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Chapter 4 THE SUPPLY AND DISTRIBUTION OF PRIMARY HEALTH CARE PRACTITIONERS This chapter discusses the supply of physicians, physician assistants, and nurse practitioners and considers their specialty and geographic distribution. Although supply and distribution issues are related, they are examined separately because they require separate policy considerations. THE SUPPLY OF PHYSICIANS The supply of physicians in the United States is increasing at a significant rate. In 1975 there were 340,280 professionally active physicians, a 30 percent increase from 1968. 1/ In addition, in 1976 there were 13,982 practicing doctors of osteopathy. 2/ If current enrollment trends continue, the number of active physicians will increase by over 60 percent by the year 1990 to 559,800, 3/ creating a physician to population ratio in 1990 of 228 per 100,000 population compared to 156.8 per 100,000 in 1975. 4/ As dramatic as this projected increase in physicians appears to be, it may not indicate an equivalent increase in physicians' services. In particular, factors such as physician productivity and work effort, or numbers of hours worked, critically affect the total supply of physi- cians' services. Physician productivity may be measured by the number of personal health services of different types produced per unit of time. Some of the factors affecting the productivity of physicians are the type and size of physician practice, the employment of different types of ancillary health manpower, and quantity and quality of medical equipment. Empirical research to date suggests that use of physician assistants and nurse practitioners and allied health manpower increases the productivity of a physician practice. 5/ Similar results have also been obtained for the use of some types of medical equipment. 6/ Although the evidence is less clear, group practice, especially single specialty groups, shows some signs of having increased productivity. 7/ The physician's work effort is another important factor in determin- ing the supply of physician services. Office based physicians averaged 51.5 hours per week in 1973. However, there is considerable variation among physicians in different areas of the country, practice arrangements, and medical specialties. 8/ Other factors, such as physicians' income, -41- h..

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asset holdings, and manner in which they are reimbursed also affect hours worked. There is some evidence that at high levels of income physicians opt for more leisure time instead of greater income. 9/ Options and Recommendations The committee considered three options related to the aggregate supply of physicians: increasing, decreasing, or maintaining the number of entrants to medical schools at the current annual level. The committee does not believe that increasing the number of medical school entrants is a reasonable policy given the available evidence at this time. Some researchers believe we have or soon will have an excess supply of physicians. 10/ Increasing the aggregate supply of physicians may not increase the available supply of primary care services. Further- more, increasing the aggregate supply of physicians may add significantly to health expenditures. Given the market power of physicians as indepen- dent professionals, they may be able to influence the use of their services. Some researchers suggest that each additional physician increases health care expenditures by $250,000 yearly. 11/ There is little direct evidence on how the total supply of physi- cians affects the supply of primary care physicians. It is reasonable to expect, however, that decreasing the number of entrants to medical school will reduce the pool of physicians available to enter primary care disciplines. In addition, reduction would be disruptive of the medical educational system. Closing recently started medical schools would be impractical; reducing the number of students accepted into existing schools could harm the finances of such schools. The committee recommends that (Recommendation #2) for the present, the number of entrants to medical school should remain at the current . annual level. This recommendation is ma continuous and vigorous efforts be made to monitor and evaluate the aggregate supply of physicians. SUPPLY OF NURSE PRACTITIONERS AND PHYSICIAN ASSISTANTS In the face of an expanded physician supply, the future of nurse practitioners and physician assistants appears somewhat uncertain. Originally, nurse practitioners and physician assistants were seen as a way of speedily increasing the supply of personal health services. In less than two years, training programs could turn a registered nurse or an individual with some health care experience, such as an ax-military corpsman, into a provider of quality medical services. 12/ More recently, new health practitioners have been considered as providers of care different in scope or nature from care provided by physicians, especially regarding health education and patient counseling. -42-

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Although differences exist between training of nurse practitioners and physician assistants, both groups are educated and trained to per- form many of the tasks traditionally performed by physicians. As defined in this report, nurse practitioners are formally trained in academic programs, of which about one-third are one-year programs conferring master's degrees. Other formal nurse practitioner programs award certificates and generally take from a few months to a year. 13/ Formal physician assistant programs are usually university based and require about two years. The first half of the physician assistant program is spent on classroom instruction in the basic sciences and the second half is spent in clinical application or preceptorships. 14/ Formal nurse practitioner and physician assistant programs began to receive direct federal support in 1971 and continue to receive support under authority of the Nurse Training Act of 1975 and the Health Professions Educational Assistance Act of 1976. 15/ Given the current numbers of physician assistants and nurse practitioners, and current levels of support and training slots, in 1990 the projected number of nurse practitioners will be 23,000, and the number of physician assis- tants will be 18,520. 16/ In 1990 there would be slightly less than one physician assistant or nurse practitioner for every fourteen actively practicing physicians. Options and Recommendations - The committee considered three policy options for the training of physician assistants and nurse practitioners: increasing, decreasing, or maintaining the numbers trained at the current annual level. The committee rejected the option of increasing the number of physician assistants and nurse practitioners being trained, partly because the expected increase in the supply of physicians might limit the employment of the new health practitioners. Although the committee acknowledged the role of these practitioners, it finds no need for expanding the supply of new health practitioners at this time. A decrease in the numbers of physician assistants and nurse practi- tioners in training was also rejected. In the opinion of the committee, these groups have established themselves as important providers of primary care. Physician and patient acceptance is high, and there is evidence that the quality of care delivered by these new health practitioners for certain services equals that of physicians. 17/ In addition, there is sufficient evidence of their productivity and potential cost effective- ness to warrant continued support. 18/ Thus, the committee recommends that (Recommendation #3) for the present, the number of nurse practitioners and physician assistants trained should remain at the current annual level. This recommendation is made with the expectation that continued monitoring and health services research will be directed to this area. -43-

