The Costs and Effectiveness of Nurse Practitioners

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The Costs and Effectiveness of NursePractitioners

July 1981

NTIS order #PB82-101326



CASE STUDY #16

THE IMPLICATIONS OF

COST-EFFECTIVENESSANALYSIS OF

MEDICAL TECHNOLOGY

JULY 1981

BACKGROUND PAPER #2: CASE STUDIES OFMEDICAL TECHNOLOGIES

CASE STUDY #16: THE COSTS AND EFFECTIVENESSOF NURSE PRACTITIONERS

Lauren LeRoy, C. Phil.Senior Research Associate

With the assistance of:

Sharon Solkowitz , B.S.Health P olicy Intern

Health Policy Prog ram , University of California, San Francisco

OTA Background Papers are d ocuments that contain information believed to beuseful to various parties. The information undergird formal OTA assessments or isan outcome of internal exploratory planning and evaluation. The material is usuallynot of immediate policy interest such as is contained in an OTA Report or TechnicalMemorand um , nor d oes it present options for Congress to consider.



Library of Congress Catalog Card Number 80-600161

For sale by the Sup erintenden t of Documents,U.S. Government Printing Office, Washington, D.C. 20402



Foreword

This case stud y is one of 17 studies comp rising Backgrou nd Paper #2 for OTA’sassessment, The Implications of Cost-Effectiveness Analysis of Medical Technology.That assessment analyzes the feasibility, implications, and value of using cost-effec-tiveness and cost-benefit analysis (CEA/ CBA) in health care decsionm aking. The ma-

jor, policy-oriented report of the assessment was published in August 1980. In additionto Background Paper #2, there are four other background papers being published inconjunction w ith the assessment: 1) a document which addresses methodologicalissues and reviews th e CEA/ CBA literature, p ublished in September 1980; 2) a casestudy of the efficacy and cost-effectiveness of psychotherapy, published in October1980; 3) a case study of four common diagnostic X-ray procedures, to be published insummer 1981; and 4) a review of international experience in managing medical tech-nology, publ ished in October 1980. Another re la ted repor t was publ ished inSeptember of 1979: A Review of Selected Federal Vaccine and Immunization Policies.

The case studies in Background Paper #2: Case Studies of Medical Technologiesare being published individually. They were commissioned by OTA both to provideinformation on the specific technologies and to gain lessons that could be applied tothe broad er policy aspects of the u se of CEA/ CBA. Several of the stud ies were specifi-

cally requested by the Senate Committee on Finance.Drafts of each case study were reviewed by OTA staff; by members of the ad-

visory panel to the overall assessment, chaired by Dr. John Hogness; by members of the Health Program Advisory Committee, chaired by Dr. Frederick Robbins; and bynumerous other experts in clinical medicine, health policy, Government, and econom-ics. We are grateful for their assistance. However, responsibility for the case studies re-mains with the authors.

JOHN H. GIBBONSDirector

iii



Advisory Panel on The Implications ofCost-Effectiveness Analysis of Medical Technology

John R. Hogness, Panel ChairmanPresident, Association of Academic Health Centers

Stuart H. Altman DeanFlorence Heller School Brandeis University

James L. BenningtonChairman

Department of Anatomic Pathology and Clinical Laboratories

Children Hospital of San Francisco

John D. ChaseAssociate Dean for Clinical AffairsUniversity of Washington School of Medicine

Joseph FletcherVisiting Scholar

Medical EthicsSchool of MedicineUniversity of Virginia

Clark C. HavighurstProfessor of LawSchool of Law

Duke University

Sheldon Leonard Manager Regulatory AffairsGeneral Electric Co.

Barbara J. McNeil Department of RadiologyPeter Bent Brigham Hospital

Robert H. Moser Executive Vice President American College of Physicians

Frederick MostellerChairman

Department of Biostatistics Harvard University

Robert M. Sigmond Advisor on Hospital Affairs Blue Cross and Blue Shield Associations

Jane Sisk WillemsVA ScholarVeterans Administration

iv



OTA Staff for Background Paper #2

Joyce C. Lashof, Assistant Director, OTA Health and Life Sciences Division

H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

Kerry Britten Kemp, * Editor Virginia Cwalina, Research Assistant

Shirley Ann Gayheart, SecretaryNancy L. Kenney, Secretary

Martha Finney, * Assistant Editor

Other Contributing Staff

Bryran R. Luce Lawrence Miike Michael A. Riddiough.Leonard Saxe

OTA Publishing Staff

John C. Holmes,

John Bergling Kathie S. Boss

Chester Strobe] *

Publishing Officer

Debra M. Datch er Joe H en son

q OTA contract personnel



Preface

q examples with sufficient evulable litera-t ure.

On the basis of these criteria and recommen-dations by panel members and other experts,OTA staff selected the other case studies. These16 plus the respiratory therapy case study re-quested by the Finance Committee make up the17 studies in this background paper.

All case studies were commissioned by OTAand performed under contract by experts in aca -demia. They are authored studies. OTA sub- jected each case study to an extensive reviewprocess. Initial drafts of cases were reviewed byOTA staff and by members of the advisorypanel to the project. Comments were providedto authors, along with OTA’s suggestions for-

revisions. Subsequent drafts were sent by OTAl numerous experts for review and comment.Each case was seen by at least 20, and some by40 or more, outside reviewers. These reviewerswere from relevant Government agencies, pro-fessional societies, consumer and public interestgroups, medical practice, and academic med-icine. Academicians such as economists and d e-cision analysts also reviewed the cases. In all,over 400 separa te individuals or organizations

reviewed one or more case studies. Although allthese reviewers cannot be acknowledged indi -vidu ally, OTA is very grateful for their com-

ments and advice. In addition, the authors of the case studies themselves often sent grafts toreviewers and incorporated their comments.

These case studies are authored workscommissioned by OTA. The authors are re-sponsible for the conclusions of their spe-cific case study. These cases are not state-ments of official OTA position. OTA doesnot make recommendations or endorse par-t icular technologies . During the var iousstages of the review and revision process,therefore, OTA encouraged the authors topresent balanced information and to recog-nize divergent points of view. In two cases,OTA decided that in order to more fullypresent divergent views on particular tech-nologies a commentary should be added tothe case s tudy. Thus r fol lowing the case



authors.

The case studies were selected and designed to

fulfill two functions. The first, and primary,purpose was to provide OTA with specific in-formation that could be used in formulatinggeneral conclusions regarding the feasibility andimplications of app lying CEA/ CBA in healthcare. By examining the 19 cases as a group andlooking for common problems or strengths inthe techniqu es of CEA/ CBA, OTA was able tobetter analyze the potential contribution thatthese techniques might make to the managementof medical technologies and health care costsand quality. The second function of the caseswas to provide useful information on the spe-

cific technologies covered. However, this was

c a r e .

Some of the case studies are formal CEAS orCBAS; most are not, Some are primarily con-cerned with analysis of costs; others are moreconcerned with analysis of efficacy or effec-tiveness. Some, such as the study on end-stagerenal disease , examine the role that forma]analysis of costs and benefits can play in policyformulation. Others, such as the one on breastcancer surgery, illustrate how influences otherthan costs can determine the patterns of use of atechnology. In other words, each looks at eval-uation of the costs and the benefits of medicaltechnologies from a slightly different perspec-

tive. The reader is encouraged to read this studyin the context of the overall assessment’s objec-tives in order to gain a feeling for the potentialrole that CEA/ CBA can or cannot p lay in healthcare and to better understand the difficulties andcomplexities involved in app lying CEA/ CBA tospecific medical technologies.

The 17 case studies comprising Background Paper #2 (short titles) and their authors are:

Artificial Heart: Deborah P. Lubeck and John P.Bunker

Automated Multichannel Chemistry Analyzers:Milton C. Weinstein and Laurie A. Pearlman

Bone Marrow Transplants: Stuart O. Schweitz-er and C. C. Scalzi

Breast Cancer Surgery: Karen Schachter andDuncan Neuhauser

Card iac Rad ionuc l ide Imaging : Wi l l i am B.Stason and Eric Fortess

Cervical Cancer Screening: Bryan R. Luce

Cimetidine and Peptic Ulcer Disease: Harvey V.Fineberg and Laurie A. PearlmanColon Cancer Screening: David M. EddyCT Scanning: Judith L. WagnerElective Hysterectomy: Carol Korenbrot, Ann

B. Flood, Michael Higgins, Noralou Roos,and John P. Bunker

End-Stage Renal Disease: Richard A. RettigGastrointestinal Endoscopy: Jonathan A. Show-

stack and Steven A. SchroederNeonatal Intensive Care: Peter Budetti, Peggy

M c M a n u s , N a n c y B a r r a n d , a n d L u A n n

Orthopedic Joint Prosthetic Implants: Judith D.Bentkover and Philip G. Drew

Periodontal Disease Interventions: Richard M.Scheffler and Sheldon Rovin

Selected Respiratory Therapies: Richard M.Scheffler and Morgan Delaney

These studies will be available for sale by theSuperintendent of Documents , U.S. Govern-ment Printing Office, Washington, D.C. 20402.Call OTA’s Publishing Office (224-8996) foravailability and ordering information.



Case Study #16

The Costs and Effectivenessof Nurse Practitioners


with the assistance of:

Sharon Solkowitz, B.S.Health Policy Intern

Health Policy ProgramUniversity of California, San Francisco



“ > - ”

Appendix: Background InfomationPhysician Extenders, . . . . . . . . . . . . . . . . . . 25

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Legislation Supporting Physician Extender

Training. ......, . . . . . . . . . . . . . . . . . . . 25Location Patterns . . . . . . . . . . . . . . . . . . . . . . 26Physician and Consumer Acceptance. . . . . . . . 28Legal Restr iction s . . . . . . . . . . . . . . . . . . . . . . 29Reimrsement.. . . . . . . . . . . . . . . . . . . . . . . 31Practice With Physicians v. Independ ent

. , Practice ......., . . . . . . . . . . . . . . . . . . . . 32

p references . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

LIST OF TABLESTable No. Pagel. Mean Physician and I %actitioner Time

With Pat ients . . . . . . . . . . . . . . . . . . . . . . . 112. First ComparisonofPracticesWithand

. . . Without a PA When SupervisionIs,Con sid ered . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Table No.Page3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Second Comparison of Practices With andWith out a PA When Supervision IsCon sid ered . . . . . . . . . . . . . . . . . . . . . . . . . . 13Patient Care Time and Cost of PhysicianExtend ers and ph ysicians, 1975. . . . . . . . . . 14Change in Average Expense per PatientVisit With Reduced physician Effort . . . . . . . 16Training Expenditures for physicians andPhysician Extendes, Acadmic Year 1975-79 17Federal Supp ort for physiciaa andPhysician Extender Training, Fiscal Year1970 . . . . . . ......... . . . . . 17Average Charge per Patient Visit in

Practices With andWith out a PhysicianExtender, 1977 . . . . . . . . . . . . . . . . . . . . . . . 18Physician Time In pu t and Income With andWithout Employment of a New Type of Health Man power (NTM). . . . . . . . . . . . . . . 19Impact of Physician Extenders on Prices,Patient Volume, and Expenditures. .. ... 21Current and Projected Supp ly of ActivePhysician Extend er, 1979 and 1990. . . . . . . . 21Employed Graduates of NP ProRrams bvRole and Type of NP Program................ 22

A-l. NP Programs by Specialty and Type of Program . . . . . . . . . . . . . . . . . . . . . . . . . q . . 25

A-2. Average Length and Range in Months of

NP Program s by Specialty and Type of Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 “A-3. Practice Setting Location of NPs by Type

of NP Program . . . . . . . . . . . . . . . . . . . . .. 27A-4. NP Programs by Availability of

Inner-City and / orRural Practice Settingand Type of Program . . . . . . . . . . . . . . . . . . 27

A-5. Practice Setting Location of NPs bySpecialty and Type of Np Program . . . . . . . . 28

A-6. NPs by the one Employment Setting inWhich They Spent Most of Their Time asNPs and Type of NP Program . . . . . . . . . . . . 30



Case Study #16:

The Costs and Effectivenessof Nurse Practitioners


with the assistance of:

Sharon Solkowitz, B.S.Health Policy Intern

Health Policy ProgramUniversity of California, San Francisco

INTRODUCTION

Definition of TermsThe concept of us ing nonphysician heal th

professionals to perform basic medical servicestraditionally provided by physicians emerged inthe mid-1960’s amidst widespread concern overa perceived physician shortage. Variously re-ferred to as new health practitioners, mid-levelpractitioners, or physician extenders, they wereseen as a way to increase the availability of

heal th care services , par t icular ly in pr imarycare. Although no single term adequately rep-resents the categories of professionals who com-prise this group, the term physician extender isused in this case study when general reference isbeing made to them. This term encompassesnurse practitioners (NPs), physicians’ assistants(PAs), and Medex, a group of former militarycorpsmen who apply their skills in civilian life.

