Financial impact of the Medicare Fee Schedule on a large multispecialty faculty practice in an academic medical center.

Abstract

Although there have been preliminary studies of the financial impact of the Medicare Fee Schedule (MFS) on specialty-specific groups of practicing physicians in an academic setting, there has been no published report of the financial impact of the MFS on an entire multispecialty academic faculty practice. This 1992 study reports the estimated financial impact of the MFS on the faculty practice at the University of Michigan Medical School (UMMS). The authors calculated the difference between the Medicare payments to be received when the MFS is completely implemented in 1996 and the payments received in 1991, and then repeated this process for each year of the transition period, 1992-1996. The UMMS will experience a $1.2 million (-4.7%) loss under the fully implemented MFS. The medical departments project an 8% gain, while substantial losses are projected for the surgical departments (-10%) and hospital-based departments (-15%). Projections indicate that obstetrics-gynecology and ophthalmology will lose nearly 20% and that surgery will lose 9%. But large percentage gains are projected for neurology (+43%), physical medicine (+25%), and family practice (+17%). Analysis of the MFS transition's effects shows an abrupt and unpredictable financial impact in the first year. Faculty practice plans may be more disadvantaged under the MFS than other physician groups, yet the uncertain impact of the MFS in the first year (1992) may inhibit accurate financial planning for all physician groups.