Physician Payment Rates in Alaska and Comparison States

Milliman Client Report

Milliman Client Report

Physician Payment Rates in Alaska and Comparison States

Prepared for: Alaska Health Care Commission Prepared by: Milliman, Inc. 1301 Fifth Ave. Seattle, WA 98101-2605 John Pickering, FSA, MAAA john.pickering@ 206 504 5884 Edward Jhu, FSA, MAAA edward.jhu@ 206 504 5828

November 29, 2011

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ........................................................................................................... 1

2. RESULTS.............................................................................................................................. 2

3. METHODOLOGY AND DETAILED RESULTS ............................................................................... 9

4. LIMITATIONS AND CONSIDERATIONS ..................................................................................... 14

APPENDIX A ....................................................................................................................... 15

APPENDIX A-1 APPENDIX A-2 APPENDIX A-3 APPENDIX A-4 APPENDIX A-5 APPENDIX A-6 APPENDIX A-7 APPENDIX A-8 APPENDIX A-9 APPENDIX A-10 APPENDIX A-11 APPENDIX A-12 APPENDIX A-13 APPENDIX A-14 APPENDIX A-15 APPENDIX A-16 APPENDIX A-17 APPENDIX A-18 APPENDIX A-19 APPENDIX A-20

SUMMARY OF RELATIVE REIMBURSEMENT ALL SPECIALTIES CARDIOLOGY CARDIOTHORACIC SURGERY CHIROPRACTIC DME ENT FAMILY PRACTICE/GENERAL PRACTICE GASTROENTEROLOGY GENERAL SURGERY INTERNAL MEDICINE INTERNAL CARDIOLOGY LABORATORY NEUROLOGY OBSTETRICS/GYNECOLOGY OPHTHALMOLOGY ORTHOPEDICS PEDIATRICS RADIOLOGY UROLOGY

Physician Payment Rates in Alaska and Comparison States November 29, 2011

TOC-1

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1. EXECUTIVE SUMMARY

The Alaska Health Care Commission ("AHCC") engaged Milliman to compare Alaska's health care payment rates and underlying drivers to those in certain other states. The comparison states are Washington, Oregon, Idaho, Wyoming, and North Dakota.

This report is the first of three reports. This report is focused on how Alaska's physician payment rates compare to other states. The second report will analyze facility payment rates. The final report will identify the key drivers of the cost differences across states.

Our results show that Alaska's physician reimbursement is approximately 59% higher than the average of the comparison states. Physician reimbursement in Alaska exceeds each of the comparison states for each type of payer and each provider specialty, though the differential varies. The results here should be interpreted with caution, since they only identify the relative reimbursement among states and do not consider reasons for the differences such as staff wages, cost of living, cost of business operation, or provider availability, which may account for some or all of the relative differences in reimbursement. Analysis of the drivers behind the differences will be presented in the third report in this series.

Physician Payment Rates in Alaska and Comparison States November 29, 2011

I Executive Summary 1

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2. RESULTS

For this report, we define physician reimbursement to be the full amounts that providers may collect for a given service, commonly called "allowed amounts". These allowed amounts include memberpaid amounts such as co-pays, co-insurance, and deductibles, as well as payments from the insurer (or government entity).

We compared relative allowed amounts for physicians in Alaska to those in the comparison states for procedure codes that were either in the top 25 by utilization rate or the top 25 in total cost (reflecting both utilization rates and the cost per service). The comparison was done separately using 2011 fee schedules for each of the following payers: Medicare, Medicaid, TRICARE, VA, and Workers' Compensation. In addition, we summarized the mean, median, and 80th percentile of 2009 commercial allowed amounts; a single fee schedule does not exist for commercial amounts since each commercial insurer negotiates its own fee schedule with providers and therefore, we have summarized fee levels from a database of health care claims.

Finally, we have included the mean, median, and 80th percentile of provider billed charges. Billed charges are the amounts that providers bill. In many cases, due either to contractual agreements with commercial insurers or government-set fee schedules, allowed amounts are less than billed charges.

We are providing the analysis for the top 25 codes overall across all specialties (including specialties not included in the list below). We have also performed the analysis separately for the top 25 codes for each of the following specialties:

cardiology cardiothoracic surgery chiropractic DME ENT Family practice gastroenterology general surgery internal medicine interventional cardiology lab neurology

Physician Payment Rates in Alaska and Comparison States November 29, 2011

II Results 2

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ophthalmology orthopedics pediatrics radiology urology For some specialties, such as chiropractic, there were fewer than 25 codes with significant volume and therefore, some of the analyses by specialty include fewer than 25 codes.

Detailed fee information for each state, payer, specialty and procedure code is included in Appendix A to this report.

Relative Reimbursement by Payer across States

Table 2.1 below shows physician relative allowed charges by state and payer. This table is based upon aggregate data across all of the specialties listed above except for DME. The table is calibrated so that the average across the five comparison states for each payer is equal to 100%. As an example, the 127% shown for Alaska Medicare indicates that Medicare reimbursement in Alaska is equal to 127% of the average Medicare reimbursement in the five comparison states. Across all payers, Alaska relative reimbursement is 160% of the comparison states across specialties that were analyzed.

Table 2.1

Physician Reimbursement Levels by State and Payer

AK

ID

ND

OR (1)

WA (1)

WY

Medicare (1) Tricare (1) VA Medicaid Workers' Compensation Comm Allowed - Mean Comm Allowed - Median Comm Allowed - 80th Percentile Billed - Mean Billed - Median Billed - 80th Percentile

127%

182% 215% 174% 190% 169% 181% 176% 142% 147% 135%

96%

97% 96% 99% 108% 96% 94% 98% 90% 89% 93%

98%

97% 98% 134% 98% 96% 97% 89% 96% 98% 93%

100%

101% 100% 87% 107% 112% 113% 110% 113% 114% 112%

105%

104% 105% 68% 86% 92% 88% 92% 107% 105% 104%

101%

101% 101% 113%

N/A 105% 107% 111% 95% 93% 98%

All Payers (2)

160%

97%

105%

102%

91%

103%

All values are relative to the average for the five comparison states (excluding AK) for each payer category

(1) For this summary, the Portland, OR and Seattle, WA Medicare and Tricare fee schedules were used. (2) The All Payers values are weighted by payer, using national health expenditure data from CMS.

The weights are: Medicare - 28%, Tricare - 2%, VA - 2.4%, Medicaid - 20.8%, Workers' Compensation - 2.2%, and Commercial - 44.6%.

Physician Payment Rates in Alaska and Comparison States November 29, 2011

II Results 3

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