The present analysis highlights data on NPs.However, the data that exist make it difficult tofocus on NPs exclusively. For that reason, dataon the various types of physician extenders areincorporated into the analysis where such dataare re levant for comparat ive purposes or incases where similarities in experience merit ab roader d i scussion . The d i s t inc t ions amongNPs, PAs, and Medex derive from differences in

legal requirements, training, and functions (seeappendix). In the wide variation of experiencedocumented for different practice settings, how-ever, these distinctions often break down. As aresult, attempts to distinguish between NPs andPAs understandably lead to broad definitions of roles such as those quoted by the GraduateMedical Educat ion Nat ional Advisory Com-mittee (32):

[A physician’s assistant is] a skilled personqualified by academic and practical on-the-jobtraining to provide patient services under thesupervision and direction of a licensed physi-cian, who is responsible for the performance of that assistant.

Today’s nu rse, operating in an expanding roleas a professional nu rse pr actitioner, provides di-rect patient care to individuals, families, andother groups in a variety of settings . . . . Thenur se practitioner engages in indep endent d eci-sionmaking about the nu rsing needs of clients,

and collaborates with other health professionals,such as the physician, social worker, and n u-tritionist in making d ecisions about other healthcare needs. The nurse working in an expan dedrole practices in primary, acute, and chronichealth care settings. As a mem ber of the health

3



4 q Backround Paper #.?: Case Studies of Medical Technologies

care team, the nurse practitioner plans and in-stitutes health care program s.

The actual roles of PAs and NPs depend ontheir work settings. In some cases, the functionsthe two perform are vir tual ly ident ical ; inothers, they are very different. PAs are intendedto operate essentially as physician substitutesfor routine primary care. NPs, while trained toassume medical tasks, come from a traditionbased on fundamental nursing concepts stress-ing aspects of patient care not usually providedby physicians.

The scope of this analysis is limited by in-adequacies in the available data. Although thereis a rather extensive body of literature on physi-cian extender practice in a variety of differentpract ice set t ings—private physician pract ice ,prepaid group practice (PPGP), hospitals, and

other organized settings that operate on either afixed budget or fee-for-service basis) —somegeneral problems, as noted by Schweitzer (87),app ear consistently in the available stud ies: nar-rowness of site coverage, incomprehensivenessof variables considered, and weakness of the re-search design. Studies often focus on a singlesite or small nonranciom groups of sites. A num-ber of studies were conducted shortly after thephysician extender entered practice and there-fore leave issues regarding maturity unresolved.Many studies do not adequately identify po-tential biases influencing the research findingsor later interpretation of those findings: In someof them, the impact on the research results of factors unique to the type of practice settingbeing examined is not specified; in others, the

COST= EFFECTIVENESS ANALYSIS

Limitations of a CEA ofPhysician Extenders

Encouragement of NPs and PAs as an innova-tion in the delivery of primary care services isbased on their potential to improve access andto lower costs without compromisin g q u a l i t y.This promise derives from several basic assump-tions (18):

q physician extenders can perform basic and

researchers conducting the study may be ad-vocates for the physician extender concept .Finally, from the perspective of cost-effec-tiveness analysis (CEA), perhaps the most seri-ous problem is a dearth of information specifi-cally defining what medical care tasks physi-cian extenders are qualified to perform. Withoutthis information, comparative analysis betweenphysician extenders and physicians is limited.

supplyBefore 1970, there were fewer than 2, OO O for-

mally trained physician extenders. Currently,there are roughly 22, OO O physician extenders inactive practice: 13,000 NPs and 9,000 PAs (18).The Congressional Budget Office (CBO) esti-mates that 2,000 NPs and 1,500 PAs and Medex

graduate annually. Assuming continuation of Federal funding at the present level, CBO es-timates the supply of physician extenders by1990 will exceed 56,000 (18). While budget-ary constraints might preclude a decision tofurther increase training opportunities, the de-mand for training positions, as reflected cur-rently by a high ratio of applicants to availablepositions, would not be an obstacle (25,101).Assuming continuation of current trends, how-ever, physician extenders will continue to rep-resen t a ve ry smal l g roup o f hea l th p ro fes -sionals. For purposes of comparison, it shouldbe noted that the number of physicians is ex-pected to r ise f rom the present 400,000 to594,000 by 1990 (18). This increase aloneeral times more than the total number of cian extenders.

is sev-physi-

routine medical care tasks traditionally per-formed by physicians;

q physicians working in concert with physi-cian extenders will thus be free to focus on

more serious and more complex medicalcare problems;

q training costs for physician extenders arecheaper than training costs for physicians;

q lower costs associated with physician ex-



Case Study #16 The Costs and Effectiveness of Nurse Practitioners 5

tender services will result in lower pricesfor the services provided; and

. improved access resul t in g f rom the add i -tion of physician extenders to the healthcare team will increase the frequency of early detection of disease and thus reduce

medical care expenditures.A number of issues concerning appropriate

training, task delegation, performance quality,physician and consumer acceptance, costs, pro-ductivity, and barriers to practice have con-strained the realization of physician extenders’potential. The importance of these concerns isillustrated by their dominance in published re-search. Only recently, with several exceptions,has cost effectiveness provided the framework for analysis of physic ian extender pract ice(69,71). The most recent contributions to CEAof physician extenders are a synthesis of relatedresearch and its application to cost-effectivenessquestions published by CBO (18), and an ex-haustive review of literature on task delegation,productivity, and cost by Jane Cassels Record(70).

The focus on literature review and synthesisin these studies reflects, in part, the data andmethodological problems associated with con-ducting a pure CEA in this area. Data from ex-isting studies are insufficient to meet the re-q u i r e m e n t s o f a t h o r o u g h C E A . M o r e o v e r,while the findings of these more narrow studies

may contribute to CEAS, the evidence they haveprovided to date is considered “limited but sug-gestive” and allowing for only “tentative” con-clusions (18). CEA seeks to determine which ap-proach accomplishes a given objective at mini-mum cost. Such a comparison between physi-cians and physician extenders is difficult, be-cause the approaches being compared, whileoverlapping, cannot be subst i tu ted for eachother in all instances. Moreover, there does notexist the same standardization with physicianextenders as with more traditional technologicalinnovations. Physician extenders differ in back-

ground, temperament, training, attitude, abilityto make independent judgments, and desire forindependence . They canno t be cons ide red aneutral “technology” to be utilized and acted on,

because they themselves exert an influence onthe i r p rac t i ce . Moreover, i t i s no t knownwhether differences in productivity, quality, in-dependence, cost, and provider acceptance existamong NPs in different types of specialty prac-tice. These factors raise both data and method-

ological quest ions which have yet to be an-swered in published research.

Physician extenders have been found to bec a p a b l e o f p r o v i d i n g h i g h p e r c e n t a g e s o f primary care services traditionally provided byphysicians—but it is unclear which services areincluded in these percentages; which services areleft out; whether those left out have more im-pact on the delivery of care, physician attitudes,productivity, and costs than those provided;and so on. One way to focus an analysis wouldbe to select for comparison a set of tasks thathave been noted in the l i terature to be per-formed by both physicians and physician ex-tenders (e.g., well-baby care, history and phys-ical, hypertension monitoring). Even then, how-ever, the results of the analysis would be 1im-ited, because they would not provide a way todetermine what medical care tasks physician ex-tenders do not perform and the value of thoseservices . I t would be di ff icul t to determinewhether a “patient visit” (the usual standard of measurement) were the same in both instancesin terms of content and outcome. The resultswould not provide adequate information for de-veloping staffing configurations that are costeffective in terms of services for which physicianextenders can substitute for physicians, servicesfor which physicians are the only providers, andservices provided by physician extenders thatphysicians traditionally have not provided.

The objectives of a CEA of physician ex-tenders will depend on the perspective of thosefor whom the study is undertaken (e.g., a physi-cian in fee-for-service private practice, a healthmaintenance organization (HMO) with a fixedbudget, or Federal policy makers concerned withreimbursement under Federal health insurance

programs). Consideration of the type of practicesetting, with its different budget and staffingconstraints, will alter the study design. The con-text within which the analysis is conducted is



6 . Backround Paper #2: Case Studies of Medical Technologies

crucial. Different factors are taken as given; dif-ferent assumptions underlie the analysis.

Moreover, structural characteristics of thehealth care system have a profound impact onthe way an innovation is used. This is clearly

evident in the case of physician extenders andraises questions as to whether a CEA should re-strict its focus to current conditions or whetherits assessment should consider changes in rela-tion to a variety of policy alternatives to modifythe existing structure. This is a key question inthe case of physician extenders. Unlike the in-troduction of most new technologies, the in-troduction of physician extenders into healthservices delivery was not accompanied by re-imbursement. Unlike many new technologieswhich enhance the position of the physician, thephysician extender is potent ia l compet i t ion.

Physicians l e g a l l y m a i n t a i n a s u b s t a n t i a lamount of control over physician extender prac-tice; however, the structure of reimbursementreinforces that control by making it virtuallyimpossible for a physician extender to practiceindependently, Any analysis that is based onwhat physician extenders can do by virtue of their training, rather than what they actually d oby virtue of the structural characteristics of thehealth care system, therefore has serious meth-odological limitations.

Yet developing a broad study based on actualexperience to make up for those limitations ismuch more difficult. The data base specifyingwhat physician extenders do and costs asso-ciated with their practice is incomplete. Mostexisting studies confine themselves to very smallsamples. The emphasis has been on ambulatorycare, leaving a dearth of information on theroles of physician extenders in hospital settings,including their potential substitution for housestaff. Expanding the sample size and composi-tion would entail the identification and surveyof physician extenders in a variety of practicesettings, itself a lengthy and expensive task.Moreover, it is difficult to disentangle physicianextender performance and cost characteristicsfrom the characteristics of the practice setting.In a CEA, which should be the focus? Is it possi-ble to control for those factors associated with

the practice setting that determine utilization of health personnel?

Given the data that are available, it is notpossible to conduct a CEA of sufficient precisionto calculate cost-effectiveness ratios. To reiter-

ate key constraints on such an analysis, it is notknown exactly what medical tasks physician ex-tenders perform, nor what tasks they cannotperform, nor the importance of either to thoseemploying physician extenders (i. e., do em-ployers seek to cover the average case or thevariance: routine versus emergency care?). It isunclear what occurs during the “patient visits”reported throughout the li terature. Are therequalitative differences in the services providedby a physician extender and those provided by aphysician? The relationship between practicesetting characteristics and physician extender

cos t and pe r fo rmance fac to r s i s no t fu l lyunderstood or described in available research.Cost information, when available, is not suffi-ciently broken down to compare the full costs of a given service provided by a physician extenderto the service provided by a physician. Costs of physician extenders are generally presented asan add-on to an existing physician practice.While calculations often account for overhead,they also reflect a fully operational practice,thus minimizing startup costs and assuming dif-ferent degrees of pract ice independence forphysicians and physician extenders. Moreover,

charges cannot be used to determine costs, be-cause existing evidence indicates little relationbetween the two.

Because the methodological problems andlack of data preclude a full CEA of physician ex-tenders at this time, no effort is made in theanalysis presented in this case study to developcost-effectiveness ratios. The purpose of theanalysis is to elaborate on the factors essentialto determining cost effectiveness and to testingassumptions regarding the cost-effectiveness po-tential of NPs against existing data and researchfindings. Even without data of sufficient preci-sion, quality, and quantity for a full CEA, onecan see trends and draw conclusions. From apolicy perspective, there emerge in this caseclear indications of areas in which alternative



Case Study #16: The Costs and Effectiveness of Nurse Practitioners q 7

poIicies would have significant impact. Giventhe expense in time and dollars of going beyondsynthesis and analysis of available informationwithin a cost-effectiveness framework, i t isquestionable how much more could be gainedthat would significantly alter the findings andconclusions s u g g e s t e d b y e x i s t i n g s t u d i e sthrough fulfilling the requirements of a moreelaborate cost-effectiveness methodology.

Studies focusing on the removal of seriousdeficiencies in the data base most likely wouldbe more useful in clarifying still outstandingissues. Assessment of the cost effectiveness of NPs must at a minimum consider the specificservices NPs are qualified to provide, perform-ance quality, productivity, task delegation ex-perience, changes in physician practice behavioraf ter the int roduct ion of NPs, employment

costs, impact on average expenses per patientvisit, training costs, price effects, and revenuegeneration ability. The discussion that followsexamines each of these factors. The difficulty inreaching definitive conclusions in this area re-sults in part from the sensitivity of the analysisto modest changes in many of the variables andfrom the need to consider the combinations inwhich these variables are found as additionalfactors influencing the outcome.