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In addition, this recommendation is based on the committee's understanding that even with the projected increase in the supply of physicians, physician assistants and nurse practitioners have an important role to play in the delivery of primary care. Their role in those rural communities unable to support a physician is of particular importance. In the opinion of the committee, rural communities with populations of 4,000 or less may be adequately and economically served by a physician assistant or nurse practitioner with physician backup. Even in more populated rural communities, they can augment the care provided by the physician so that the patient can obtain needed primary care on a 24 hour basis. _/ In addition, new health practitioners can improve access to primary care in urban settings, especially in hospitals, nursing homes, and as part of a team in a group practice. Moreover, the committee views these providers as enhancing the delivery of primary care by educating patients to lead more healthful lives. The availability of a sufficient supply of new health practi- tioners could assure that a wide breadth of services is offered to patients on the primary care level. New health practitioners, by concentrating on communication with patients, might help patients to adhere more closely to prescribed regimens, to assure successfully an increased responsibility for their own health, and to face illness and other important events more resourcefully. The committee also feels that nurse practitioners and physician assistants, properly utilized, can reduce the cost of health care. They are trained in two years or less as compared to the much longer training period of the physician, and their average earnings are about 40 percent of those of a physician. 20/ Moreover, research findings indicate that nurse practitioners and physician assistants can provide a range of medical services at a level comparable in quality to that of physi- cians. 21/ THE SUPPLY OF PHYSICIANS IN PRIMARY CARE DISCIPLINES Although physicians are only one group of providers of primary care, the special role of physicians in the health care system makes their availability extremely important. In 1976 the Congress declared that "physician specialization has resulted in inadequate numbers of physicians engaged in the delivery of primary care." 22/ In 1931, almost 95 percent (117,079) of all practicing physicians were in primary care disciplines; 23/ by 1963 only 47.9 percent (or 125,367) were. 24/ From 1963 to 1975, the absolute number of physicians in primary care disciplines increased to 152,365, but their percentage dropped to 44.8 percent. 25/ Although the total number of physicians is expected to increase dramatically by 1990, after adjusting for changes currently underway, the percentage in primary care disciplines will increase to only 50 percent. 26/ However, as discussed previously in this chapter, the 44

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rigorous determination of the aggregate supply is difficult given the current lack of data and level of knowledge in this area. Although the committee acknowledges that other medical specialties and other types of health manpower deliver primary care, the committee believes that the current and projected future supply of physicians delivering primary care, as currently organized, is and will be inadequate to meet the primary care needs of the nation. STRATEGIES TO INCREASE THE SUPPLY OF PHYSICIANS IN PRIMARY CARE DISCIPLINES As part of a more systematic approach to increase the supply of physicians in primary care disciplines, the committee explored policy alternatives directed at practicing physicians, particularly those entering medical practice, and at medical students and residents. (Recommendations specifically affecting the medical student and the resident appear in Chapter 5~. Physicians select their disciplines at different points in their careers. As many as half do not make their final choice until after graduating from medical school and some not until many years after entering practice. Many factors, including social, economic, educational, and personal influences, determine specialty choice. 27/ The committee considered four strategies for increasing the supply of physicians in primary care disciplines. One was to continue to increase the total supply of physicians with the assumption that some would train in primary care disciplines. This option was rejected because of its cost implications and because the assumption has no rigor- ous empirical basis. As noted earlier in this chapter, at this time, the committee does not support an increase in the training of physicians. Another strategy discussed was to organize the delivery of primary care into health maintenance organizations (HMOs) that would be more flexible in ways of reimbursing providers, benefits offered, and par- ticipating populations than the HMOs described in the current federal legislation. 28/ The strategy was not adopted because of the lack of data, the inconclusive research findings, and the political difficulty of achieving the needed changes in the near future. In an attempt to make the practice of primary care more attractive to physicians, the committee considered policies to reduce the income differentials between primary care and other physicians. To accomplish this the committee considered a third strategy of direct controls on income or income ceilings similar to those adopted in other countries, but it rejected them 29/ They might produce negative work incentives and were deemed politically and administratively unacceptable. As a workable policy the committee explored a fourth strategy of changes related to reimbursement for the delivery of primary care. The enactment of national health insurance legislation would also have direct and indirect consequences for the supply of primary care physicians. 30/ -45-

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In developing its reimbursement recommendations, the committee was aware that Medicare, Medicaid, and private health insurance plans differ in their approach to financing health care. Medicare is a federal insurance program, similar in some ways to private health insurance plans but not directly affected by the private market. Medicaid is a state-administered program aided by federal funds and based on welfare principles. There are variations among private health insurers as well. Most commercial insurance companies use the traditional approach of indemnity insurance; that is, they compensate subscribers for the costs of medical care. Blue Shield plans, in theory, assure their members certain units of medical service. The distinction has become blurred with time, and in practice service plans have some indemnity features and many indemnity plans have adopted some service concepts. Differences in philosophy, ownership, and administrative practices will affect the imple- mentation of the committee's reimbursement recommendations. Currently, physicians are compensated for their services by either salary, capitation payments, or fee-for-service. Salaried physicians usually work for institutions such as hospitals, nursing homes, or group practices. Capitation requires paying the physician for the number of patients he or she is responsible for during a period of time. However, fee-for-service, that is, payment for each service delivered, is still the prevalent method of paying physicians: 71 percent of non-federal patient care physicians are paid by the fee-for-service method. 31/ With fee-for-service payment, physicians' income is determined, to a large extent, by the fee received for each service and the quantity of services delivered. Private and public third-party payors usually reimburse the physi- cian on a fee-for-service basis. 32/ However, the determination of the maximum level of reimbursement differs among third-party payers. They use fee schedules or customary, prevailing, and reasonable reimbursement (CPR), also known as the usual, customary and reasonable charge method (UCR). With the customary, prevailing and reasonable method, third-party payors maintain records of the services provided and the charges billed by the physicians in an area. From these, they develop individual and area statistical profiles of physician charges. Medicare, approximately half the Medicaid states, about half of the Blue Shield enrollees and larger commercial insurers use this method. Under Medicare, payment to the physician is based on the reasonable (allowable) charge for the service, which is defined as the lowest of the physician's actual charge, the physician's customary charge, or the area's prevailing charge. 33/ As defined by the programs, the actual charge is the physician's big ed charged to the patient for the services provided; the customary charge is the median of the charges filed by a physician during the previous year for the service; and the prevailing charge is the 75th percentile of the distribution of customary charges of all area physicians during the previous calendar year, weighted by the number of times each physician -46-

