Exception Policy for Reimbursement of New Physicians in Medical Groups

This final report summarizes the results of our review of a reimbursement exception policy made by the Health Care Financing Administration (HCFA) for new physicians who join medical groups. The Congress provided, effective April 1, 1988, that the customary charges of first-year physicians be limited to 80 percent of the prevailing charges of the established physicians in the same locality. The Congress subsequently amended the law to cover physicians and other health care practitioners in their second, third, and fourth years of practice by providing limits of 85, 90, and 95 percent, respectively. The HCFA provided for an exception that allowed carriers to use the Medicare group customary charges rather than applying the percentage limits to new physicians in the groups. We found that the exception policy was not authorized by the Congress and that HCFA should not have provided the exception. As a result, intended savings may not have been realized.