On the basis of available data, it appears thatNPs do alter the production of medical servicesin a manner that can improve access to suchservices and reduce production costs. That theintroduction of NPs will result in a reduction inthe price of medical care services or in overallmedical expenditures appears less likely. With-out a reduction in price that reflects lower costs,the financial benefits derived from the cost-effective attributes of NPs accrue primarily tothe physician or to the employing institution.This situation with NPs is similar to the expe-rience with many new medical technologies thatare cost saving. Benefits to consumers comewhen the introduction of NPs results in im-proved access.

Services Provided by PhysicianExtenders

In order to determine the cost effectiveness of

physician extenders, i t i s necessary to knowwhat services they are qualified to provide andwhether those services are substitutive or com-plementary to those provided by physicians.This key question is one on which available dataare clearly inadequate. Most studies refer toservices provided by or delegated to physicianextenders in terms of office visits rather thandefinitive tasks. They describe services physi-cian extenders are producing rather than thosethey are qualified to produce (70). Instead of categorizing services by specific tasks, studiesare more likely to categorize services generallyinto those physician services that physician ex-tenders either can or cannot safely provide.

There are some studies that have attempted todefine areas of medical practice or diagnosesmanaged by physician extenders. Although the

study samples are often very small, the findingsof these studies, accompanied by more generalconclusions drawn from the bulk of availableresearch, suggest several patterns:

q

q

q

physicians and physician extenders haveboth a complementary and substitutive re-lationship. NPs provide additive servicesand PAs serve as an extension of the physi-cian (70);physician extenders are capable of safelyprov id ing a h igh pe rcen tage o f p r imarymedical care services (70); andstudies that document current performancereveal that the practice setting is the major determinant of services provided by physi-cian extend ers (29,50).

In general, PAs work more closely with physi-cians than do NPs and also provide care whichis more oriented toward acute or emergency sit-uations. NPs often assume a large degree of in-dependence and responsibility and tend to be in-volved in a broader spectrum of patient care, in-cluding counseling, education, and general con-sultation on a continuing basis.

Among the studies that begin to define serv-ices performed by NPs is that of Coulehan andSheedy (20) . The medical pract ice of an NPtrained in diagnosis and treatment of generalmedical condi t ions included the fol lowing:wellness care; stable chronic disease (hyperten-



8 . Background Paper #2: Case Studies of Medical Technologies

sion, diabetes, obesity, arteriosclerotic heartdisease, ar th ritis, ch r on ic d e pr ess io n, p sy-chophysiologic reactions); and acute self-limitedconditions (colds, sore throats, acute viral syn-drome, minor trauma, rashes, skin infection).Of the 15 most common diagnoses for theCoulehan and Sheedy study sample, the NPhandled so percent or more of the followingconditions: upper respiratory infections, otitismedia, otitis externa, soft tissue trauma, andgonorrhea. The NP managed one-third to one-half of patients presenting the following: muscleor back strain, dermatitis or eczema, hyperten-sion, diabetes, obesity, and urinary tract infec-tion. Again, it must be noted that these servicesreflect services the NP provided within the con-straints of the practice setting, not necessarilythe range of services the NP was qualified toprovide. Moreover, it should be noted that theCoulehan and Sheedy study was conducted in1973, and therefore reflects early experiencewith NPs, Subsequent studies reveal even higherpercentages of patients presenting the same con-ditions being treated by NPs.

In terms of specific tasks, the limited data thatare available indicate that physician extenderscan perform medical functions basic to primarycare such as taking medical his tor ies , per-forming routine physical examinations, carry-ing out simple diagnostic procedures, orderingroutine lab tests and interpreting their results.

Physician extenders commonly administer injec-tions, apply dressings, casts and splints, and canperform life-preserving measures in emergencysituations. Some are qualified to perform minorsurgical procedures such as removing a foreignobject from the eye 01 routine suturing (10).

Physician extenders generally are restrictedfrom prescribing drugs except under certainconditions (e. g., having prescriptions counter-signed by a supervising physician or prescribingwithin a l imited “scope of practice”). EightStates prohibit physician extenders from writingdrug prescriptions. The issue of whether or notphysician extenders are qualified to prescribedrugs is one that a number of States are current-ly reviewing. Some States are experimentingwith the extension of prescr ibing pr ivi leges(e.g., California ha s a project which allows pr e-

scribing by NPs, PAs, and pharmacists in fivegeographic areas of the State). The constraintson drug prescription represent the most sen-sitive unresolved issue in terms of tasks allowedto be performed by physician extenders, bothbecause of the integral role of prescribing in

medical care and because of the implications of such constraints for professional independence(18).

Performance QualityThe quality of services provided by NPs is

crucial to their acceptance by both physiciansand patients. Indeed, this issue has been studiedmore than any other. Like most research in thisarea, the studies on quality generally use smallsamples, assess quality from a variety of dif-ferent perspectives and focus more on short-

term results than on long-term outcomes of pa-tient care. These evaluations of physician ex-tender services repeatedly confirm their highquality (10,14,24,41,42,44,51,52,79). The qual-ity of medical care services provided by physi-cian extenders is at least comparable to the qual-ity of services provided by physicians them-selves. Furthermore, in some cases, physicianextenders have shown performance superior tophysicians in symptom relief, diagnostic accu-racy, and patient satisfaction (33,70). Sum-marizing the findings of the numerous studies of physician extender performance in a variety of

practice settings, CBO concludes: “Physicianextenders have performed as well as physicians,with respect to patient outcomes, proper diag-noses, management of ‘indicator ’ l medical con-ditions, frequency of patient hospitalization,manner of drug prescription, documentation of medical findings and patient satisfaction” (18).

In its study of the Federal physician extenderreimbursement experiment (102), System Sci-ences, Inc., used nationally recognized diseasetreatment protocols to evaluate the quality of care provided to p atients by physician/ physi-cian extender teams and by physicians only.The resul ts favored p hysician/ ph ysician ex-



Case Study #16. The Costs and Effectiveness of Nurse Practitioners q 9

tender teams and revealedfor physician/ NP teamsgroup.

Productivity

higher quality ratingsthan for any other

It is difficult to measure productivity in stricteconomic terms when applied to health man-power. The inputs and outputs of the medicalcare production process are difficult to defineand measure. Some people define the output of the medical care industry as an intermediategood to be combined with other inputs in theproduction of good health. However, most fo-cus on this intermediate product and try to de-velop proxy measures for what actually occurswhen patient and health professional come to-gether.

The output most commonly associated with

health professional services is defined in termsof patient visits. Productivity of physicians andphysician extenders usually is measured by then u m b e r o f p a t i e n t v i s i t s p e r u n i t o f t i m e .Holmes, et al. (39) noted the inability of thismeasure to reflect either the complexity or thevolume of services provided during a patientvisit. These investigators also noted the difficul-ty of determining the re la t ive contr ibut ionsmade to patient care when more than one pro-fessional is involved. To overcome these inade-quacies, they suggested the use of a relativevalue scale to assign values to the specific ac-

t iv i t ies performed by physic ians , NPs, andnurses. This and other attempts are being madet o d e v e l o p m o r e r e f i n e d m e a s u r e s o f p r o -ductivity, but the use of patient visits is mostprevalent in the literature.

Although there is little doubt that the efficientuse of NPs can improve the productivity of thedelivery of medical services, it is essential to dis-tinguish between potential impact and actual ex-perience. As Reinhardt (74) points out, deter-minat ion of physic ian product ivi ty must ac-count for both technical feasibility in the pro-duction process and the probable economic be-havior of the physician. One needs to know notonly what is technically feasible but also whatconfiguration of inputs physicians are likely tochoose and to what extent physicians will at-

tempt to maximize the output that is technicallyattainable with that combination of inputs (75).The physician, perhaps in collaboration withthe administrator in an organized setting, deter-mines how the physician extender will be usedas an input in the production of medical serv-

ices. While the debate continues regarding theindependence of NPs, reality shows them to befunctionally dependent on the physician. Berki(37) defines this relationship as one of “con-s t ra ined subst i tu tabi l i ty” wi th the physic iandetermining most of the constraints.

The extent to which tasks are delegated fromphysician to NP, the amount of time it takes aphysician or NP to perform the same task, andthe impact of the introduction of NPs on physi-cian behavior are key productivity-related vari-ables in the cost-effectiveness calculation. In areview of 15 studies that used physician officevisits as a measure of delegability, Record (70)concluded that between 75 and 80 percent of adult primary care services and up to 90 percentof pediatric primary care services could be del-egated to physician extenders. The purpose of the Record study was to estimate different com-binations of physicians and physician extendersthat could produce given levels of primary careservices. Cost estimates associated with the var-ious configurations revealed potential cost sav-ings of $0.5 billion to over $1 billion in caseswith higher physician extender participation.This amounted to 19 to 49 percent of total pri-mary care provider costs.

Steinwachs, et al. (94) reported on the ex-per ience of the Columbia Medical Plan, anHMO, in expanding the use of physician ex-tenders over a 3-year period. As the involve-ment of physician extenders increased, dramaticchanges occurred in the distribution of patientencounters between physician extenders andphysicians. In 1971-72, 79 percent of patient en-counters in adult medicine were managed ini-tially by physicians. By 1973 -74, that figure haddropped to 38 percent. In 1971-72, physician ex-tenders managed 10 percent of initial encountersfor illness and injury and conducted no healthreviews. By 1973-74, physician extenders man-aged 50 percent of illness and 75 percent of in-



10 q Backround Paper #2: Case Studies of Medical Technologies

jury initial encounters and conducted 50 percentof adult health reviews. The delegation of re-sponsibility for initial encounters in pediatricswas even higher, with all but 16 percent of pedi-atric health reviews being conducted by physi-cian extenders.

The changes in distribution of patient en-counters among physician extenders and physi-cians resulted in a major change in staffing pat-terns as the Columbia Medical Plan evolved(94). During the study period, enrollment nearlydoubled. In response to this growth, the numberof full-time equivalent (FTE) internists increasedless than 10 percent, while the number of physi-cian extender FTEs increased 260 percent. Theresult was a change in staffing patterns from theearly study period when physicians represented60 percent of the total nu mber of FTE prov iders

to the final months of the study when their rep-resentation decreased to 38 percent of total FTEproviders. Pediatrics experienced a similar butless pronounced staffing change, with physicianFTEs increasing by one-third and physician ex-tender FTEs nearly doubling.

I n t h e N o r t h e r n C alifo rn ia Ka is er -P er -manente Medical Care Program, also an HMO,NPs conducted a Heal th Evaluat ion Service(H E S) cons i st ing o f a u tom ated mu l t iphas ichealth testing followed by a physical examina-tion and health appraisal (22). Of the patientswho entered the Kaiser system through HES, 74percent were managed without physician refer-ral. Of those referred to a physician, two-thirdswent to a specialty clinic, thus having the NPs’HES visit substitute for an initial primary carephysician visit. Moreover, pelvic exams con-ducted through HES replaced 5,207 visits to thegynecology clinic during the study period.

Similar experience is reported for two NPsworking in the offices of two family physiciansin the Burlington Randomized Trial (79,93). Pa-tients were divided randomly into two groups:one receiving first-contact, primary care serv-ices from a family physician working with anurse (“conventional” care); and the other re-ceiving such care services from NPs. The studyfound that NPs were able to provide primarycare services as safely and effectively as physi-

cians. In 67 percent of patient visits, care wasprovided with no physician consultation.

More specifically, in settings with both NPsand physicians, NPs assume primary responsi-bility for the diagnosis and treatment of acuteself - l imited condi t ions and acute condi t ionswith limited uncertainty in the diagnosis and re-sponsiveness to a defined therapy. Adult healthrev iews a re sha red by phys ic ians and NPs ,while the majority of well-baby care can be pro-vided by pediatric NPs, Physicians retain pri-mary responsibilit y for diagnosis and treatmentof more complex and serious acute conditionsand for chronic conditions (89,94,109).

It is obvious from the aforementioned andother studies (19,85, 105) that NPs can assume ahigh proportion of primary medical care tasks.Existing studies also reveal substantial variation

among pract ices, making more d i ff icu lt thetranslation of specific expectations for task delegation to widespread experience. Record(70) outlines a number of factors accounting forthat variation, including type of practice set-ting, structure and age of practice, provider rolestrain, legal and reimbursement constraints, andlevel of demand.

The time spent by NPs in managing a patientvisit is significantly higher than that spent byphysicians . Tab le 1 shows the exper ience o f physician extenders in the Southern CaliforniaKaiser-Permanente Health Facility.

