Relative cost differences among physicians' specialty practices
E. R. Becker, D. Dunn and W. C. Hsiao
Department of Health Policy and Management, Harvard University School of Public Health, Boston, MA 02115.
Practice costs, defined as those costs of medical practice that exclude the
physician's own time and effort, represent a substantial portion of the
resources necessary to perform a service. In this article we describe the
development of the practice cost index used in constructing the
Resource-Based Relative Value Scale (RBRVS). We derived the practice cost
index value for each specialty, using specialty-specific practice costs and
gross revenue data. The index values for all other specialties are
standardized to the value for general surgery, and these are used to adjust
the resource-based relative values for services performed by each
specialty; in this way, the RBRVS incorporates practice cost variations.
The data used in the construction of the practice cost index are the 1983
Physician Practice Cost and Income Survey data, adjusted to reflect the
relative levels of 1986 professional liability insurance. Our findings show
that among most specialties, the range of relative difference in practice
costs as a percentage of gross revenue is approximately 15%. Four
specialties fall outside this range: pathology, psychiatry, rheumatology,
and orthopedic surgery. We discuss problems with the available data on
practice costs as these relate to their use in the RBRVS and conceptual
issues in applying practice costs to the construction of the RBRVS.