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has billed for that given service. In addition, Medicare has separate reimbursement rates for general practitioners and specialists. Under Medicaid, half the states have separate reimbursement rates for general practitioners and specialists. The definitions of teems such as customary, prevailing, and reasonable are not consistent for all third- party payers, but the method is essentially the same. 34/ Most of the Blue Shield Plans pay for physician services at the 90th percentile of the distribution of all physician charges. Physicians can bill the patient more than the reasonable charge paid by the Medicare program and the charges paid by some private insurers. Physicians can choose to have the payment assigned to them or to the patient under Medicare and under some private health insurance plans. If physicians accept assignment under Medicare, they may not bill the patient for any difference between their charges and the Medicare pay- ment. However, Medicare covers 80 percent of the cost of physician services, with the remaining portion paid by coinsurance. If physicians do not accept assignment, they may bill the patient more than the Medicare payment but must collect the full amount from the patient. The effectiveness of using third-party payments as a means of redistributing physician manpower depends upon the physician's partici- pation in a system. There has been a decline in the percentage of physicians participating in Medicare, as measured by the assignment rate which decreased from 64 percent in 1969 to just below 50 percent in 1975. 35/ Medicaid is a mandatory assignment program and the physician must collect no more than the maximum allowable. However, physicians can refuse to participate in the program. Approximately half of the state Medicaid agencies, about half of the Blue Shield enrollees and many commerical insurers use fee schedules to specify the maximum level of payment for a particular service. The physician is paid at his billed charge or at the fee schedule level, whichever is lower. Fee schedules are determined by a survey of physi- cian's billed charges, through negotiations between insurance companies and medical societies, or, as is done by most state Medicaid agencies, by applying a dollar conversion factor to a relative value system. 36/ Relative value systems establish a quantitative but nonmonetary scale on the worth of one procedure as compared to all other procedures. 37/ For example, if administration of a measles vaccine has a relative value of 2.2 and the conversion factor is 10, then the third-party payor would pay the physician a maximum of $22.00 for the immunization. Relative value systems describe and code physician's services and are used as a guide to physicians to determine their charges as well as a basic reference to establish fee schedules. 38/ Medicare uses a relative value system when there is no reliable statistical base for determining a prevailing charge for a medical procedure or service in the area, or to determine a physician's customary charge if there is no sufficient data upon which to base this determination. -47-

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In 1976 third-party payors paid for 61 percent of the expenditures for physician services, and Medicare and Medicaid accounted for 20 percent. 39/ Although no payment method automatically favors one level of care over another, any payment method can be structured to favor one type of practitioner over another, or one service or procedure over another. The current structure and methods of third-party payment systems do not encourage physicians to enter primary care disciplines. There are identifiable inequities in the way physicians are paid by third-party payors which may deter physicians from providing primary care. Nationally, the average income of physicians in primary care disciplines is much lower than that of other physicians. Internists on the average earned a net income of $53,900 in 1975 compared to net incomes of radiologists and anesthesiologists of $124,400 and $87,000 respectively. 40/ Prevailing charges of Medicare carriers appear to favor non-primary care physicians for some services and procedures. Between 1968 and 1972, Medicare payments to general practitioners and internists grew at a slower rate than payments to surgeons and certain other specialists, which suggests that economic advantages for nonprimary care physicians exist in this program. 41/ Medicare and Medicaid legal provisions inhibit physicians in rela- tively low-paid primary care fields from attaining the reimbursement levels of more highly compensated physicians. By forbidding reimburse- ment at a level higher than the 75th percentile of prevailing charges of members of a physician's own specialty in the geographic area, Medicare (and, by extension Medicaid, which disallows reimbursement higher than that supplied by Medicare) limits the reimbursement of physicians in those primary care fields where such reimbursement already is relatively low. Indeed, Medicaid reimburses at an appreciably lower level than Medicare for most services. 42/ Relative value scales also encourage the growth of procedure- oriented specialization among physicians by placing higher values upon separate procedures, such as radiological and laboratory services, than upon other services, such as office visits. Furthermore, specific proce- dures are more likely to be covered by private insurance. It is estimated that only 20 percent of office visits but 80 percent of surgical services are paid for by third-party payers. 43/ It is likely that some physicians receive no compensation from third-party payors for performing some essential aspects of primary care. Options and Recommendations Payment practices of third-party payors place no premium upon the delivery of primary care and in fact may discourage physicians from specializing in primary care disciplines. Thus, to increase the avail- ability and quality of primary care services, the committee recommends changes in the structure and practices of reimbursement methods. -48-