For given presenting complaints, physicianextenders averaged 4 to 9 minutes longer thanphysicians. Recent research has shown that NPsspend up to 65 percent more time per patientvisit and see 60 percent as many patients perhour as do physicians (18,103). NPs see fewerpatients per day because of their longer time pervisit , a shorter workday, and more time de-voted to patient telephone consultation and ad-ministrative activities. The number of patientvisits reported for NPs ranges from 5 to 14 p erday (101). Consideration of the number and

duration of patient visits to NPs must accountfor the possibility that the content of the NP pa-tient visit differs from that of a physician visit.If NPs do, in fact, provide more patient edu-cat ion and counsel ing than physicians , they




298307, 1978

may be improving access and the patient’s ex-perience during the encounter. Since such serv-ices generally are not reimbursable, and reim-bursement is used as a measure of value, it is dif-ficult to determine the value of these services.

An NP who substitutes for a physician in pro-viding specified medical services allows the phy-sician to increase productivity. As Reinhardtpoints out, this is true even if the NP spendsmore time providing the same service (75s):

Because of the need for supervision of physi-cian extenders, the delegation of a task nor mallyrequiring 10 minutes of physician time to a phy-sician extend er may a ctually free only 8 minutesof physician time (and may require 20 minutesof the physician extender’s time). Even so, as

long as som e ph ysician tim e is freed a t all, task delegation will enable the physician to treatmore cases per unit of time and hence in-crease . . . hourly prod uctivity.

Physicians working with NPs noted an addi-tional increase in their efficiency due to the needto be more rigorous and clear in communicatingtheir thoughts to the NPs (93).

Estimates of increases in the productivity of physician practices that include NPs range from20 to 90 percent (31,36,38,39,43,70,82,104). Insome cases, these estimates reflect actual ex-

periences; in others, they are the resuIt of com-puter simulation models that determine produc-tivity increases based on optimal staffing config-urat ions for performing medical care tasks .Given tha t the computer s imula t ion models

measure potential rather than actual experience,these general ly yie ld higher es t imates . Thegreatest productivity increases come when theNP has primary responsibility for a subset of patients and when triage is performed by theNPs’ referring complicated cases “up” to thephysician rather than by the physician’s dele-gating routine medical problems “down” to theNP (90).

The amount of physician time freed by NPs isreflected in p hysician/ NP substitution rates. Ina mathematical model for HMO staffing pat-terns, Schneider and Foley (82) estimated thatthe subst i tu t ion of one physician extenderwould decrease physician requirements by 53 to60 percent depending on departments. After the

expanded use of physician extenders in the Col-umbia Medical Plan, the workload (number of encounters per FTE) remained constant for thephysician extenders but declined for physicians,in part because physicians were freed from rou-tine medical procedures to concentrate on pa-tients with more time-consuming complex prob-lems (94). Although physicians still must beavailable for consultation with the NP, Green-field, et al. (33) found that the physician time re-quired for consultation was 92 percent less thanthe time that physicians would spend treatingthe same clinical problem.

In addition to the numerous studies that de-f ine product ivi ty in terms of pat ient vis i ts ,Holm es, et al. (39) used a relative value scale todetermine productivity differences between tra-



12 q Backround Paper #2: Case Studies of Medical Technolologies

ditional physician/ nur se practices and physi-cian/ NP practices. They found product ivi tylevels in practices incorporating NPs to be anaverage of 25.8 percent high er (39).

Produ ctivity increases that result from th e useof NPs vary widely, depending on the practicesetting, the responsibilities delegated to the NP,the severity and stability of illness in the pa-tients served by the practice, and how the physi-cian chooses to use the free time resulting fromtask delegation. As will be discussed below, thepotential for productivity increases is not nec-essarily realized. Moreover, Hershey and Kropp(36) point out the negative impact that max-imum task delegation and resulting prod uctivityincreases can have on the practice environment.Considering such factors as office hours, wait-ing room congestion, and supervision time, theyconc lude tha t an opera t ing env i ronment r e -sembling that of a conventional physician prac-tice cannot be achieved with more than a 50-per-cent increase in procductivity. If physician hoursremain constant, supervision time has a markedimpact on how much of an increase in pro-ductivity a practice environment can absorb.Tables 2 and 3 compare practice environmentswith and without PAs under varying supervi-sion times.

Employment CostsTo determine the cost effectiveness of NPs,

both the amount of time they spend to performa given service and the cost per unit of time forNPs must be compared with the figures for phy-sicians. However, a v a i l a b l e c o s t d a t a a r elimited, and what data exist often come fromstudies of smal l samples that are not com-parable. An additional difficulty in comparingcosts arises because most physicians are self-employed and compensated for their services ona fee-for-service basis, while virtually all NPsare salaried.

The basic costs of employing an NP includesalary, f r inge benef i ts , and physician super-vision. The average salary of NPs was estimatedin 1978 to be about $13,800 (105). Using 1 9 7 5data , CBO (18) determined that the medianhourly wage for physician extenders was about$6 as compared with $24 for physicians. Record(70) found salary (or income) differentials bet-ween physicians and physician extenders to beclose to $36,000 per p rovider p er year. Severalstudies stress the importance of such differen-tials in the physician’s decision to employ an NP(33,82). In their systems analysis of the use of physician extenders, Schneider and Foley (82)

Table 2.—First Comparison of Practices With and Without

a PA When Supervision Is ConsideredAssumptions

With PA/4 minutes supervisionWithout PA 242 patients 264 patients 286 patients 308 patients220 patients per week per week per week per week

Measures per week (10%-gain) (20%-gain) (30%-gain) (40%-gain) —Average physician-patient contact time per

day, Including supervision (hours) 5.93 4 34’ 5.24b 5.55 6.15Average time last patient leaves office

(minutes past 4 p m ) . 30 25 b 27 37b 66a

Average total wait per patient (minutes) 17 16 18 23b 39a

Average percent of patients who wait fora d m i s s i o n t o e x a m i n a t i o n r o o m 39 52b 54b 62 b 81 a

Maximum number of patients in waiting roomo n a v e r a g e d a y 3 3 5 10a

Average annual net Income before taxes $34,735 $31,970 $35,102 $38,250 $41 ,615 b




Table 3.—Second Comparison of Practices With and Withouta PA When Supevision is Considered

AssumptionsWith PA

4 minutes 2 minutes 1 minutesupervision supervision supervision No supervision

Without PA 264 patients 286 patients 308 patients 330 patients220 patients per week per week per week per week

Measures per week (20%-gain) (30%-gain) (40%-gain) (50%-gain)Average physician-patient contact time per

d a y, i n c l u d i n g s u p e r v i s i o n ( h o u r s ) 5.93 5.24’ 4.75b 4.84b 4.75bAverage time last patient leaves office

(minutes past 4 p.m.) . . . . . . . . . . . . . . . . . . . . 30 27 27 26a 31Average total wait per patient (minutes) . . . . . . 17 18 17 20 18Average percent of patients who wait for

a d m i s s i o n t o e x a m i n a t i o n r o o m . . 39 53a 53a 72zb 7 l b

Maximum number of patients in waiting roomon average day . . . . . . . . . . . . . . . . . . . 5

$34 37356a 7b

Average annual net income before taxes. . . . . . $35:102 $37,567 $42,291’ $46,855 b

SOURCE J C Hershey and D H Kropp, ‘A Re-Appratsal of the Productlvlty Potential and Economic Benefits of Physiclan’s Assistant s,” Med. Care 17602, 1979

found physician extenders’ use to be unaffectedwhen their salaries remained below 47 percentof physician salaries. Once the physician ex-tender’s salary reached 62 percent of the phy-sician’s salary, however, physician extendersrapidly lost their cost effectiveness in the model.

The amount of time reported for physiciansupervision and consultation varies consider-ably among practices. Supervision time varieswith the type of practitioner involved. Legal re-

quirements also determine the time devoted tosupervision. Forty-three States require directsupervision of PAs and Medex; only 11 Stateshave similar requirements for NPs (18). Withina given practice, variation in consulting time is afunct ion of the reason for the consul ta t ion,whether the physician sees the patient or onlyconfers with the NP, and the practice experienceof the NP. The actual t ime per consultationranges from less than a minute to approximately8 minu tes. Consultation on initial visits requiresabout half as much time as consultation on con-tinuing visits (105). Record, et al. (72) foundthat in the 12 percent of cases where the PAsunder study requested physician consultation,the physicians were likely to spend as much timewith the patient as if they had been the initialprovider. In such cases, the extra cost to the

practice is represented by the cost of the PA andnot that of the physician. Because of the cost im-plications, direct referral to the physician wouldbe optimal but usually is not possible in suchcases.

In its review of available studies, CBO de-termined that supervision and consultation withphysician extenders require between 10 and 20percent of physician time (18). With CBO esti-mates of hourly earnings, this adds between $3

and $5 to the physician extender’s hourly salarycost. CBO further determined that direct com-pensation accounted for 54 to 72 percent of thetotal cost of a physician extender, while super-vision costs made up the remainder (18). Table 4compares the time and costs of physicians andphysician extenders, according to patient visits.If both salary and supervisory costs are con-sidered, the hourly costs of NPs range from one-third to one-half of physician costs ($9 to $12/ hour as comp ared to $24/ hour).

It should be recognized that th e salary level of NPs is in part a function of the demand for theirservices. As Berki (7) points out, with somecaveats , demand for physician pr imary careservices can be considered a direct demand ex-pressed by the patient. The demand for NPs is



14 q Background Paper #2: Case Studies of Medical Technologies

Table 4.—Patient Care Time and Cost of Physician Extendersand Physicians, 1975 a

Physician extenderPA -

NP and Medex PhysicianMinutes per patient visit. . . . . . . . . . . . 19.4 13.2 1 1 . 7Cost per hour . . . . . . . . . . . . . . . . . . . . $9.43-$12.22 $8.36-$10.73 $23.90Direct compensation. . . . . . . . . . . . . . $6.63b $5.98b $23.90’Supervision. . . . . . . . . . . . . . . . . . . . . . $2.80-$ 5.60 d $2.38-$4.75d N.A.Cost per patient visit . . . . . . . . . . . . . . $3.04-$3.94 $1.84-$2.36 $4.66

one that the physician must “initiate,” “ex-press, ” and “legitimate,” making this dem and aderived one (7). Goldfarb (30) notes that the

market for physician extenders is not suffi-ciently competitive to raise the relatively lowwages of ph ysician extenders to the w age levelthat w ould prevail if more p hysicians expresseddemand for their services. She finds that the fac-tors that depress wages are stronger than thosethat raise them, resulting in a prevailing wagelevel that bears little relationship to pro-ductivity and, on average, leaves them under-paid. Obviously, an increase in dem and for NPsresulting from such systemwide changes as en-actment of national health insuran ce or expan-sion of HMOS, or a decrease in demand re-

sulting from changes in physician distributionthrough the National Health Service Corps orthe potential oversupply of physicians would re-quire a reassessment of salary costs.

The costs associated with NP practice go be-yond direct compensation and supervision. Theneed for additional staff support, space, and

equipment may accompany the decision to hirean NP. Moreover, the style of NP practice hascost implications. A number of studies havefound that p hysician extenders perform morediagnostic tests than physicians and have dif-ferent p attern s of med ication u se (18,26,43,71).One recent stud y (60) found that N Ps performed53 percent m ore d iagnostic tests per p atient thanthe physicians for wh om they w orked and 46percent more than the physicians who d id notwork with any physician extenders at all. Insome cases, these increased lab tests result inidentification of additional pathology (43). Al-

though the benefit to the patient in such in-stances may counter the additional cost, patientdiscomfort and time plu s the cost of false posi-tives or negatives mu st be considered. Available




evidence also suggests that the use of protocolscan diminish the tendency toward excess use of diagnostic tests (33,34).

In addition to spending more time per patient,NPs may log more visits per patient in a giventime period. Since the salary and supervisioncosts of NPs are significantly lower than thesalaries of physicians, the increased return visitsare not necessarily a financial problem from thepractice’s perspective, although they do con-sume the patient’s time. However, as Spector, etal. (92) discovered, a disproportionate increasein visits can raise the overall cost per patientbeyond the point where the use of NPs is cost ef-fective for the practice. Others stress that interms of overall medical expenditures such prac-tice patterns may be cost effective if they reducehospitalizations (78).

When all of these cost factors have been con-sidered, NPs have been found to perform com-parable medical care tasks at a lower total costthan physicians. Lewis and Resnik (51) foundthis to be true for inpatient and ambulatoryservices for all patients. In the Kaiser-Per-manente Medical Care Program, which insti-tuted a Health Evaluation Service (HES) op-erated by NPs, entry costs (health appraisal,followup, and referral) for the HES group were$43.09 as compa red to $61.41 for patients u singphysicians as the point of entry. Costs of overallmedical resources used over 12 months by co-

horts of patients with comparable health statuswere $98.63 for the HES group and $131.18 forthe physician group (22). In another Kaiser-Permanente facility, overall combined. costs of NPs were 20 percent lower than physician costs(33) . Studies on pr ivate physician pract ices ,while not specifically addressing the cost issue,indicate similar experiences (66,86).

