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Payment source and provider type in the US healthcare system

Benitez, Joseph MPH; Coplan, Bettie MPAS, PA-C; Dehn, Richard W. MPA, PA-C, DFAAPA; Hooker, Roderick S. PhD, PA

Journal of the American Academy of PAs: March 2015 - Volume 28 - Issue 3 - p 46–53
doi: 10.1097/01.JAA.0000460924.36251.eb
Original Research

Greater use of physician assistants (PAs) and nurse practitioners (NPs) to meet growing demand for healthcare in the United States is an increasingly common strategy to improve access to care and control costs. Evidence suggests that payment for services differs depending on the type of provider. This study sought to determine if the source of payment for a medical visit varies based on whether care is provided by a physician, PA, or NP. Data from the National Hospital Ambulatory Medical Care Survey (2006 through 2010) were analyzed. Physicians were proportionally more likely than NPs or PAs to provide care for medical visits compensated by private insurance or Medicare. Conversely, PAs and NPs were more likely to serve as providers of care for services with other payment sources such as Medicaid and out-of-pocket.

Joseph Benitez is a health services researcher and doctoral candidate at the University of Illinois at Chicago's School of Public Health. Bettie Coplan is an associate clinical professor in the PA program at Northern Arizona University in Phoenix. Richard W. Dehn is a professor in the College of Health and Human Services at Northern Arizona University's Phoenix Biomedical Campus, and chair of the university's Department of Physician Assistant Studies. Roderick S. Hooker is a retired PA and healthcare analyst. The authors disclose that a portion of this research was funded by a grant from the Physician Assistant Education Association.

Acknowledgment: The authors wish to thank the Physician Assistant Education Association for grant funding support of this project.

The structure of healthcare delivery in the United States differs substantially from health systems in other well-resourced nations in several ways. The US system depends on broad use of physician assistants (PAs) and nurse practitioners (NPs) to expand access to medical services and relies on a highly variable range of payment sources. These sources include out-of-pocket payment, charity, private insurance, publicly provided or underwritten insurance, and federal services such as Medicare, Medicaid, public health, Indian Health Service, Bureau of Prisons, military, community health centers, and Veterans Health Administration (VHA).1,2 Now in the second decade of the new millennium, the US healthcare workforce faces complex challenges as the population ages, patients with chronic diseases live longer, and the Affordable Care Act (ACA) expands public and private health insurance.

Various supply and demand models address the resulting increase in need for services by examining the effect of potential changes to the traditional health workforce.3-6 One proposed solution is greater use of PAs and NPs.7,8 Although the number of US medical school graduates is expected to increase, the anticipated growth is proportionally small when compared with forecasted increases in the number of PA and NP graduates.9,10 As the healthcare system evolves and providers other than physicians increasingly deliver medical services, payment for services may become a critical policy issue.

Since the mid-1990s, reports have suggested that PAs and NPs manage a greater proportion of patient visits reimbursed by lower-payment options (such as Medicaid, Medicare, workers' compensation, charity, pro bono, and out-of-pocket). One national study revealed that visits paid by Medicaid and other government payment sources accounted for a proportionally larger share of visits to PAs and NPs compared with physicians.11 Another study of Medicare recipients found significant differences in types of payments for PA and NP visits compared with physician visits. Medicare-Medicaid dual enrollees more frequently reported that a PA or NP was their principal provider of care; those with private insurance in addition to Medicare more often identified a physician as their primary provider.12 Lin and colleagues found that the distribution of “expected source of payment” (private versus Medicare/Medicaid) for patient care was similar for NPs compared with PAs when either served as the sole providers of care.13

Outpatient hospital visits remunerated by private insurance account for 37% of all medical visits in the United States.2 Sixty-one percent of private physician office visits are compensated by private insurance.14 In community health centers (CHCs), where the majority of patients are either uninsured or have Medicaid, only 17% of office visits are paid for by private insurance.2,15 Notably, both CHCs and hospital outpatient departments use PAs and NPs at higher rates than do private family medicine physicians.16 In general, healthcare providers receiving relatively lower payments for medical services relative to private insurance are more likely to employ PAs and NPs than healthcare entities that primarily receive reimbursement from private insurance.17

This study sought to determine if the source of payment for a medical visit correlates with the likelihood that care will be provided by a specific type of provider. A possible correlation is of interest because studies have shown that source of payment influences physicians' decisions about the type of services to offer patients and that Medicaid influences patients' access to physician care.18-22 However, the potential for payment source to influence the likelihood of receiving services from a provider other than physician has not been fully addressed. One perception is that differentiation in the type of healthcare provider for a patient is partly predetermined by the source of payment, consistent with relative wage differences between providers. In other words, NPs and PAs may be more likely to provide care for patients when the payment is less relative to private health insurance.