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One change considered is to reimburse all physicians at the same level for the same primary care service. One method of achieving this aim is to base the payment level for a service on the minimum level of skill required to provide the service, as measured by the education and training of the physician. This option has the advantage of basing third-party payments for physician services on objective measures rather than on historical precedent and previous fee levels. It also has obvious cost saving implications. However, in the opinion of the committee, it would be difficult to implement and administer. The committee did not specify how payment levels should be estab- lished but they recommended that (Recommendation #4) third-party payers (federal, state, and private) should reimburse all physicians at the same . payment level for the same primary care service. This recommendation lessens the financial disincentive to physicians to enter the primary care disciplines by equalizing third-party payments to all physicians for the same primary service, and allows for equal payment for identical services of acceptable quality. Fee levels would be statewide. See Recommendation #8. The committee recognizes that many primary care services are provided by practitioners who may have the dual role of a primary care practitioner and a specialist; for example, a general internist who has a subspecialty in cardiology or a general surgeon would be in this category. It is also recognized that this system might prove disadvan- tageous because the practitioner may not be as well trained in the primary care role as in the specialty role, and there may be a tendency to use specialty skills when these are not needed For example, the cardiologist might be more likely to conduct an extensive hypertensive workup on a newly discovered case of hypertension than would another physician. The committee suggests, therefore, that specialty differentials in payment levels be limited to services that meet two tests: the service is provided by one who is recognized as having special skills, and the service is provided at the request of another physician (usually a primary care physician). The committee feels that consultant services may warrant a higher level of payment, since they often involve more complex problems and require greater time and special skills. Elimination of the specialty differential would be an unacceptable option. Yet, adoption of the recommendation without the application of the dual tests proposed above would probably raise the payment level of primary care physicians nearer to that of referral specialists, thus increasing total cost. The assign- ment of a managerial role to the primary care physician would provide a level of cost and quality control, more clearly separate physicians into primary and referral specialist roles, and provide an operational mechanism for providing reimbursement to all physicians, whether a primary care physician or not, for performing primary care services. There are unresolved issues in using this approach, including whether -49-

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referral specialists can refer patients to other referral specialists without patients being required to see a primary care physician first, and whether primary care physicians in a group practice can refer patients to referral physicians in the same group. To increase the availability of primary care the committee also recommends that (Recommendation #5) third-party payors (federal, state and private) should reduce the differentials In payment levels between . , . primary care procedures and non-prtmary care procedures As noted earlier, payment for services involving complex procedures or equipment is usually higher than for other services. In many instan- ces, as with the electrocardiogram or chest x-ray, the value was established at an early point in the history of the procedure. Although later technologic advances and higher rates of utilization may have substantially reduced the time, judgment, skill, and cost of the equipment required to perform the procedures, this reduction has not been reflected in the value scales or in physician charges. The committee considered three ways to remove the disincentive to the provision of primary care procedures: removing the differentials between payments for procedures completely; increasing payments for primary care procedures above those for non-primary care procedures; and reducing the differentials in payments between primary care and non- primary care procedures. The first option was rejected because those procedures that require the most time, skill, judgment, and training warrant some additional payment. The second option was dismissed, because the additional payment for primary care services might produce the necessary additional primary care services and attract more physicians into primary care disciplines, but it would increase the costs of health care. An intermediate course, and the one adopted by the committee, is to reduce the differentials between procedures. This recommendation would encourage physicians to enter primary care practice. It would also allow some payment differentials based on the levels of training, skill, and judgment required. Finally, the committee recommends that (Recommendation #6) third- party payors (federal, state, and private) should institute payments to if_ providers and currently no ~ 1th ~ ~ , . .. education and preventive services. The primary car Chapter 3 of this report, is composed of one or more providers. The majority of such units are currently owned and operated by physicians, although they may be owned and operated by other health providers or private or public bodies. As emphasized in the definition, comprehensiveness of care, includ- ing health education and preventive measures, is an attribute essential to the practice of good primary care. The provision of a broad range of 50

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services, including services for basic medical problems, psychosocial problems, and health education, distinguishes the primary care practi- tioner from the secondary care practitioner and the referral specialist. In general, third-party payors tend to restrict the provision of preventive measures. An exception is the Medicaid program which mandates states to provide early and periodic screening, diagnosis and treatment (EPSDT) for those under 21 years of age and family planning services. 44/ Some preventive services are included under both provisions. States vary in their performance in providing services so that only about 20 percent of those eligible (1.1 million) received services under the EPSDT provisions in 1976. 45/ Medicaid also allows the states the option of covering other services and receiving federal reimbursement for them. There are two major arguments against offering third-party payments to physicians for providing preventive services. One is the limited capability for assessing the efficaciousness of many preventive measures; the other is the possibility of increasing health care expenditures. The probability of an immediate rise in expenditures for health care must be weighed against the possibility of future savings, both economic and in terms of human suffering. For example, there is a need for education about the health hazards of cigarette smoking. Empirical evidence indicates cigarette smoking is a causative factor in lung cancer, chronic bronchitis, emphysema, ischemic heart disease, and obstructive peripheral vascular disease. Cigarette smoking is considered to be the direct cause of 80 percent of the 80,600 deaths due to lung cancer in 1975 46/ The economic burden of cancer is high as well. In 1975, 9 percent (23 billion dollars) of the total eco- nomic costs of illness was due to cancer. 47/ Because the evidence on the efficacy and effectiveness of many preventive measures is not firmly established, the committee suggests instituting safeguards before establishing payment for particular measures. Criteria should be developed and used for the incorporation of specific measures into a third-party payment system. The criteria of one proposal include an evaluation of the scientific evidence on the significance of the measure and assessment of the costs and benefits in economic and human terms. The proposal suggests preventive services appropriate for each period of life. 48/ In addition, demonstration and special projects to prove the efficac Or usness and effectiveness of the measures might be undertaken. Other safeguards against overuse and abuse suggested by the committee are providing payment for preventive services, including health education, for a specific time, such as once a year. Furthermore, such payments should be contingent upon the patient's recognition and certification of receipt of the service. This could be accomplished by the patient cosigning the physician's claim forms for reimbursement. The recommendation may have effects other than improving the avail- ability of health education and preventive services. No doubt additional -51-