Average Expenses per Patient VisitEven if one allows for supervision costs, NPs

can provide selected services at less cost thanphysicians. This lesser cost does not necessarilytranslate into lower average expenses per pa-tient visit, the latter of which are a function of total practice expenses and patient volume (18).A number of Studies have documented increases

in patient visits which occurred in practicesusing p hysician extenders (38,65). Annual pa-tient visits in the University of Southern Califor-nia survey (103) were 50 to 60 percent higher inpractices with physician extenders. System Sci-e n c e s, In c . ( 1 0 2 ) f o u n d t h a t p r a c t i c e s i n -

corporating physician extenders provided 12more patient visits per $1,000 of cost than prac-tices without them. CBO reports that the Sys-tem Sciences study showed practice expenses forphysicians with physician extenders to be 74percent higher than for solo physicians (18). A tthe same time, patient volume in the physi-cian/ ph ysician extender p ractices was 146 per-cent higher, resulting in an average expense perpatient visit 29 percent lower than that for solophysicians.

While experience has shown that NPs and

other physician extenders can lower average ex-penses per patient visit by as much as one-third,the manner in which the physician or institutionuses them and the way in which time freedthrough task delegation is used will determinewhether the potential saving is realized. If NPsare used to provide services complementary tothose of the physician rather than services sub-stituting for the physician’s, the potential re-duction in average per-visit expenses may bediminished or lost. In such cases, however, thecomplementary services often imply quality en-hancement, a different (and implicitly better)

visit for the same cost.With the addition of NPs to a practice, physi-

cians may choose to maintain, increase, or de-crease their level of effort. Komaroff, et al.,caution (43):

Over and above any efficiencies introducedby this or any oth er system, the time a ph ysicianaverages with patients on a given day is power-fully influenced by two additional factors: thevolume of patients to be seen and the “style” andinterests of the individual physician. It istherefore un wise to expect too mu ch from, or toattribute too mu ch to, organizational changes of this kind in the absence of strong p ressures tooptimize efficiency.

In order to achieve the saving that comes fromsuch efficiency, the practice employing an NP



must either expand its volume of patient visitsor maintain its volume and reduce its physicianinput. The latter option is obviously more feasi-ble in an institutional setting where physiciansare hired as salaried employees than in physi-cian office practices where physicians are self-employed (and also) would be less likely to hirean NP).

If physicians continue to see the same numberof patients, NPs may reduce average per-visitexpenses by increasing pat ient volume suf-f i c i en t ly to more than cover cos t s accom-panying their in t roduct ion into the pract ice .Reduction in physician effort in terms of patientvisits, however, may occur for several reasons:1) physicians may be seeing patients with morecomplex problems that demand more time pervisit; 2) they may devote more time to hospi-talized patients; and 3) the presence of NPs may

allow physicians to take more leisure time. Fur-thermore, some physician time is required forsupervision and consultation with the NP. Forwhatever reason, if physicians reduce their pa-tient load, the average expense per patient visitincreases, as illustrated in table 5. However, itshould be recognized that if the number of pa-tients seen by the physician per day decreasesbecause of more time spent per patient or the de-livery of more complex services, the “patientvisit” produced becomes a different product thatmay justify a higher cost.

Contrary to what had been hoped for, the re-ductions in average expense per patient visit

achieved by solo practices have not been real-ized in many group practices. Using System Sci-ences, Inc., data, CBO reports average per-visitexpenses in group practices employing physi-cian extenders to be only 1 percent lower thanthose in group practices without them, althoughsolo practices with physician extenders have ex-perienced as much as a 30-percent reduction inavera ge pr actice expenses (18). CBO spe cula testhat the differential may be due less to practiceorganization than to the type of physician at-tracted to each practice arrangement, with phy-sicians in group practice more highly valuingleisure time and using physician extenders to re-duce their workload.

Training CostsTraining costs indirectly affect employment

costs and the costs to society of NPs. These costs

are important because much of them are pub-licly subsidized and they may have some in-fluence on salary expectations. NPs obviouslybenefit from public subsidies for their training,

just as do other health professionals. They enterthe job market with a lower personal investmentin training than would have existed withoutsubsidization. This, in turn, means that they areseeking a return on an investment that does notreflect the full costs of their training, thus ben-efiting their employers through lower salarycosts (30).

Total training expenditures for physician ex-tenders are substantially lower than those for

Table 5.--Change in Average Expense per Patient Visit With Reduced Physician Effort

Number ofHours per day Hourly cost Total cost patients Cost per patient visit

Physician . . . . . . . — .—

8 x $24 = $192 - 10 = $19.20NP . . . . . . . . . . . . . 8 x $12 = $96 - 6 = $16.00

$288 - 16 = $18.00(average expense per

patient visit)

Physician . . . . . . . 8 x $24 = $192 - 7 = $27.40NP . . . . . . . . . . . . . 8 x $12 = $96 - 6 = $16.00

$288 - 13 = $22.10(average expense per

patient visit)




physicians, as shown in table 6. Total expend-itures for the segment of training that qualifiesone to practice as a physician extender are lowerfor NPs than for PAs (18). In the case of NPs,the figures in table 6 do not account for the costsof education required to obtain an RN license asa prerequisite to NP training. Depending on thetype of initial nursing education program (seeappendix) and the duration of the NP trainingprogram, the costs of NP training could equal orexceed the costs of PA training. Estimates of theaverage annual costs of nursing education in1979 are $5,901 for baccalaureate programs (4years), $4,974 for diploma programs (3 years),and $4,912 for associate degree programs (2years) (47). Developing comparable full trainingcost figures for NPs, PAs, and physicians iscomplicated by the di fferent educat ion re-

Table 6.-Training Expenditures” for Physicians andPhysician Extenders, Academic Year 1978-79

Cost per studentAnnual costb Total costc

PhysicianMean . . . . . . . . . . . . . . . . . . . $14,200 $60,700Median . . . . . . . . . . . . . . . . . N A d N A d

Range . . . . . . . . . . . . . . . . . . $7,600 -$ 20,800$30,200-$83,000Physician extenderePA and Medex

Mean $6,800 $11,900Median $7.400 $9,900Range $4400-$9.900 $7,100-$17,200

NPMean $12,900 $10,300Median $10,100 $8,000Range $5,300-$31.000 $3,000-$32,000

quirements for entry into NP, PA, or medicaltraining programs. Since a baccalaureate degreeis a prerequisite for medical school, comparablefigures for physician training must include thecosts of baccalaureate education if the costs of obtaining the RN license are included for NPs.Program requirements for PAs do not nec-essarily include postsecondary education, al-though most PAs have had at least 3 years of college. Whether any of these education costsshould be accounted for (as a reflection of reali-ty rather than formal entrance requirements) isunclear.

Looking solely at the expenditures for the NPor PA phase of training (see table 6), higheraverage annual expenditures for NPs are in partexplained by the fact that PA training occurs inmedical schools, using their faculty and re-sources. Thus, there is an indirect subsidy of PA

training in medical schools that is met more di-rect ly in NP t ra ining programs. Moreover,while the average annual cost of NP training ishigher than for PAs, the shorter length of NPtraining results in lower average total costs forNPs.

The total Federal contribution to basic healthprofessions education and training is highest formedical education. This reflects both the costsof that training and the fact that virtually allmedical schools receive Federal funds. Theamount of Federal support per student and itsrelation to average annual training costs, asshown in table 7, is significantly higher forphysician extender training.

Table 7.—Federal Support for Physician andPhysician Extender Training, Fiscal Year 1978

Percent ofaverage

Total annualFederal Amount per trainingsupport student cost s

Physician. ... ... .$190 million $3,000 20%Physicianextender. . . . . . . . . $22 million $4,000- 50-700/0

$5,000



18 q Backround Paper #2: Case Studies of Medical Technologies

The public cost of producing each additionalphysician and physician extender who wouldnot have been trained in the absence of Federalsupport has been estimated by CBO (18). In -cluding both construction and operating sup-port, the Federal cost of each additional physi-cian trained between 1969 and 1978 was esti-mated to range from $40,000 to $60,000. TheFederal cost for each physician extender duringthe same time period ranged from $10,000 t o$20,000. 2 A significant factor in the differentialbetween medical education and physician ex-tender training, CBO noted, is the Federal strat-egy of providing seed money but not operatin g

subsidies to physician extender programs.

NP programs are less dependent on Federalsubsidies than PA programs. In fiscal year 1978,only 40 percent of NP programs received Fed-eral support, as opposed to 90 percent of PA

programs. Because they are less dependent of Federal subsidies, NP programs are potentiallyless vulnerable to changes in Federal trainingsupport, although it can be assumed that manyNP programs do receive public subsidies at theState level that also might diminish if Federalpolicy no longer encouraged the training anduse of new health professionals.

Annual training expenditures for physicianextenders are significantl y lower than those forphysicians. As Scheffler (80) argues, however,even if the cost of training physician extenderswere the same as that for physicians, physicianextenders would still be a good investment be-cause of their shorter training period. Schefflerestimated that three PAs can be trained for thecost of training one physician and together canproduce 1.8 times more visits than one physi-cian. Although analyses like Scheffler’s begin tograpple with the issue of differences in trainingcosts between physician extenders and physi-

c ians , thei r f indings do not def ine the costsassociated with the specific services that eithergroup can provide. Detailed cost data on train-ing for specific sets of primary care services arenonexistent. There is no agreement on a uni-form set of services that any type of physician

extender can provide. Some consensus is a pre-requisite to refining currently available data.Without i t , only gross comparisons of totaltraining costs are possible.

Medical Care PricesLower costs associated with NPs do not nec-

essarily translate into lower prices for their serv-ices. Moreover, productivity gains for physi-cians who employ NPs may not lead to a re-duction in physician fees. Therefore, consumerscannot necessarily expect to benefit from a re-duction in average charges in practices withNPs. Because the market for medical care serv-ices does not conform to the competitive model,a reduction in expenses need not be followed bya decline in prices (7,18,74,90). As seen in table8, a System Sciences, Inc., survey (102) did re-veal lower average per-visit charges of about 21percent in practices with physician extenders.Similar experience has been documented else-where (66). However, the note accompanyingthe table suggests that the location of many of the physician/ ph ysician extend er practices in

Table 8.—Average Charge per Patient Visit inPractices With and Without a Physician

Extender, 1977

Average chargeper patient visitb

Type of practlcea and provider (in dollars)Phystcian with physician extender ., .. .$13.00

NP ., . . . . . 8.13PA or Medex 12.02Physician ., ., . . . . . . . . . . . 15.06

PhysicIan without physician extender 16.48




lower income areas with fewer available healthresources could account for the charge differ-ential.

Few physicians surveyed by the General Ac-counting Office reported any reduction in feesfor ph ysician extend er services (27). Moreover,CBO cautions that u se of NPs to p rovide com-plementary services rather than to increasevolume could lead to even higher average per-visit charges (18). Existing d ata lead to the con-clusion that wh ere prices for p atient services dodecline after introduction of a physician ex-tenders, the change is insufficient to lead tomore than a modest reduction in averagecharges per p atient v isit. The tend ency for phy-sician extenders to ord er m ore d iagnostic testscan further increase practice revenues if the testsare performed in the physician’s office (84). Inaddition, if the physician extender assumessome of the nonreimbursable physician services(e.g., telephone consultation, prescription re-fills), that frees physician time to p rovide reim-bursable services. Therefore, in the majority of cases (no price change or modest price change),the physician extender’s income generation po-tential is enhanced by the fact that additionalreimbursable services are being provided andthat prices may be excessive in relation to thecosts of physician/ physician extenders pr ac-tices. Whether the introduction of physician ex-tenders might cause fees to increase less rapidly,thus leading to a relative decline in prices, hasnot been examined.

There is little reason to expect physicians tocharge a lower price for physician extender serv-ices or to reduce their fees if the use of physicianextenders leads to a reduction in physician timerequired per patient visit. There is no incentivefor physicians to do so. Bicknell, et al., write(9):

On groun ds that they bear ultimate responsi-bility, most U.S. physicians employing assist-ants expect to continue receiving their cus-toma ry fees from all pat ients, includ ing those ex-amined and treated by the assistant. The resultbetrays the promise of primary care assistants.Instead of bringing a reasonable dim ension toprimary care costs, inadvertently the assistantsmay maximize the worst in the fee-for-servicesystem . . . .

Berki (7) argues that current fee levels do not re-flect physician time inputs, citing a study bySchonfeld, et al. (83) that found office visit feesto be significantly higher than could be justifiedby the value of ph ysician time devoted to suchvisits. Berki also describes the possible dilem-

mas of fee differentiation. While physicianscould achieve financial benefits from the em-ployment of NPs, even if they received a lowerfee for NP services, the incentive to incorporatethis innovation into th eir practices diminisheswith any reductions in NP revenue-generatingpotential. Such fee differentiation also mightengender resistance among patients who viewthe lower price of NP services as a signal thatcare provided by NPs is of lower quality thanthat rend ered by ph ysicians.