Any effect of payment source is not strictly binding, as the relationship is likely moderated by the relative availability of physicians versus other types of providers. Rural areas, for example, contain a proportionally higher distribution of PAs and NPs and lower distribution of physicians than urban areas.16 To address the influence of access to a particular provider based on geography, an analysis of the relationship between provider and payment source based on location was undertaken, with regressions stratified by the five National Center for Health Statistics (NCHS) county categories of urbanization using the NCHS Urban-Rural Classification system (Table 1).

Table 1

Table 1

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In outpatient settings, a number of factors likely determine whether a physician, PA, or NP sees a patient. If the propensity for a patient to be scheduled with a particular type of provider is in part determined by the patient's mode of payment, consideration may be given to the difference in marginal revenue gained from the patient's source of payment and the marginal cost of hourly wage for the provider being seen. The assumption is that physicians are paid a higher wage than NPs and PAs regardless of specialty or employment setting.23

Because Medicaid and Medicare typically reimburse at lower rates than private insurance, physicians may have less incentive to treat a patient whose primary source of payment is Medicaid.24 Taking this a step further, assuming there are no other influences and looking at the bottom of the payment scale, a physician would be more likely to treat a patient paying with Medicaid than a patient without the ability to pay. Similarly, patients with lower-reimbursing insurance or no insurance would be more likely to be treated by PAs and NPs because their marginal cost of labor is less than that of a physician. The premise is that employers of healthcare professionals will maximize their revenue stream when labor costs and reimbursement are optimized. This national study was undertaken to see whether PAs and NPs in hospital outpatient departments are in fact more likely to provide care for patients with lower levels of reimbursement.

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Data were drawn from the National Hospital Ambulatory Medical Care Survey (NHAMCS) outpatient department visits for 2006-2010 (with repeated cross-sections). The study sample includes more than 123,000 observations representing more than 74 million outpatient visits. A more detailed description of the survey can be found on the CDC website ( The NHAMCS data in particular were chosen because PA and NP visits can be readily separated from physician visits. This is an important distinction from many other available data sources because incident-to services provided by PAs or NPs are not attributed to physicians. All analyses were completed using Stata/SE 13.1 for Windows (Stata Statistical Software: Release 12. College Station, TX: StataCorp LP; 2011).

The primary analysis was a multinomial logistic regression with type of provider as the dependent variable. For prevalence estimates, the survey was weighted by visit to reflect the design and sampling scheme of the NHAMCS for each year. Sample weights were used to approximate the prevalence estimates and adjust for the complex sampling design, which is described elsewhere.17 Predicted probabilities based on the final regression models are included in the results section (Table 2).

Table 2

Table 2

The dependent variable was a nominal categorical variable indicating whether a patient was treated by a physician, PA, or NP. The independent variable was the patient's source of payment for the visit. The statistical model tests the likelihood that a patient was treated by a provider other than a physician as a function of the patient's primary source of payment. All regression models controlled for patient sex, racial/ethnic group status, total number of chronic conditions (such as hypertension and hyperlipidemia), and age. Additional contextual controls included the median household income of the patient's home postal code, percentage of the population in the patient's postal code with a bachelor's degree or higher; the census-based geographic region of the country (North, South, East, West), and the metropolitan area status (urbanity) of the location of the outpatient department.

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To characterize the sample by location, Table 1 shows that 28% of all weighted hospital outpatient department visits occurred in large metropolitan areas at one end of the five-level urbanity scale, and about 31% of outpatient department visits occurred in sparsely populated areas at the other end. The percentage of physician visits in each of the five areas of urbanity followed closely with the overall percentage of visits in each of these areas; however, the distribution of NP and PA visits was notably different. Although more than half of the physician visits occurred in larger metropolitan areas, the majority of PA visits (62%) and NP visits (51%) were in more sparsely populated areas. Table 1 shows that the percent of PA and NP visits increases as the location of services becomes more rural and the availability of physician services decreases.

Overall, physicians provided care for about 83% of the visits during the study period (Table 1). PAs provided care for 5% of visits and NPs for 11%. Among all visits, 47% occurred in large urban areas and 22% in rural areas. Almost a third (31%) of the physician visits occurred in a large/central metropolitan area; 18% took place in rural areas. The bulk of PA and NP visits occurred in nonmetropolitan (rural) areas.

Figure 1 illustrates that all three providers allocated an equal proportion of their visits to providing uncompensated care (3.4% to 3.8%) and care to privately insured patients (33.3% to 34.5%). What differs is that proportionally PAs and NPs provided more care to patients paying out of pocket than physicians did (9.4% versus 6.6%). Additionally, physicians and NPs spent the largest share of their efforts treating Medicaid patients; however, the share of NP (42%) visits paid by Medicaid was larger than the share of either PA (34%) or physician (38%) Medicaid visits.