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The practice of not reimbursing for primary care services provided by nurse practitioners and physician assistants is another policy that perpetuates the uneven geographic distribution of primary care practi- tioners. Specific information on the payment practices of Blue Shield and commercial insurers in this respect are not available, but Medicare does not reimburse for services provided by physician assistants and nurse practitioners, 67/ and only a few state Medicaid agencies allow payment for such services. 68/ Restricting reimbursement for these providers, as well as requiring the physical presence of the supervising physician, greatly limits their usefulness in underserved areas, especially rural clinics. Various legislative proposals to amend the relevant Medicare provisions and to allow for the payment of services furnished by physician assistants and nurse practitioners in rural health clinics have been proposed. 69/ The recently enacted P.L. 95-210 provides reimbursement to rural health clinics under Medicare and Medicaid for services furnished in rural health clinics by nurse practitioners and physician assistants, if the nurse practitioner or physician assistant is legally authorized to furnish such services. This legal authority includes physician supervision. The act contains provisions for demonstration projects for clinics employing nurse practitioners and physician assistants in medically underserved urban areas. 70/ The pattern of non-reimbursement for primary care services furnished by nurse practitioners and physician assistants is inconsistent with public policy that promotes the distribution of primary care practitioners in underserved areas. Therefore, the committee recommends that (Recom- mendation #9) reimburse the practice unt . . same payment level regardless of whether the services are provided by physicians' nurse practiti ~ ce unit can be owned and operated by physicians, other health professionals, or government organizations. In making this recommendation, the commit- tee recognizes the unresolved problem of determining whether a service, e.g., a physical examination, delivered by a physician is the same service when delivered by a nurse practitioner or physician assistant. Some believe that the physicians' medical expertise precludes their service from being the same service as that delivered by a nurse practitioner or physician assistant. Another point of view is that nurse practitioners and physician assistants deliver some primary care services with more communicative and facilitative skills than most physicians. Most committee members agreed that, for reimbursement purposes, a service delivered by a physician assistant and nurse practitioner is similar to a service delivered by a physician if both are delivered at an acceptable level of quality. The committee rejected the option of the reimbursement for primary care services provided by physician assistants and nurse practitioners at a lower level than for similar services established for physicians. Payment differentials are discriminatory and connote a two-tiered system -56-

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of health care. In addition, the evidence indicates that the quality of care for the range of services provided by nurse practitioners and physician assistants is equivalent to that of physicians, 71/ and that nurse practitioners and physician assistants increase the availability of primary care services. A reduced payment level for physician assis- tants and nurse practitioners may be offset by administration and implementation costs. Furthermore, a reduced level of reimbursement might hinder their employment potential. 72/ MONITORING AND RESEARCH NEEDS The issues of the adequacy of the supply and distribution of primary care practitioners require continuing attention. Policy decisions and alternatives should be based on an accurate picture of the current as well as future situations. Thus, the committee strongly recommends that (Recommendation #10) there should be an active, continuous program for ~ _ monitoring a number of factors includ , ~ . geographic distribution of physicians, nurse practitioners, and physician assistants,and also for monitoring the perce . Lion regarding the adequacy and availability of primary care services. A factor that requires particular attention is the number of physicians who change their specialty, even after they are in practice. The fact that a physician is enrolled in or completes a residency in a specialty does not ensure that he or she will later practice in that specialty. Many physicians who train in internal medicine, pediatrics, family practice, general practice, or obstetrics and gynecology later change to referral specialties 73/ The magnitude of this change must be monitored in developing policy about primary care manpower. The committee also recommends that (Recommendation #11) an increased emphasis should be given to health services research in primary care man- power. In the committee's judgment, is essential for the intellectual development of the field. A field augments its body of knowledge, gains professional prestige, and increases its competency through research. The committee also suggests that primary care faculty members participate in research efforts to augment faculty expertise and to add another positive dimension to the role model of a primary care physician. In its attempt to evaluate the need for primary care practitioners and the factors that attract physicians and other health practitioners to the delivery of primary care, the committee discovered a paucity of reported reliable research. The type of research that the committee believes would be most helpful is that of health services research. Health services research has the potential of effecting a positive change in the content, organization, and delivery of health services. Although there is disagreement on a workable definition of health services research, it has been defined as encompassing "...broad scientific fields, the overall objective of which is to improve the provision of health services." 74/ -57-

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There are studies now underway that will provide data on staffing and manpower utilization patterns in primary care practice arrangements, on the case mix seen by specialists and the time they spend in nonspeci- alty practice, and on the utilization of new health practitioners. 75/ More definitive information is needed about the factors involved in the physician's choice of specialty and in the physician's decision to change specialties. The retention of physicians and other practi- tioners in the primary care field needs investigation. Some of the factors to be researched include the influence of professional contraints, educational experiences, and community, social, and personal characteristics. Research is needed to determine the population's need for primary care services and the manpower for meeting that need. Currently there is no agreement about the definition of needs or an adequate methodology for their assessment or an understanding of the work behavior of providers. Moreover, to facilitate this research, accurate data is needed on the use of specific primary care services, the efficacy of primary care procedures, and the differing roles of primary care practitioners. In addition, further work on the quality of primary care, the cost and efficacy of the delivery of primary care in different practice ar- rangements, team delivery of primary care, and the effect of reimbursement policies and credentialing on the providers of primary care is needed. -58_

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REFERENCES Chapter 4 1. Gene Roback and Henry A. Mason, Physician Distribution and Medical .icensure in the U.S.. 1975 (Chicago, American Medical Association: 1976~; see also staff paper, "Data on the Supply and Distribution of Primary Care Physicians." American Association of Colleges of Osteopathic Medicine, "Osteo- pathic Medical Manpower Information (OMMI) Project," Final Report. (DHEW Publication No. HRA 231-75-0615~. Rockville, Md., HRA, 1977 3. U.S. Department of Health, Education and Welfare, "Supply and Distribution of Physicians and Physician Extenders: A Background Paper Prepared for The Graduate Medical Education National Advisory Committee," March 1, 1977, pp. 61-2 (mimeographed). The prelimi- nary projections utilized in this background paper used the following methodology: "Medical graduates were estimated by projecting medical school first-year enrollments to the year 1986-87 and combining them with enrollment attrition rates and three year program trends. The first-year enrollment projections were based on studies of the effects of federal capitation grants, construction grants, new schools, and local and state funding. Foreign and Canadian medical graduates were projected using a cohort model of FMG and CMG immi- gration by type of visa and preference category accompanied by a detailed analysis of the potential impact of current legislation affecting FMGs. Since estimation of the anticiapted effect of the legislative changes involves significant uncertainty, the results were computed in ranges, and the midrange figure was used in this 'basic' projection. Mortality and retirement losses were computed by five-year age cohort on an annual basis, using age distributions and mortality and retirement rates from AMA data." Ibid, p. 61, 9. Although the physician population ratio is useful as an indicator of the adequacy of the supply of physicians, it has a number of serious limitations. Among these are that it does not account for the productivity of the physician, the pro- ductivity of other health providers, the number of hours worked, and the quality of care delivered. In addition, the physician population ratio measure is only one dimension of the need or demand for personal health services. -59-

