How Do Primary Care Providers Respond to Reimbursement Cuts? Evidence From the Termination of the Primary Care Incentive Program

Abstract

The Primary Care Incentive Payment Program (PCIP) provided a 10% bonus payment for Evaluation and Management (E&M) visits for eligible primary care providers (PCPs) from 2011 to 2015. Using a 2012 to 2017 sample of continuously eligible PCPs (the treatment group) and ineligible specialists with historically similar provision of billed services (the control group), this study is the first to examine how PCPs responded to the program's termination. Using inverse probability of treatment weighted difference-in-differences models that control for inter-temporal changes in provider-specific beneficiary characteristics, individual provider fixed effects, and zip code by year fixed effects, it finds that providers responded to the removal of the 10% bonus payments by increasing their billing of bonus payment eligible E&M relative value units (RVUs) by 3.7%. This response is consistent with supplier-induced demand and suggests a 46% offsetting response consistent with actuarial assumptions by the Centers for Medicare & Medicaid Services when assessing reimbursement reductions.

Keywords: Medicare Part B; fee-for-service; offsetting; supplier-induced demand.