency officials intimated that not all of the added dollars flowing to physician services are warranted.

"We would like to understand these concerning trends further, including which changes in utilization are likely to be associated with important health improvements and which ones have health benefits that may be more questionable," wrote Herb Kuhn, director of CMS' Center for Medicare Management, in a letter to the Medicare Payment Advisory Commission last month.