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5. Richard M. Scheffler, "The Productivity of New Health Practitioners: The Physician Assistant and Medex" in Health Manpower, Vol. 1, ed. Richard M. Scheffler, Research in Health Economics: An Annual Com- pilation (Greenwich, Conn.: JAI Press, in press); Uwe E. Reinhardt, Physician Productivity and the Demand for~Health Manpower (Cambridge, Mass.: Ballinger, 1975),- Kenneth Smith, Ralph Andreano~~~and Uwe E. Reinhardt, "A National Health Manpower Policy: A Critique and Strategy," in Health Manpower. Vol. T 6. Jack Hadley, "Research on Health Manpower Productivity: A General Overview," in Health Manpower and Productivity, ed. John Rafferty (Lexington, Mass.: Lexington Boo ~ . 143-205. 7. Uwe E. Reinhardt and Kenneth R. Smith, '`Manpower Substitution in Ambulatory Care," in Health Manpower and Productivity, ed. John Rafferty (Lexington, Mass.: Lexington Books, 1974) pp. 3-38; Richard M. Scheffler, "Productivity and Economies of Scales in Medical Practice; in Health Manpower and Physician Productivity, pp. 39-52; Frank A. Sloan, "Effects of Incenti ~ formance," in Health Manpower and Physician Productivity, pp. 53-84; Richard M. Scheffler, "Further Consideration on the Economics Group Practice: The Management Input," Journal of Human Resources 10 (1975~: 258-63. 8. Martin S. Feldstein, "The Rising Price of Physician Services," Review of Economics and Statistics 52 (1970~: 121-133; Stephan G. Vahovlch, "Phys ~ ons by Specialtyt' Industrial Relations 10 (1977~: 51-60. . 9. Frank A. Sloan, 'Physician Supply Behavior in the Short Run," Industrial and Labor Relations Review (1975~: 549-569; Frank A Sloan, "A Microanalysis of Physicians Hours of Work Decisions," in The Economics of Health and Medical Care, ed. Marc Perlman (London: MacMillian, 1974). 10. Uwe E. Reinhardt, Physician Productivity and the Demand for Health - Manpower. - 11. Robert G. Evans, "Supplier Induced Demand: Some Empirical Evidence and Implications," in The Economics of Health and Medical Care, ed. Marc Perlman, (London: MacMillan, 1974), pp. 15-77; Eli- Ginzberg, "Paradoxes and Trends: An Economist Looks at Health Care," New England Journal of Medicine 26 (1977~: 814-6. 12. See staff paper, "Education of Primary Care Practitioners." 13. American Nurses' Association and U.S. Bureau of Health Manpower, A Directory of Programs Preparing Registered Nurses for Expanded Roles, 1974-75, DREW Pub. No. (BRA) 76-31, 1975. purse practitioners are also trained in informal programs for which data are scarce and unreliable. -60-

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14. Association of Physician Assistant Programs, Nationa]. New Health Practitioner Program Profile, ].976-77 (Washington, D.C.: 1975~; see also staff paper "Education of Primary Care Practitioners." 15. P.L. 94-63 (1975); P.L. 94-484 (1976). 16. U.S. Department of Hea].th, Education, and Welfare, "Supp].y and Distribution of Physicians and Physician Extenders," p. 78. 17. Char].es E. Lewis, "Evaluating the Performance of Intermediate Health Workers," in Intermediate Health Practitioners, ed. Vernon W. Kippard and Elizabeth E. Purcell (New York Josiah Mac y Jr. Foundation, 1973), pp. 89-103; Charles E. Lewis and Barbara Resnik, 'Nurse Clinics and Progressive Ambulatory Patient Care," New England Journal of Medicine 277 (1967~: 1236-41; Eva D. Cohen, et. al., An Evaluation of Policy Related Research on New and Expanded Roles of Health Workers, (New Haven, Conn.: Yale University School of Medicine, October 1974~. See also staff papers, "Consumer Acceptance of Nurse Practitioners and Physician Assistants" and "Physician Acceptance of Nurse Practitioners and Physician Assistants." 18. Richard M. Scheffler, The Supply and Demand for New Health Profes- sionals: Physician Assistants and Medex, Final Report, Submitted . to U^S. Department of Health, Education, and Welfare, Contract No. 1-44184, November 1977; Jane Cassels Record and Joan E. Bannon, Cost Effectiveness of Physician Assistants, Fina]. Report; HMEIA ~ . . _ Contract No. 1-MB-44173 P U.S. Department of Health, Education, and Welfare, 1976. 19. See checklist in Chapter 2. 20. Richard M. Scheffler, "Estimating the Private Rate of Return to Training the Physicians' Assistant,'' Industrial Relations ].4 1975~: ].78-189; Richard Scheff].er, "The Market for Paraprofes- sionals: The Physician Assistant," The Quarter].y Review of Economics and Business 14 (].974~:.47-60. 21. Charles E. Lewis, "Evaluating the Performance of Intermediate Health Workers"; Lewis and Resnick, "Nurse Clinics and Progres- sive Ambulatory Patient Care '; Cohen, et. al., An Evaluation of Policy Related Research on New and Expanded Roles of Health ~ .. Workers. See staff papers, "Consumer Acceptance of Nurse Practi- tioners and Physician Assistants" and "Physician Acceptance of Nurse Practitioners and Physician Assistants." 22. P.L. 94-484 (1976~. This legislation identifies family medicine, general internal medicine, and general. pediatrics as primary care specia].ties. The American Medical. Association inc].udes obstetrics and gynecology as wet].. In this chapter the data include family and general physicians, internists, pediatricians, and obstetricians and gynecologists. 61

