Concept: Physician Price Index

Introduction

This concept describes a method of costing physician services using a physician price index. NOTE: For an overview of general costing methods (sources of data, types of costs, and approaches) and the methods of costing specific health services (hospitals, physicians, home care, personal care homes and pharmaceutical/prescription drugs) that have been used in MCHP research over time, please see the Costing Methods: An Overview of Costing Health Services in Manitoba concept.

The costs associated with medical services (physician claims) data may vary between years because the fees associated with particular services changed, because the number of services provided changed, or both. The Physician Price Index is a costing tool that can be applied to medical claims data to distinguish between changes in physician costs due to changes in fees, and changes in costs due to changes in the number of procedures. The Index allows us to determine what the costs in any year would be if all fees were adjusted to a constant (e.g.: 1993/94) level -- that is, it allows us to calculate constant dollar costs. Any difference in constant dollar costs between years is due to a change in the number of services provided.

Method

The method used to develop the Physician Price Index involved the following steps:


1. For each year, calculate the implicit price of each of the six categories of medical services listed (Office Visits, Laboratory services, major surgery, consultations, hospital visits, diagnostic radiology) by dividing the total cost for each by the number of procedures, using Tables 7 and 9 from Manitoba Health Annual Statistics .
   
   
2. The 1993/94 cost data was used to determine the percent of total cost accounted for by each category: office visits (55%), laboratory services (13%), major surgery (12%), consultations (10%), hospital visits (5%) and diagnostic radiology (5%).
   
   
3. Calculate a weighted price for each year, by multiplying the 1993/94 weight for a particular category by its price in any year and summing over the number of categories.
   
   
4. 1993/94 was set as the base year, and the index was calculated for each year by dividing the 1993/94 weighted price into the weighted price for other years.

How to use the index

1. We can use the physician price index to put all physician costs into 1993/94 (i.e. constant) dollars, by dividing current dollar physician costs by the price index for that year. (i.e. 1996 physician costs/1996 index = 1996 physician services at 1993 prices.)
   
   
2. We can adjust 1993 physician costs to prices in any other year, by multiplying 1993 physician costs by the index for the selected year.

The Physician Price Index

The following table presents the Physician Price Index for different fiscal years and the corresponding price index multiplier.

Fiscal Year	Index Multiplier
1988/89	0.9151
1989/90	0.9484
1990/91	0.9679
1991/92	0.9753
1992/93	1.0007
1993/94	1.0000
1994/95	0.9512
1995/96	0.9957
1996/97	1.0036
1997/98	1.0193
1998/99	1.0292
1999/00	1.0429
2000/01	1.0957
2001/02	1.1316
2002/03	1.1193

Notes / Cautions

• The price indices are most helpful when they are applied to broad baskets of services and interventions. If researchers are looking at a particular diagnosis or intervention, or a small group of services, then it would be better to simply look up the fee associated with particular tariff codes in other years, rather than to use the index.
  
  
• Any price index is based on an arbitrary year, in the sense that the weights for the various categories are based on the experience of that year. As you move further away from that year, the weights will probably vary more.
  
  
• For that reason, price indices are usually recalculated every decade or so to adjust the weights. Since our hospital costs are based in 1993/94, it makes sense to use this index as long as we use the same hospital costs. When the hospital cost list is updated, we should recalculate the physician price index so that both use the same base year.
  
  
• Note that this Physician Price Index is based on Manitoba data and is specific to Manitoba costs. If we are using claims data from another province to compare outcomes, then we must either calculate a Physician Price Index using their data or use a broader price index, such as the Consumer Price Index or the Implicit Price Deflator for both provinces.

MORE INFORMATION

• Annual Statistics Data from Manitoba Health (see Manitoba Health Web Site - Manitoba Health Annual Statistics for more information):
  
  
  • Manitoba Health Annual Statistics 2002-2003
    
    • Table 7: Cost for Selected Medical Services - 1993/1994 to 2002/2003
      
    • Table 9: Number of Selected Medical Services - 1993/1994 to 2002/2003
    
    
  • Manitoba Health Annual Statistics 1997-98
    
    • Table 7: Cost for Selected Medical Services - 1988/89 to 1997/98
      
    • Table 9: Number of Selected Medical Services - 1988/89 to 1997/98
    
    Note: Tables 8 and 10 are Indexes of Selected Medical Services. These are not price indices.