Figure 1

Figure 1

Figure 2 reveals the association between setting and provider by source of payment. When the same compensation array is stratified by urban-rural across a continuum of the five population densities (metro-central to nonmetro) some of the findings become amplified. Regardless of metropolitan size, the combined percentage of visits paid by private insurance and Medicare dollars (the top of the payment scale) was higher for physicians than PAs or NPs. Across all settings, NPs saw a larger proportion of patients whose primary source of payment was Medicaid than physicians or PAs. Compared with physician visits, a greater share of NP and PA services was paid out of pocket (spanning 2006 to 2010).

Figure 2

Figure 2

In the full sample, with type of provider as the dependent variable, patients whose primary source of payment was Medicaid were proportionally 32% more likely to be treated by NPs than physicians and 16% more likely to be treated by PAs (Table 2). Patients paying out of pocket were 42% more likely to be treated by a PA and 60% more likely to be treated by an NP. Uncompensated visits were 76% more likely to be managed by a PA.

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Patients' sources of payment appear to correlate with whether they see a physician, PA, or NP. This differentiation tends to occur when compensation for a patient visit does not involve third-party insurance. In this analysis of hospital outpatient department ambulatory care visits, when private insurance is not the mode of payment, the likelihood that a PA or NP will provide services increases. The hypothesis that source of payment influences type of provider merits further investigation. Identifying when this occurs by policy or system and then analyzing outcomes in terms of cost and quality of patient care is recommended. Considering the fact that PAs and NPs often provide care comparable with physician care, such a strategy may benefit the healthcare system as well as the patient, and may be an optimal means of maximizing division of labor or coordinating care.25,26

This type of analysis is of interest because, generally speaking, payment method tends to affect physician behavior. For example, physicians who are compensated in fee-for-service settings are more likely to perform procedures than those who are in capitated systems.27,28 Various studies have shown that payment by fee-for-service, capitation, and salary influences physician activity levels and productivity, with increases in productivity and procedure compensation proportional to levels of remuneration.29,30 These observations transcend a number of countries and are not unique to the United States.28 When policies are implemented to curb health expenditures by controlling fee levels, changes in productivity tend to occur. For example, physicians increase the volume of service supply, or provide services that attract higher fees.27 Although the effect of using PAs and NPs as a strategy to offset low revenue has not been reported in the public domain, the results of this study suggest that some lower-remuneration patient visits may be diverted to NPs and PAs.

Some evidence indicates that, absent a remuneration system, patients seeking primary care are not differentiated. In the VHA system, NPs and PAs attend about 30% of all ambulatory care encounters. NPs, PAs, and physicians fill similar roles in VHA medical care, although patients of PAs and NPs are slightly less complex than those of physicians.26 PAs appear to be as productive as physicians in the occupational medicine setting, where industrial injuries account for a large portion of the caseload. These visits involving workers' compensation tend to be prepaid and are largely undifferentiated by provider type. PA and NP compensation in family medicine, however, is about half that of a physician, so using PAs and NPs for low-compensation visits has the potential to improve revenue to the organization.31,32

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Although these findings do not represent a causal relationship, the correlation between type of provider and source of payment should not be ignored. This dataset also does not address variation in the use of PAs and NPs across outpatient settings other than hospital outpatient departments. The public use version of the NHAMCS data prohibits users from controlling for the relative ratio of outpatient department physicians to NP and PA staff, a factor that could influence the likelihood of receiving treatment from a provider other than a physician.

In addition, patients may have been treated by providers with whom they had prior encounters in the outpatient department—longitudinally or as an episode. This noninclusion is a limitation of the NHAMCS dataset. Finally, if a patient had been treated in the outpatient department before a recorded visit, the data do not reflect whether the subsequent visit is with the same provider.

An ideal study would assign the average reimbursement amounts to each source of third-party payment to further investigate if amount has any predictive effect. Doing so would identify an upward trending supply curve for each source of insurance. The supply curve could summarize how much more likely physicians are to provide care as the level of reimbursement increases within each insurance type, and the slope on the curves could be compared with similar curves plotted for PAs and NPs. Because different factors influence the accessibility to physician care across the myriad of settings in the United States, this study suggests sources of payment should be considered one of them.

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In the US multipayer system, it appears that, compared with physician visits, a higher proportion of NP and PA patient encounters are associated with lower levels of reimbursement. This is observed with greater proportionality as the area's population decreases. Furthermore, it appears that physicians may be more likely to attend visits with higher remuneration, such as private insurance and Medicare. Knowing the higher proportion of lower-reimbursement visits attended by PAs and NPs sets the stage for further inquiry into payment-based research, as it may help project the effects of expansions in Medicaid coverage on access to physician care. As the proportion of all types of providers delivering uncompensated and out-of-pocket care to uninsured patients is likely to decrease, research will likely shift toward differences in access by the type of insurance.

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    payment; physician assistant; nurse practitioner; healthcare; United States; Medicare

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