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23. U.S. Department of Health, Education, and We].fare, Surgeon General's Consultant Groups on Medical Education, Physicians for a Growing America, Public Health Service Publicati D.C.: October 1973~. 24. See staff paper, "Data on the Supply and Distribution of Primary Care Physicians." 25. Ibid. 26. U.S. Department of Health, Education, and Welfare, '~SuppJ.y and Distribution of Physicians and Physician Extenders,'' p. 68. 27. Institute of Medicine, Medicare-Medicaid Reimbursement Po].icies (Washington, D.C.: National Academy of Sciences, 1976), pp. 289- 298; Jack Hadley, 'Models of Specialty and Location Decisions," Technical Paper No. 6, Nationa]. Center for Health Services Research, Health Resources Administration, U.S. Department of Health, Educa- tion and Welfare, October 1975; Id., "A Predictive Model of Specialty Choices," Health Manpower Vo].. I (in press) ed. Richard M. Scheffler, Research id -ice: An Annual Compilation (Greenwich, . . . . Conn.: JAI Press, 1978 . 28. P.L. 93-222, 1974. 29. Jack Hadley, 'National Health Insurance and the Health Labor Force: Physicians," Working paper 5057-7, Urban Institute, Washington, D.C., August 1977 (mimeographed); Owe E. Reinhardt, "Health Manpower Policy in the United States,' paper presented at the Bicentennia]. Conference on Health Po].icy, University of Pennsylvania, Phi].ade].- phia, November 1976. 30. Hadley, pp. 4-].2. 31. Jon R. Gabel and Michael A. Redisch, "A].ternative Physician Payment Methods: Incentives, Efficiency and Nationa]. Health Insurance,.. paper presented at the Eastern Economic Association Meeting, Hartford, Conn., April 1977 (mimeographed), p. 2. 32. The term service is used loosely and may refer to a defined unit such as an x-ray, or a range of services related to a single incident, as pre- and post-surgical care for an operation. 33. Institute of Medicine, Medicare-Med~caid Reimbursement Policies (Washington, D.C.: Nationa]. Academy of Sciences, J.976), pp. 327-33].. 34. The National Association of Blue Shield Plans uses a usual, custo- mary and reasonable charge method (UCR). A usual fee is the most consistent charge by an individual physician or provider to patients for a given service. A customary fee is a charge which falls within the range of usual charges for a given service billed by most -62-

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physicians or providers with similar training and experience within a given area. A reasonable fee is one which meets the usual and customary criteria, or which, in the opinion of an appropriate peer review committee, merits special consideration based upon the complexity of treatment of the particular case. Private insurers use a similar method. 35. Institute of Medicine, Medicare-Medicaid Reimbursement Policies, p. 343. 36. Jon Gabel, Martha Blaxall, Ira Burney and George Schieber, "Paying the Physician: Some Lessons from the Med~care-Medicaid Experience," paper presented at the American Public Health Association Meetings, Miami, Florida, 1976, p. 3. 37. W.S. Sobaski, "Effects of the 1969 California Relative Value Studies on Costs of Physician Services Under SMI," Health Insurance Statistics 69, Office of Research and Statistics, Social Security Administration, U.S. Department of Health, Education, and Welfare, (1975). 38. California Medical Association, 1974 California Relative Value Studies (San Francisco' California Medical Association, 1975), 39. Robert M. Gibson and Margaret Smith Mueller, "National Health Expenditures, Fiscal Year 1976,' Social Security Bulletin (April 1977~: 3-22. 40. Nancy Thorndike, "Net Income and Work Patterns of Physicians in Five Medical Specialties," Research and Statistics 13, Office of Research and Statistics, Social Security Administration, U.S. Department of Health, Education, and Welfare (1977~; Abt Associ- ates, "Physician Survey on Administrative Costs and Medicaid Participation," HEW Contract No. 75-0212, paper presented at the ORS-DHO Contractors Workshop, Washington, D.C., March 1977. 41. Institute of Medicine, Medicare-Medica~d Reimbursement Policies, p. 340. 42. Ibid., p. 69. 43. Frank Sloan and Bruce Steinwald, "The Role of Health Insurance in the Physicians' Service Market" Inquiry 12 (1975~: 275-299. 44. 92 U.S.C. 139d (a) (1) 5. 45. Children's Defense Fund, EPSDT:- Does it Spell Health Care for Poor Children? (Washington, D.C.: Washington~Research Project, Inc., 1977). -63-