With current physician p ricing behavior, NPsare not only a cost-effective addition to theirpractices, but often a profitable investment forthe physician. NPs’ income-generation potentialgives the physicians more flexibility in maxi-mizing their combined income and leisure ob-

jectives. Table 9 illustrates the physician’s abili-ty to w ork less time after emp loying a ph ysicianextender while suffering no loss in income.Rather than working less time and maintainingtheir incomes, physicians could choose to in-crease their incomes by maintaining th eir pre-vious level of effort and by generating evenmore revenu e from an increased volume of pa-tients. This alternative appears to be m uch m oreprevalent (103). Most studies of revenue gen-eration and profitability found higher expenses

Table 9.—Physician Time Input and IncomeWith and Without Employment of a New Type

of Health Manpower (NTM)

One NTMNo NTM employed —-——

Physician practice hours/week . . . 60 60Weeks/year . . . . . . . . . . . . . . . . . . . 50 46.7Office vists/week . . . . . . . . . . . . . . 120 150Visits/year . . . . . . . . . . . . . . . . 6,000 7,000Fee/visit. . . . . . . . . . . . . . . . . . . . . . $10 $10

Fee/volume/year . . . . . . . . . . . . . . . $60,000 $70,000Market cost/NTM ... . . . . . . . . $10,000Income/year. . . . . . . . . . . . . . . . . . . $60,000 $60,000




for pr actices incorporating physician extendersthan for physician-onl y practices, but alsofound p hysician/ ph ysician extenders’ revenuesto be sufficiently higher to show greater profits(21,4O,65,66,8O,81,86,1O8).

The amount of profit realized throu gh the em-ployment of NPs varies considerably amongpractices. In a separate study of 26 NPs inped ia t r i c p rac t i ces r epor t ed in 1 9 7 2 b yYankauer, et al. (108), average annual grossrevenues generated by the NPs exceeded theirexpenses by an average of $2,500. In a study of pediatric NPs in 1969, Schiff, et al. (81) foundthat the NP generates net revenues of about$6,000 after 1 year of practice. Schwartz (86) ex-amined the revenue-generatin g experiences of three d ifferent types of p ractices emp loying NPsin California. He found that the average annualnet revenue of an NP in a rural solo private

practice in 1974 was $18,653, resulting in an in-crease by more tha n one-third in the emp loyin g

ph ysician’s income. Kane, et al. (40) found thatthe higher profits earned by p hysician/ Medexpractices were in part due to the physician’sbeing relieved by the Medex to spend time onmore highly remunerative activities, such asspecialized procedu res and inpatient care. Evenwith limited third-part y reimbursement for phy-sician extender services, only one major studycited this as a financial problem for physiciansemploying NPs (93).

From the physician’s perspective, the NP is acost-effective addition to the practice. The factthat th e financial benefits gained from th e use of NPs are not passed on to consumers is well doc-umented. As noted earlier, the potential in-crease in income afford ed th e ph ysician by theNP is a major incentive for NP employment.Given that income increases are usually the re-sult of expansion in the volum e of patient visits,consumers m ay benefit from imp roved access toservices. While this has been the experience of practices in areas w ith few available health re-sources, it is unwise to assume that increasedvolume, regardless of its character, generallyleads to imp roved access.

Finally, the pr ice effects of ph ysician extend eremployment in organized systems with cap-

itation should be treated separately. The pro-ductivity gains from physician extender em-ployment are likely to result in cost savings insuch systems. Given that they provide specifiedservices in return for monthly cavitation pay-ments, such organizations may choose to ex-

pand their scope of benefits or increase physi-cian salaries or leisure rather than to pass thesavings to the consumer in the form of reducedpremiums. Which act ion such organizat ionschoose depends on how they assess their com-petitive advantage over similar practices in thearea and standard insurance carriers (7).

Medical Care Expenditures

Practices employing physician extenders gen-erally see more patients than those withou t phy-sician extenders, increasing volume by as muchas 50 to 60 percent (18). Prices charged for serv-ices in physician/ ph ysician extend er practicesdo not differ significantly from physician-onlypractices even though average per-visit practiceexpenses tend to be lower. Given current em-ployment and pricing patterns, NPs and PAs doincrease medical expenditures beyond the ex-penditures that would have occurred withoutthem. Because of their small numbers (physi-cians outnumber physician extenders by 18 to1), physician extenders’ current impact on totalexpenditures is marginal. If physician extenderswere slated to play a substantially larger role,with no other changes, in the current healthservices delivery system, their impact on overallmedical expenditures would grow.

CBO estimated that in 1977 medical expend-i tures for pract ices employing physic ian ex-tenders w ere 19 to 24 percent higher than thosefor practices without physician extenders (seetable 10). If 50 percent of physician practicesemployed physician extenders, extrapolation of cu r ren t t r ends fo r bo th p r i c ing and pa t i en tvolume increases would result in at least a 10-percent increase in total expenditures related tophysician practices, Given the expanding supply

of physicians, it is uncertain whether the in-crease in volume of patient visits required tosupport this higher number of physician/ physi-cian extender practices is possible.



Total expenditures associated with physicianextenders must include training expenditures,much of which are subsidized with public funds.The costs of physician extender training are sub-stantially lower than those for physician train-ing. To the extent that physician extenders sub-stitute for physicians, and that substitution isreflected in the respective numbers of physicianextenders and physic ians t ra ined, the lowerphysician extender training costs could reducetotal training expenditures. For now, the ex-tension of public support for physician extenderprograms means an increase in public expend-itures for health professions training. Since thepotential savings from this public investmentare not passed on to the consumer, medical careexpendi tures a lso are inf la ted by the in t ro-duction of physician extenders.

The increase in medical care expenditures

associated with physician extenders may be out-weighed by the benefits their presence bringsthrough increased access. In a recently reportedsurvey, 57 percent of physicians who employNPs cited the extension of services to more peo-ple as the NP’s major contribution to medicalservices delivery (55). Improved access occursnot only as the result of the general increase involume of patient visits in practices with NPs,but also because NPs tend to serve more low-income and nonmetropolitan patients who tra-ditionally have had diminished access to physi-cians (61,98). NPs in underserved areas can free

overextended physicians to focus on complexmedical problems and consultant services (104).Furthermore, with the NP to provide followup,such physicians can discharge hospital patients

sooner (91). Improved access to primary careservices may reduce expenditures for costly spe-cialized services and hospitalization. To the ex-tent that NPs contribute to the expansion of pri-mary care services, the increase in expendituresaccompanying their use could be offset by suchsavings.

Cost Effectiveness:Actual or Potential?

That individual NPs can be cost effective isdocumented in numerous studies. Generalizingthat experience to the total NP or physician ex-tender population or basing future projectionson individual experiences is more difficult .Although the number of physician extenders isexpected to more than double in the next decade(see table 11), physicians will still outnumberphysician extenders by 10 to 1.



Given the nature of the U.S. health care sys-tem and realistic expectations for future struc-tural change, it is uncertain how many NPs andPAs will find employment commensurate withtheir training and whether society will benefitfrom their cost-effectiveness potential. In theirlongitudinal study of NPs, Sultz, et al . (99)found that only 50 percent of employed NPsfunctioned purely as NPs (see table 12). Otherswere either performing mixed functions or pro-viding only traditional nursing services. It mustbe noted that this study was based on 1974 data,thus reflecting the early experience of NPs.Many master’s students at that time were facul-ty in schools of nursing preparing to teach in NPprograms. This, in part, may explain the seem-ingly low percentage of NPs functioning fulltime in the NP role. Data on more recent ex-perience are essential in order to more accurate-ly estimate the education costs of one fully func-tional NP, the increased availability of NP serv-ices resulting from additions to the supply in thefield, and the prospects for future employment.Given their small numbers and current employ-ment experience, the total impact of physicianextenders, even if beneficial, will be modest.

The structure of the U.S. health care system isoften cited as the major factor inhibiting theachievement by NPs of their full potential. Ac-cording to Bicknell, et al. (9), the “hospital-based, specialist-intensive, resource-rich” s y s -

tem is incompatible with primary care practice

and resistant to innovations that augment pri-mary care capacity. Patterns of financin g t h a tcover the costs of an inefficient delivery process,medical education that discourages delegationof patient responsibility, and the prominent role

of physicians in defining the boundaries of prac-tice for other health professionals inhibit thegrowth and efficient utilization of a professionthat may invade territory traditionally confinedto physicians.

Within the existin g structure, incentives to

employ NPs vary accordin g to practice arrange-ment , physic ian payment mechanisms, andbudget constraints. In general, the financial in-centive for physicians in private practice to hirean NP or PA is diminished, because physiciansearn high incomes and are not constrained bycompetitive market forces to produce services inthe most cost-effective manner. On the otherhand, employment of physician extenders canoffer attractive benefits to physicians. Physicianextenders allow physicians to expand their prac-tices to improve patient access and increase in-come. They provide the physician an opportuni-ty for more leisure time or a more leisurely work pace. Final ly, many physic ians who emplo y

physician extenders stress their contribution toupgrading the quality and comprehensiveness of care provided by their practices (90).

Mult ip le considerat ions enter in to the de-cision to hire a physician extender. The phy-sician must be convinced that sufficient demandexis ts for the planned expansion in pat ientvolume. Smith (90) cautions, “If the present hin-drances of access to medical care are, as somehave suggested, merely geographical, we mighthave the ironical situation of there being no

physician to hire the practititioners where theyare needed and no need for them where there is aphysician to hire them. ” Legal and reimburse-ment policies must not constrain physician ex-tenders’ potential to meet the physician’s expec-

table 12. —Employed Graduates of NP Programs by Role and Type of NP Program

Type of programCertificate Master’s Total

Role Number Percent Number Percent Number Percent.NP role only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— . . — . — — . — —257 55.2°10 67 35.8%. 324 49.70/0

Traditional nursing role only, . . . . . . . . . . . . . . . . . . 51 11.0 71 38.0 122 18.7

NP role and traditional nursing role, . . . . . . . . . . . 157 33.8 49 26.2 206 31.6Totala. . . . . . . . . . . . . . . . ., . . . . . . . . . . . . . . . . 465 100.0 ”/0 187 ‘ - - 100.0% 652 100.0%




tations. Physicians with minimal experience intask delegation may not feel comfortable usingphysician extenders in the manner required tobenefit fully from their employment. Some ini-t ial investment for salary and perhaps addi-tional overhead accompanies the introduction

of the physic ian extender in to the pract ice .Sultz, et al. (98) reported that 92 percent of physicians employing NPs thought the benefitsof their employment outweighed the costs. Forthe physician contemplating whether to hire, theincentives also must seem to outweigh the risks.

The rapid expansion in medical school enroll-ments and projected increases in physician sup-ply add a new dimension that may overshadowother factors influencing physician extenders’employment opportunities. Physician supply isgrowing and there are thousands more in theeducational pipeline who must be absorbed intothe system. The effects of this increase in physi-cians are now only being contemplated, butthey could be profound. Among them could bea restriction in employment opportunities forNPs and PAs. Some argue that NPs will farebetter because of their nursing background andscope of practice (18). Regardless, there arealr ead y s ig n s t h a t p h y s ic ia n s , p a r t i cu l a r lyspecia lis ts , are redef ining the scope of thei rpractices in response to diminished numbers of patients requiring their specialized skills. Aiken,et al. (3) recentl y concluded, “Despite the cur-rent shortage of generalist-physician services,continuing specialist participation in primarycare will lead to sufficient generalist medicalservices by the mid-1980’ s.” Physicians may berecapturing primary care responsibilities thatnot so long ago they considered delegating.Moreover, it has been suggested that practicingphysicians who perceive this oversupply mayhire young physicians to perform the tasks thatphysician extenders can handle (64).

Organized se t t ings that operate on f ixedbudgets (prepaid group practices and some clin-ics) have a much greater incentive to employ

NPs and PAs. It is to their financial advantageto produce services with the most efficient com-bination of inputs, substituting lower pricedphysician extenders for higher priced physicianswhenever possible. Such organizations will dis-

play more efficient staffing patterns unless theyare able to pass through the costs of more in-efficient personnel configurations to third-partypayers who reimburse on a cost basis. The valuesuch organizations place on physician extendersis reflected in the fact that half of all PAs and 80

percent of all NPs are employed in organizedsettings (18). Future changes in practice ar-rangements and the preferences of new physi-cians toward entering organized practice set-tings or private practice, therefore, will have animpact on future opportunities for physician ex-tenders.

