Health Practitioner Bonuses and Their Impact on the Availability and Utilization of Primary Care Services. Overview


In this study, funded by The Assistant Secretary for Planning and Evaluation (ASPE), we analyze the impact of three different health practitioner incentives on the supply of primary care services: (1) the Medicare primary care incentive payment (PCIP); (2) the physician shortage area (PSA) bonus; and (3) the health professional shortage area (HPSA) bonus. Section 5501(a) of The Affordable Care Act authorized a quarterly incentive payment program to augment the Medicare payment for primary care services when furnished by primary care practitioners beginning in 2011 and ending in 2015. Medicare has been paying a HPSA bonus since 1987. Initially, the HPSA bonus was paid to physicians providing care in rural geographic HPSAs; in 1991 it was extended to services provided by physicians in urban geographic HPSAs. Subsequently, section 413a of the Medicare Modernization Act put in place an additional 5 percent bonus payment for physicians practicing in PSAs. PSAs were those counties and rural zip codes in MSAs with the lowest physician to population ratios. The purpose of these incentives is to increase the supply of provider services, both in general and for evaluation and management (E&M) in particular. In the case of the PCIP, it is to increase the supply of primary care services in Medicare. In the case of the PSA and HPSA bonuses, it is to increase the supply of services in certain locations designated as underserved.

  • We first consider the PCIP program. Under the PCIP program, eligible providers in designated primary care specialties are offered a 10 percent reimbursement premium for primary care services. The study addresses the following broad empirical issues surrounding the Medicare PCIP program.

  • Experience to date with the Medicare primary care incentive payment in terms of the aggregate number of recipients and the distribution of those recipients by specialty and by geographic area.

  • Proportion of primary care providers who qualify for the bonus and the characteristics of those primary care providers.

Volume of eligible claims submitted by the PCIP eligible providers and the impact of Medicare PCIP policy on the primary CARE services provided and other outcome measures of interest.

To explore these topics, we used a customized data set constructed at the provider level. This data set included all the claims submitted by the entire universe of Medicare providers each year from 2005 to 2011. Subsequently, each provider was linked by National Provider Identification number (NPI) to Provider360 data (available from Lewin Group’s parent company Optum Inc.) and the AMA Physician Master File to add provider characteristics such as provider demographics (e.g., age, gender), provider designation, medical school, and practice location. We also added geographic location-specific variables from the Area Resource File (ARF) based on the practice location information of providers. The main advantage of this pooled data set is the ability to track providers over time and capture changes in their volume of services in response to financial incentives.

We use a difference-in-difference (DID) approach to identify the effect of the financial incentives associated with the Medicare PCIP policy on key outcomes of interest. This method entails: (1) inclusion of a treatment group which is likely to be affected by the PCIP policy and a relevant comparison group not likely to be affected by the policy; (2) controls for year-specific effects common to both groups; and (3) an interaction of the treatment group and the year effects to capture the distinct impact of the policy on the treatment group. The model also controls for provider demographics and regional characteristics. One advantage of the DID estimation approach is that it enables us to disentangle the net impact of the 10 percent PCIP policy from changes that coincided with the PCIP policy affecting both the treatment and comparison group.

Policy makers have long been concerned about patient access to health care, particularly primary care, in underserved or shortage areas. We also focus on two additional financial incentive programs: Health Professionals Shortage Area (HPSA) bonus and Physician Shortage Area (PSA) bonus implemented in an attempt to improve access in shortage areas. These programs offer a higher rate of reimbursement in Medicare for eligible providers should they provide services in designated shortage areas. More specifically, we examine the following issues surrounding HPSA and PSA bonus:

  • The distribution of HPSA bonus recipients; the overlap between HPSA and Medicare primary care incentive payment (PCIP), and the overlap between the HPSA and PSA bonus recipients.

  • Impact of HPSA bonus on the number of primary care providers and subsequent impact on the volume of primary care services.

Impact of PSA bonus on the number of primary care physicians and subsequent impact on the volume of primary care services.

Finally, we examine the existing evidence from the literature on the variation in Medicaid reimbursement rates relative to the Medicare rates to inform the impact of the Medicaid parity provision in the ACA. We describe the variation in Medicaid reimbursement rates relative to the Medicare rates, both for primary care and for all services, across US states during the period 2008-2012. Based on the empirical results from the PCIP analysis, we perform an exercise to simulate the effect of a 10 percent increase in the Medicaid-to-Medicare fee index on the proportion of US office-based physicians accepting new Medicaid patients across all states.

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