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PREFACE The methods of physician payment and their effects on the costs and characteristics of medical care have recently moved up on the national health policy agenda. For many years the focus of policy attention and experimentation was on hospital payment. Physician payment issues were relatively little examined, even though health care analysts frequently acknowledged the primacy of physician decision-making in the allocation of health care resources. Now with the dramatic change in Medicare reimbursement to hospitals, along with continuing fear about the financial viability of the Medicare program, private sector actions to moderate health cost increases, and the rapid expansion of the physician supply, the Congress and other policymakers are indicating it may be time to reconsider the methods of physician payment e The Institute of Medicine's interest in the issues of physician payment arose primarily from its members, concerns about the effects of physician payment methods on the nature of health care, rather than the cost issue itself. The conference summarized here and the accompanying background papers arose from these members' concerns. Although the conference was convened primarily to provide advice to the IOM on how it might best approach these issues, many inquiries about the conference have led us to make this summary and the background papers available for the information of those with interest in methods of physician payment. The surge of interest by Congress has resulted in current studies of physician payment methods by the Health Care Financing Administration and the Office of Technology Assessment. A major study on this topic is being proposed by the IOM, and other groups have indicated their intent to conduct studies. If the forces for change are gathering momentum, a better understanding of the issues and the range of relevant perspectives should be useful to all concerned with physician payment methods. The conference participants represented many different viewpoints, and the background papers and authors represented the judgment of the planning committee about aspects of the topic that deserved attention by the participants. The papers were intended to stimulate thought and to provide a more common basis of understanding f or a diverse group. We hope these proceedings can serve those purposes for others as well. We wish to thank the planning group and the discussion group leaders for their efforts to steer the IOM through the turbulent waters of a controversial topic while making headway toward a productive IOM role in further study. Special thanks go to Paul Bee son for his even-handed and iv

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stimulating chairing of the conference and for his counsel concerning follow-up steps. The background paper authors and the initial speakers admirably fulf illed their assigned roles of provocation and insight. Finally, Sunny Yoder of the IOM staff has my personal appreciation not only for this summary, but, also, for her important work in planning the conference and developing the subsequent IOM study proposal. Because the purpose of the conference was to stimulate thoughts and suggestions for the IOM, we hope that readers of these proceedings who were not present will feel free to give us the benefit of their ideas and reactions as the IOM continues its engagement with these important issues. Karl D . Yo rdy Senior Program Officer and Director, Division of Health Care Services v

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