P r e p a i d g r o u p p r a c t i c e s ( P P G P s ) h a v eperhaps the strongest incentive to employ physi-cian extenders. Operating revenues derive fromfixed cavitation payments for plan enrollees.The PPGPs seek to minimize expenses in rela-tion to revenues by using more cost-effectivemeans of achieving comparable outcomes. Thisincludes the substitution of NPs and PAs forphysicians wherever possible. While they haveyet to follow their own maximum substitutionmodels, HMOS, the prototype PPGP, are lead-ers in employing physician extenders and con-ducting research on their actual and potentialutilization (33,69, 71,94). CBO reported that in1977 HMOS provided care to their memberswith an FTE of 0.44 physician extenders for eachphysician, as opposed to 0.07 physician ex-tenders for each office-based physician in theUnited States (18).

HMOS have the advantage of greater flexi-bility in modifying personnel arrangements togain the benefits from substitution. Physiciansin private practice, beyond fulfilling their objec-tives for leisure time, are unlikely to reduce theirtime inputs to achieve a more efficient opera-tion. Where physicians are salaried employees,however, the efficiency objectives of the em-ploying organization may lead to a reduction intheir time, numbers, or income. In line with theHMOS’ incentive to minimize total salaries,Greenfield, et al. (33) repor t on t he effects of an

experimental physician extender protocol sys-t e m i n t r o d u c e d a t t h e S o u t h e r n C a l i f o r n i aKaiser-Permanente Facility and the adaptationof the organization to a more cost-effectivemodel. Before the study, 10 physicians and 3



physic ian extenders saw 2,700 pat ients permonth, 70 percent of whom had acute illness.Two years after the stud y, 6.5 physicians and 6physic ian extenders saw 2,900 pat ients permonth, 70 percent of whom had acute illnesses.

The use of NPs and PAs resul ts in pro-

ductivity gains and cost reductions. Yet, theirfuture participation in medical care delivery isuncer ta in . Avai lable evidence indicates thatphysician extenders’ incorporation into orga-nized settings, particularly HMOS, has contrib-uted to more cost-effective service delivery.However, the experience in private physicianpractices is less promising. Demand for physi-cian extenders in that setting has been limited.Although the public benefits from increasedavailability of services, the cost effectiveness of physician extenders in such settings has not re-duced prices. Moreover, since most physician

extenders are employed in organized settings,employment opportunities are l imited by thefact that the majority of physicians are in theprivate practice, fee-for-service sector.

Government subsicly of NP and PA traininghas not been accompanied by policies to ensurethe promise of these health professionals oncethey are in practice. Moreover, policies thatmay inhibit the use of physician extenders, suchas those supporting expansion in physician sup-ply, have been enacted s imul taneously wi thpolicies encouraging t h e i r d e v e l o p m e n t .Changes could be made-shor t of a nat ionalheal th insurance scheme with incent ives torestructure health services delivery—that wouldfacilitate the efficient use of physician extenders.Modifying current reimbursement policies tocompensate for physician extender services in amanner that reflects their lower costs would af-fect prices, although it might also reduce op-portunities for physician extender placement inphysician private practices. Opportunities forNPs to practice more independently through re-moval of legal and reimbursement constraintscould provide consumers with a lower cost al-ternative for receiving the primary care servicesthat both physician extenders and physicians

can provide. The expansion of PPGPs and othermedical care organizations that operate on fixedbudgets would provide more employment op-portunities for physician extenders in settingsthat use them more efficiently, As Berki argues(7):

Where medical care is provided by hierar-chical organizations on a cavitation basis, bothservice expansion and price reduction are likely.Thus, not only is effective use of new types of health manpower enhanced by the structuralcharacteristics of hierarchical organizations, butalso the gains flowing from their employmentare less likely to accrue to the providers, and themore likely it is that consum ers will benefit byincreased ava ilability of services at lower p rices.

In evaluating the role of physician extenders,it is insufficient to assess their cost effectivenesswithout also looking at who gains from the sav-ings. Are the financial benefits of lower trainingand employment costs to be shared with thepublic or reaped only by providers? Under thecurrent fee-for-service system, are the modestsalaries of physician extenders exploitative,given thei r income-generat ion capaci ty? Theorganization and financing of health services inthe United States encourage inefficiency in thedelivery of medical care. Reforms that wouldoptimize the efficient use of physician extendershave implications for the cost effectiveness of other components of the system. Physician ex-tenders can be in tegrated in to the exis t ingsystem, as they have for the past decade, withperpetuation of existing inefficiencies. From apubl ic pol icy perspect ive , i t must be askedwhether improved access, resulting from em-ployment of physician extenders, but unaccom-panied by 1ower prices, is worth the further in-flation in medical care expenditures. This is thechoice as the system currently functions. Giventhe overriding concern for containing healthca re cos t s , an a s sessment o f NPs and PAsshould consider not only thei r performancewithin the constraints of the current system, butalso their potential role in an integrated strategyof reform to meet public policy objectives.



Case Study #16. The Costs and Effectiveness of Nurse Practitioners q 25

APPENDIX: BACKGROUND INFORMATION ONPHYSICIAN EXTENDERS

TrainingAlthough p hysician extender training existed on a

very limited scale as early as the 1930’s, the majorthrust in training both NPs and PAs in the UnitedStates began in 1965 (5). Duke University establishedthe first primary care PA training p rogram. PAs gen-erally receive 2 years of academ ic and clinical train-ing in a medical school setting. Although postsec-ondary education or p revious experience in a healthpr ofession is not specifically requ ired, most PAs hav ehad 3 or more years of college-level education orseveral years’ experience in a r elated health field su chas medical technology, physical therapy, or voca-tional nursing. While the initial intention of PA pro-

grams was to provide training in primary care, abouthalf of all PAs now specialize in oth er fields su ch asophthalmology, urology, orthopedics, internal medi-cine, and other medical and surgical subspecialties(46).

Medex often are considered in th e same category asPAs because they practice und er the same legal au-thority and receive similar preparation. Medex train-ing was conceived as a way to allow former militarycorpsmen to ap ply their skills to ru ral med ical prac-tice. The first training program was established in1969 at the University of Wash ington. Med ex receive15 months of training, including preceptorship,often with rural physicians. Unlike PAs, Medex aretrained almost exclusively in primary care.

The concept of expanded function nursing grewout of a program to train nurses to become ped iatricNPs at the University of Colorado in 1965 (49). Alsoreferred to as nurse clinicians, nurse associates,clinical nurse sp ecialists, or nu rse genera lists, these

SpecialtyPediatric. . .Midwifery.

M a t e r n i t yFamily. . . . .Adult . . . . . .Psychiatric.

Total .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

. . . . . . . . . . . . . .

individuals all belong to the general category known

as NPs, The N P receives add itional training beyondthat requ ired for an RN license 3 in a particular spe-cialty such as p ediatrics, family pr actice, maternity,adu lt practice, or psychiatry. There are two types of training p rogram s: those that offer an NP certificateand those that award a master’s degree. Table A-1shows the distribution of d ifferent N P training p ro-grams by both specialty and type of degree offered.

Until standardization of the length of NP cer-tificate programs to 1 year in the Nurse Training Actof 1976, NP training varied between master’s and cer-tificate progra ms as w ell as am ong sp ecialties. Mas-ter’s d egree programs require a p revious baccalaure-ate RN license and , on average, require more than a

year of training; certificate prog ram s are now 1 yearin length. Table A-2 shows the average length of dif-ferent NP training program s.

Legislation Supporting PhysicianExtender Training

Federal support for physician extender trainingwas limited before 1970. Some early NP tra ining pr o-grams received assistance through special projectgrants provided under the Nurse Training Act of 1964 (Public Law 88-581) and, later, title 11 of theHealth Manpower Act of 1968 (public Law 90-490)(103). The National Center for Health Services Re-

search fund ed the first Medex training program at the

Table A-1 .—NP Programs by Specialty and Type of Program

T y p e o f p r o g r a m “ -

Certificate Master’s Total

Number Percent Number Percent Number Percent

42 48.8 ”/0 ‘8 17.8°\o 50. 38.2-0/05 5.8 6 13.3 11 8.4.7 8.1 7 15.5 14 10.7.

17 19.8 12 26.7 29 22.115 17.5 8 17.8 23 17.6. .

— — 4 8.9 4 3.0. .

86 1OO.OO /O 45 100.OYO 131. . 1OO.O O /O




University of Washington. By the late 1960’s, PAtraining programs were receiving funding from avariety of Federal sources, including the Office of Economic Opportunity, the Model Cities Program,the Veterans’ Administration, the Public HealthService, the Department of Defense, and the Depart-ment of Labor (52). However, most physician ex-tender training programs during this period de-pend ed on institutional or private resources.

In the early 1970’s, the Federal Government be-came mor e interested in the potential of physician ex-tenders to add ress health manp ower problems. In-creasing concern over rising costs and the continuedshortage of physicians in primary care was reflectedin tw o ma jor p ieces of legislation aimed specificallyat increasing the num ber of NPs and PAs. The Com-prehensive Health Manpower Act of 1971 (PublicLaw 92-157) provided the first large Federal pro-vision for NP and PA training programs (35). TheNu rse Training Act of 1971 (Public Law 92-150) pro-vided broadened authority for special project grantsand contracts including support for training pro-grams for NPs (99). Passage of the Nurse TrainingAct of 1975 further reinforced the Federal commit-ment by establishing a new, separate section for su p-port of NP training. Further, in 1977, the Health Pro-

fessions Educationa l Assistance Act of 1976 (PublicLaw 94-484) was am end ed by the H ealth Services Ex-tension Act (Public Law 95-83) to provide a dd itionalgrants and contracts for physician extender trainingprogram s (64). Although th e Nu rse Training Act of




Table A-3.—Practice Setting Location of NPs by Type of NP Program a


Practice setting location Number Percent Number Percent Number PercentInner city . . . . . . . . . . . . . . . . . . 126 31 .40/0 41 42.4°10 167 33.6°\oOther urban . . . . . . . . . . . . . . . . 65 16.3 24 24.7 89 17.9Suburban . . . . . . . . . . . . . . . . . . 35 8.8 11 11.3 46 9.3Rural . . . . . . . . . . . . . . . . . . . . . . 77 19.3 7 7.2 84 16.9Combination. . . . . . . . . . . . . . . 16 4.0 3 3.1 19 3.8OtherC. . . . . . . . . . . . . . . . . . . . . 81 20.2 11 11.3 92 18.5

Totald . . . . . . . . . . . . . . . . . . . 400 1 OO.OO /O 97 1 OO.OO /O 497 1 OO.OO /O

The tendency of NPs to locate more often in inner-city areas may be partially explained by the fact thatNP training pr ograms are largely based in urban cen-ters (see table A-4). Moreover, most nurses, whocomprise the applicant pool for NP programs, areemployed in m etropolitan areas initially and thus aremore likely to rem ain there (18).

In the past, it has been difficult for many und er-served areas to attract and maintain physicians.How ever, practice in th ese areas may h ave specialadvantages for ph ysician extenders. One study of 85NPs in rural areas (97) showed that 40 percent choserural practice because it “offered a creative approachto health care delivery. ” Another 25 percent were inrural settings because of “the opportunity for role

autonomy. ” Both of these responses can be inter-pr eted as reflections of the inadequ acy of ph ysiciansupp ly in relation to consum er needs. What may bedefined by physicians as problems of rural practicemay instead present them selves as opportu nities for

physician extenders w hich may not be available inareas with an adequate or excess supply of ph ysicians(8,15,37,73,97),

Several training programs have been developedspecifically to prepare NPs to practice in underservedareas. One of the largest such p rograms in th e coun-try is the FamiIy Nu rse Practitioner Program at theUniversity of California. Stud ents in this programare recruited from rural areas and trained w ith a self-selected physician preceptor in a rural practice. Ad-ministrators of the program feel that this system hashelped to promote a positive relationship betweenphysicians and NPs and to encourage their furtheruse in rural areas (88). Other institutions, includingthe University of North Carolina and the Universityof Minnesota, operate similar training programswhich place NPs in Area H ealth Edu cation Centersand other rural health clinics in their States (28). In

Kentucky, the Frontier Nursing Service trains nurse-midw ives and family NPs to provide services to ruralareas of southeastern Kentucky and is the only avail-able source of prim ary care to most residents in thisarea (62). These programs have succeeded in placingand maintaining a high percentage of their graduatesin rural areas.

The practice location of NPs varies by both theirspecialty and typ e of training program from whichthey graduated. The specialties most likely to berepresented in inner-city locations are pediatrics,midwifery, and maternity, while family NPs are themost likely to be represented in rural areas (see tableA-5). Moreover, a larger percentag e of practitioners

from certificate programs (19 percent) than graduatesof master’s degree programs (7 percent) is in ruralareas.