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46. 47. Institute of Medicine, Perspectives on Health Promotion and Disease Prevention in the United States: A Staff Paper (Washington, D.C.: National Academy of Sciences, January ~ 88. Dorothy P. Rice, Jacob J. Feldman and Kerr L. White, The Current Burden of Illness in the United States, An Occasional Paper of the Institute of Medicine (Washington, D.C.: National Academy of Sciences, 1977~. 48. Task Force Report. Preventive Medicine USA (New York: Prodest, 1976). 49. See staff paper, "Data on the Supply and Distribution of Primary Care Physicians"; Richard Scheffler, "The Regional Distribution of Physicians and Specialists," Review of Regional Studies (Winter 1971~; Richard Scheffler, "The Relationship Between Medical Training and the Statewide Per Capita Distribution of Physicians," Journal of Medical Education (1971~: 995-8. 50. U.S. Congress, House, Committee on Ways and Means, Subcommittee on Health; Hearings on Medicare Reimbursement for Physician Extenders Practicing in Rural Health Clinics, Testimony of Dale W. Sapper, February 28, 1977 (Washington, D.C.: Government Printing Office, 1977), p. 10. 51. See staff paper, "Data on the Supply and Distribution of Primary Care Physicians." 52. Donald Dewey, Where the Doctors Have Gone: The Changing Distribu- tion of Private Physicians in the Chicago Metropolitan Area, 1950- 1970, Chicago Regional Hospital Stud-y (Chicago: Illinois Regional Medical Program, 1973~. 53. American Academy of Family Physicians, "Preliminary Report on a Survey of 1976 Graduating Family Practice Residents," (Kansas City: 1976, mimeographed). 54. Scheffler, "The Supply and Demand for New Health Professionals: Physician Assistants and Medex"; Harry Sultz, Marie Zielezny and Louis Kinyon, "Highlights: Phase 2 of a Longitudinal Study of Nurse Practitioners," State University of New York at Buffalo, New York, 1977 (mimeographed). 55. Scheffler, "The Supply and Demand for New Health Professionals: Physician Assistants and Medex." 56. Sultz, Zielezny and Kinyon, "Highlights: Phase 2 of a Longitudinal Study of Nurse Practitioners," p. 20. -64-

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57. The major current effort to encourage physicians to locate in shortage areas is a series of loan forgiveness and scholarship provisions in the 1976 Health Professions Educational Assistance Act (P.L. 94-484~. The act expands the appropriation authorization for the National Health Service Corps and continues the system of Area Health Education Centers. 58. Institute of Medicine, Medicare-Medicaid Reimbursement Policies, pp. 279-294; Jack Hadley, "Models of Physicians' Specialty and Location Decisions,' Technical Paper loo. 6, National Center for Health Services Research, Health Resources Administration, U.S. Department of Health, Education, and Welfare, October 1975. 59. Ibid., Medicare-Medicaid Reimbursement Policies. 60. Jack Had]ey, "National Health Insurance and the Health Labor Force: Physicians..' 61. Institute of Medicine, Medicare-Medicaid Reimbursement Policies, p. 341. 62. Frank Sloan and Roger Feldman, "Monopolistic Elements in the Market for Physicians. Services," paper presented at the Conference on Competition in the Health Care Sector: Past, Present and Future, Federal Trade Commission, Washington, D.C., June 1977 (mimeographed). 63. Institute of Medicine, Medicare-Medicaid Reimbursement Policies, p. 333. 64. Catherine White, Institute of Medicine, paper presented at the Social Security, ORS-DHS Physician Contractors Workshop, Washington, D.C., March 1977. Institute of Medicine, Medicare-Medicaid Reimbursement Policies, . . _ p. 69. 66. For a discussion of the state role in health activities, see Florence A. Wilson and Dune an Neuhauser, Health Services in the United States (Cambridge, Mass.:. Ballinger, 1964), pp. 179-82. 67. See ]861(s) (2) of the Social Security Act, 42 U-S.C. Sec. 1395 (S) (2) (A); 20 CFR 405.23]. For further discussion, see staff paper, "Public Payment for Primary Care Services." 68. Seven states permit payment for medical services provided by nurse practitioners and physician assistants as 'services provided...by or under the personal supervision" of a licensed physician. See staff paper, "Public Payment for Primary Care Services." 69. H.R. 14833, 94th Cong. 2nd session; H.R. 15159, 94th Cong. 2nd session; H.R. 15594, 94th Cong. 2nd session and H.R. 8422, 95th Cong. 1st session. -65-

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70. P.L. 95-210 (1977). 71. See staff papers, "Consumer Acceptance of Nurse Practitioners and Physician Assistants" and "Physician Acceptance of Nurse Practi- tioners and Physician Assistants," and Cohen, et. al., An Evalu- ation of Policy Related Research. 72. See staff paper, "Physician Acceptance of Nurse Practitioners and Physician Assistants." William D. Holden and Edithe J. Levit, "Migration of Physicians From One Specialty to Another: A Longitudinal Study of U.S. Medical School Graduates," Journal of the American Medical Associ- ation 239 (1978): 205-9; Henry Wechsler, Joseph L. Dorsey and Joanne D. Bovey, "A Follow-up Study of Residents in Internal Medicine, Pediatrics and Obstetrics-Gynecology Training Programs in Massachusetts," New England Journal of Medicine 298 (1978~: 15-21. 74. Panel on Health Services Research and Development of the Presidents Advisory Committee, In Providing Health Care Through Research and Development (APO #4106-00036, Washington, D.C.), March 1972, p. 1. 75. Ongoing studies include a nationwide survey of physicians and surgeons in approximately twenty medical and surgical specialties conducted at the University of California Medical School. The study is attempting to derive empirically a basis for the catego- rization of care as primary and non-primary care. A long diary kept by the physicians will provide information about the case mix seen by the specialists and will provide estimates of how physicians spend their professional and nonprofessional time. The Physician Extender Reimbursement Study conducted at the University of Southern California and by Systems Sciences, Inc. is examining the effects of various levels of reimbursement on the utilization, cost-effec- tiveness, productivity, and types of services rendered by nurse practitioners and physician extenders. The Health Services Research and Development Center of the Johns Hopkins Medical Institutions is examining the appropriate type of manpower to use in urgent, walk- in facilities and the effect of utilization of such facilities on the continuity and coordination of primary care. Another Johns Hopkins project is examining the anxiety component of ambulatory care with respect to outcome measures such as patient satisfaction with care and the relation of the resolution of anxiety to different types of primary care practitioners. Among the research being conducted at the Health Services Research Center of the University of North Carolina at Chapel Hill is a comprehensive evaluation of several models of rural primary health care programs including the effect of various mixes of providers on the programs. -66-