Example. The available data indicate the office-expense and earnings components of the index should be given relative weights of 40 percent and 60 percent, respectively, and it is calculated that the aggregate increase in expenses of practice for a particular July through June period was 112 percent over the expenses of practice for calendar year 1971 and the increase in earnings (less increases in workers' productivity was 110 percent over the earnings for calendar year 1971. The allowable increase in any prevailing charge that could be recognized during the next fee screen year would be 110.8 percent ((.40 * 112) + (.60) * 110) = 110.8) above the prevailing charge recognized for fiscal year 1973.
Medicare Economic Index Expenditure Categories, Weights, and Price Proxies
Expense category | 1989 weights1 2 (percent) | Price proxy3 |
Total | 100.0 | |
1. Physician's Own Time (net income, general earnings) | 54.2 | |
a. Wages and Salaries | 45.3 | Average hourly earnings, total private non-farm.4 |
b. Fringe Benefits | 8.8 | Employment Cost Index, fringe benefits, private non-farm.4 |
2. Physician Practice Expense | 45.8 | |
a. Non-physician Employee Compensation | 16.3 | |
(1) Wages and Salaries | 13.8 | Employment Cost Index, wages and salaries weighted for occupational mix of non-physician employees.4 |
(2) Fringe Benefits | 2.5 | Employment Cost Index, fringe benefits, white collar.4 |
b. Office Expense | 10.3 | CPI-U, housing. |
c. Medical Materials and Supplies | 5.2 | PPI, ethical drugs; PPI, surgical appliances and supplies; and CPI-U medical equipment and supplies (equally weighted). |
d. Professional Liability Insurance | 4.8 | CMS survey of change in average liability premiums for $100,000/$300,000 liability coverage among 9 major insurers. |
e. Medical Equipment | 2.3 | PPI, medical instruments and equipment. |
f. Other Professional Expense | 6.9 | |
(1) Professional Car | 1.4 | CPI-U, private transportation. |
(2) Other | 5.5 | CPI-U, all items less food and energy. |
1 Sources: Martin L. Gonzalez, ed.: Physician Marketplace Statistics, Fall, 1990. Center for Health Policy Research, Chicago, American Medical Association, 1990; Mark Holoweiko, "Practice Expenses Take the Leap of the Decade," Medical Economics, November 12, 1990; and CMS, OACT special study.
2 Due to rounding, weights may not sum to 100.0%
3 All price proxies are for annual percent changes for the 12 months ending June 30th.
4 Annual percent change values for Physicians' Own Time and Non-physician Employee Compensation are net of the change in the 10-year moving average of output per man-hour to exclude changes in non-farm business sector labor productivity.
42 C.F.R. §405.504