D. Using the "Pseudo Bill" to Find VA Healthcare Cost

1. What is the cost of physician services for inpatients?

Physicians prepare bills to Medicare using Current Procedures and Terminology (CPT) codes. The Medicare fiscal intermediary confirms that the bill was a appropriate and calculates a payment based on a system of relative values assigned to each code. The Medicare conversion factor provides about $35 per billed relative value unit.

VA physicians do not use CPT codes to characterize the services that they provide to inpatients. At least two studies have determined the mean Medicare payment to physicians for services provided to hospitalized patients in each DRG. Using these payment rates requires the analyst to assume that every patient assigned to a given DRG received exactly the same physician services. This assumption, while not perfect, is fairly reasonable as provision of additional physician services often results in the stay being assigned to a different, more expensive DRG.

Two studies that have calculated physician payments associated with different DRGs are:

• Miller ME, Welch WP. Analysis of Hospital Medical Staff Volume Performance Standards: Technical Report. Washington D.C.: The Urban Institute; 1993.
• Mitchell, JB, NT McCall, FT Burge, S Boyce, R Dittus, D Heck, M Parchman, L Iezzoni. Per Case Prospective Payment for Episodes of Hospital Care Health Economics Research, Inc. (1995) NTIS RB95-226023

Here is how to use relative values calculated by Miller and Welch to find physician charges for inpatient stays. Miller and Welch found the mean charge for physician services associated with hospital stays in each DRG. They reported a relative value for each DRG, that is the mean charge for that DRG divided by the mean charges for all DRGs.

View our downloads section for an Excel spreadsheet with Miller and Welch's relative values. These values are from Appendix B of their report. The values are based on charges incurred only during the hospital stay. They are based on all stays in Miller and Welch's data; outlier stays were not trimmed from the dataset.

Miller and Welch reported the average charges for physician services of an inpatient stay in 1992 as $1,116. Thus, to find the charge for physician services in any given DRG, multiply the value in the spread sheet by $1,116.

It is possible to estimate the mean charge using more contemporary conversion factors. The 1992 mean charge of $1,116 was found by multiplying the Medicare 1992 conversion factor of $31.001 by 36, the mean number of Medicare Relative Value Units billed by physicians in the Miller and Welch data. Other conversion factors might be substituted, as follows:

Year	Conversion Factor	Mean Physician Charge
1998	33.64	1,211
1999	34.73	1,250
2000	36.61	1,318

Limitations

Miller and Welch analyzed charges for physician services from 1987 data. Physician practice patterns have undoubtedly changed since then. Several new DRG's are not represented in the Miller and Welch data.

These reports provide information on the average physician payment associated with each DRG. The payments may be adjusted. For example, the mean payment might be adjusted for differences in length of stay. The typical Medicare payment for a daily physician visit to an inpatient is $51; this adjustment could be applied for the number of days that the stay deviated from the national mean length of stay for that DRG.

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• Physician RVU by DRG

  Date: 1/24/2003 | Size: 39Kb

  Relative values calculated by Miller and Welch to find physician charges for inpatient stays.