Although physician extenders have made theirpresence known in und erserved comm unities, and, as



28 . Backround Paver #2: Case Studies of Medical Technologies

Table A-S.—Practice Setting Location of NPs by Specialty and Type of NP Programa

Type of Pediatric Midwifery Maternity Family Adult Psychiatric Totalprogram/practice - -— -- ---—– —–– -——-– ——–-.–– —. ---setting location Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent Number Percent

— — —

CertificateInner city. ., .,Other urban. . . .S u b u r b a n .R u r a l . . .C o m b i n a t l o n b .O t h e r c

Total. . . .

Master’sInner city. .Other urban, .,S u b u r b a n .Rural . . ., . .C o m b i n a t i o n b .Other c . . . . . .

Total. . . . . . . .

TotaldInner city, . . .,Other urban. , . . .

Suburban. . . . . .Rural . . . .C o m b i n a t i o n b .Otherc . . .

Total. ., . . .,

702820261115

170

31

11

—

17

732921271116

177

—

41.1 0/0

16.511.815.36.58.8

100.0

42.80/014.314,314.3

—

14.3100.0

41 .2’7016.4

11.915.36.29.0

“100,0

321

2 —

1

9

1263

—2

225

158

4223

34

810

1

4—

225

31

————

4

1111

1

4—

229

2814

529

5

21102

1612

531

7

44

4426

10326

28146

—.

—

—

—

—

—

—

—

—

—

21

— —

3

— —

21

— —

3

—

—

—

—

—

—

—

—

—

66.7 %33.3 — —

100.0

— —

66.70/033.3 — —

100.0 —

126

6535771681

400

41

2411

7

311

97

16789

46841992

497

31 .40/o

16.38.8

19.34.0

20.2100.0

42.4%24,711.3

7.23.1

11.3100.0

33.60/’17.9

9.316.93.8

18.5100.0.

a group, they seem most easily attracted to theseareas, it should not be assumed that this trend w illcontinue indefinitely. As noted earlier, und er currentlegal arrangements, physician backup mu st be avail-able to physician exterders. It is uncertain h ow manyphysician extenders can be absorbed in und erservedareas given this constraint. Also, until now, manyrural p ractices have been sup ported by Federal andState funds. If these resources evaporate in thefuture, such rural practices would have to becomefinan cially self-sufficient in ord er to retain existingpersonnel or to employ new personnel. A study of physician extender practices in ru ral commu nities inCalifornia has shown that freestanding rural prac-tices can become financially viable with continuedFederal and State sup port (31). But without such sup -port or third -party reirnbursem ent, economic viabili-ty is mu ch less likely (63).

Physician and Consumer AcceptanceFrom the beginning, physician an d consumer ac-

ceptance of NPs has been a major issue. The wide-spread u se of NPs depend s on the w illingness of phy-sicians to hire them and patient receptiven ess to the

kinds of services they provide, particularly in privatephysician practices.

Current Federal reimbursement p olicies, which donot includ e paym ent for services provided by p hysi-cian extenders, serve as a disincentive for physiciansto emp loy physician extenders. Amon g the other r ea-sons most frequently cited by physicians for not hir-ing NPs are legal restrictions, limitations on space orfacilities, and resistance from other health providers(100). Concerns about liability and malpracticecoverage also may discourage physicians from hiringNPs (45,56,107). How ever, the use of NPs also pro-vides advantages for physicians to expand the num -ber of patients in their practices, increase their in-come, broaden the scope of their services, or acquiremor e flexibility with th eir time. Physician extend ersmay be u seful par ticularly to rural p hysicians, who,because of their fewer numbers, must see consid-erably more patients and work longer hours thantheir urban counterparts (46).

The Institute of Medicine (IOM) reported on aseries of studies in the last decade w hich attempted todocument both ph ysician app roval of the concept of NPs and physician willingness to hire them (77).While the findings varied significantly among the



Case Study #16 The Costs and Effectiveness of Nurse Practitioners q 29

studies, the general pattern showed that physicianapp roval of the concept of NPs often w as not accom-panied by a w illingness to hire them. While one sur-vey cited by IOM found that as man y as 70 percentof physicians would hire an NP (67), most othersfound considerably lower interest. For example,Lawrence, et al. (45) found that only 24 percent of

those surveyed w ould h ire an NP, although 86 per-cent expressed ap pr oval of the concept (45).Physician attitudes toward NPs are perhaps more

strongly influenced by their medical education ex-perience than any other single factor. Medical educa-tion does not encourage delegation of patient-care-related tasks to non physicians and emph asizes ulti-mate physician responsibility in all aspects of care.Physicians may feel that by u sing NPs th ey will sac-rifice quality of care and important elements of thephysician-patient relationship. As a result, physi-cians m ay be p articularly reluctant to d elegate tasksto a large d egree or to accept the NP as a p rofessionalcolleagu e (19,96).

In its review of studies on task delegation, IOMconcluded th at while physicians who employed NPswere satisfied with their performance, they were“more disposed to delegate duties that are in therealm of nursing practice and not in the realm of medical practice” (105). While confident of the NP’sability to take medical histories, provide counseling,and perform other routine tasks relating to primarycare, many physicians express hesitation in allowingNPs to p erform physical examinations or other moretechnical procedures. In the past, pediatricians havebeen the m ost receptive to N Ps functioning in an ex-pand ed capacity, but the recent increase in the num -ber of pediatricians and pediatric NPs, combinedwith the d eclining birth rate, may alter this pattern inthe future (1).

Because exposur e to team p ractice is a recent an dstill limited innovation in medical education, olderphysicians (particularly those in long-standing soloprivate practices) are somewhat less likely thanyounger ones to be receptive to NPs, Physicians ingroup practices generally are m ore willing to emp loyNPs than solo practice physicians. Several explana-tions are offered for this pattern, including the sug-gestion that m embers of group p ractices are more fa-miliar w ith team p ractice and m ore willing to d ele-gate tasks to gain time for other professional ac-tivities or for leisure (45,54).

Because of the reluctan ce of physicians in pr ivatepractice to employ NPs, most NPs practice in orga-nized settings. As seen in table A-6, only 14.2 percentof NPs sur veyed by Sultz, et al. (100) were em ployedin private physician practices.

Consumer acceptance of NPs is essential to the in-tegration of N Ps into med ical services delivery. The

patient’s confidence in the NP’s professional com-petence, the qu ality of commun ication between p a-tient and N P, and im proved access to services due toNP participation in the practice are key factors inachieving consumer acceptance.

From the beginning, consum ers have show n lessresistance than physicians to NPs. Studies on con-

sumer acceptance reviewed by IOM show that pa-tients seem to p erceive little or no d ifference betweenphysicians and NPs once an ongoing relationship isestablished (76). In fact, several stud ies have foun dpatients pr eferring N Ps for man y services pr eviouslyprovided by physicians (41,48,53,57). Other studieshave reported that patients under the care of NPsbroke fewer ap pointments and complied more strict-ly with prescribed treatments than those of physi-cians (14,51,81,85). NPs tend to spend more time perpatient visit and p lace greater emph asis on counsel-ing and education. These aspects of NP practiceenhance their attractiveness to patients.

As with physicians, consumer acceptance of NPs

increases with exposure to them. It is here that thephysician plays a critical role. The patient often usesthe ph ysician’s attitude tow ard the NPs as a signal toaccept or r eject NP services (68). Moreover, reportsof experimental projects introducing NPs noted thenecessity of assuring patients assigned to NPs thatsuch assignment w ould not restrict their access to thephysician. As a result, patient confidence in theavailability of the physician was generally sufficientfor them t o receive the majority of their care from theNP (17).

Obviously, acceptance by physicians and consum-ers is just as great an issue for PAs as for NPs.Because of the differences in their trainin g and skills,one group may be p referred by p hysicians in certainsituations. Whereas the PA usually functions moredirectly with the physician or as a physician sub-stitute, the NP m ay bring a broader spectrum of serv-ices to a p ractice. This is an area w hich has yet to b eexplored in depth.

Legal RestrictionsSince licensure is a State responsibility, each State

has legal jurisdiction to regu late the p ractice of healthprofessionals. As new professions emerge, they seek recognition by th e State. In su ch instances, the Statemu st act with little precedent or experience to guideits actions. The lack of uniformity in State regulationof NPs and PAs reflects their relatively recent in-trodu ction and th e continued u ncertainty about theirappropriate role in health services delivery. More-over, as poin ted ou t by CBO (18), changes in med icalpractice legislation generally occur in consultation



30 . Backround Paper #2 : Case Studies of Medical Technologies

Table A-6.—NPs by the One Employment Setting in Which They Spent Most of Their Timeas NPs and Type of NP Program a


Employment setting Number Percent Number Percent Number Percent2217

5248

591575

986

80

4

3243

1

42

402

— —

47

In-hospital practice. . . . . . . . . . . . . ‘ - — --- .- . - - —

Patient unit . . . . . . . . . . . . . . . . .Emergency room. . . . . . . . . . . . .

Ambulatory clinical practice . . . . .Private practice. . . . . . . . . . . . . .Prepaid group practice. . . . . . . .Hospital-based clinic . . . . . . . . .Community-based clinic

or center. . . . . . . . . . . . . . . . . .Other ambulatory practice. . . . .

Nonhospital institutional setting .School for mentally or

physically handicapped. . . . .Grades 1-12, public school

system. . . . . . . . . . . . . . . . . . .College health programs . . . . . .Other non hospital institutional

setting . . . . . . . . . . . . . . . . . . .Nonhospital community setting . .

Health department orhome health agency. . . . . . . .Social services or agency . . . . .Other nonhospital community

setting . . . . . . . . . . . . . . . . . . .School of nursing . . . . . . . . . . . . . .Extended care facility. . . . . . . . . . .Other b . . . . . . . . . . . . . . . . . . . . . . .

Overall . . . . . . . . . . . . . . . . . . . . . 403 100.070 97 100.070 500 1OO.O O / O

5.5%4.21.3

61.514.6

3.718.6

23.11.5

19.9

1.0

7.910.7

0.310.4

9.90.5

1312

1

6912

527

2321

1

8

61

13.4”/012.4

1.071.212.45.2

27.8

3529

6317

7120

102

7.0 ”/05.81.2

63.414.2

4.020.4

23.72.11.0

1.0

1168

81

4

3244

23.21.6

16.2

0.8

6.48.8

8.21

500.2

10.0

6.21.0

453

9.20.6

1.01.7

1

231

1.02.13.11.0

1

278

0.20.41.41.6

with the medical profession. The requirements forphysician supervision, restrictions on functions suchas dru g prescribing, and prohibition of independ entpractice all reflect the influence of organizedmedicine on this process.

In 1978, Miller and Byrne, Inc. (58) published asurvey of State legislation governing the practice of NPs and PAs. Each State regulates NPs through theState’s nurse practice act. In some States, NPs areable to practice without significant changes in ex-isting statutes. Although they perform functionsbeyond that of traditional nursing, their expandedrole is considered an extension of nursing allowed bythe statute, rather than a significant d eparture requir-ing new regulations. In States that prohibited nursesfrom engaging in d iagnosis and prescription of treat-ment, NPs could n ot practice without n ew statutoryauthority. The response of these States has beeneither to replace previous statutes w ith new defini-tions of nursing r oles or to amend existing law to a c-commodate expand ed role nu rsing. The response of some States has been to provide more open-ended

authority in recognition of evolving nursing roles.For examp le, the California Nu rse Practice Act statesthat nursing is “a dynamic field . . . which is con-tinually evolving to include m ore sophisticated p a-tient care, ” and also recognizes “the existence of overlapping functions between ph ysicians and reg-istered n urses” and perm its “sharing of functions”5(58). While States have generally recognized the par-ticipation of nur ses in activities pr eviously restrictedto physicians, they have maintained prohibitionsagainst nurses functioning independ ently in the med-ical sphere.

The PA, unlike the NP, represented a new type of health professional previously not covered by Statelaw (58). For this reason, new statutory authoritywas requ ired in every State where PAs w ere allowedto practice. Initially, States responded by expandingphysician delegator authority under the MedicalPractice Acts to allow PAs to work under physiciansupervision. The majority of States, however, have



Case Studv #16: The Costs and Effectiveness of Nurse Practitioners q 31

enacted regulatory statutes giving the State board of med ical examiners authority over training and em-ployment of PAs. As with NPs, the laws regardingPAs tend to vary from State to State. For example,legislation in N ew Mexico, Ohio, and South Carolinacontains extensive lists of specific medical taskswhich PAs may or may n ot perform. In other States,such as Oregon, where the laws are much less ex-plicit, the PA may perform w hatever tasks are per-mitted by the supervising physician. There is alsowide variation regarding the particular type of super-vision required for PAs. Some States permit tele-phone consultation as a sufficient means of supervi-sion while others also require the physician to es-tablish written protocols and review all patientrecords on a regular basis. Very few States requiredirect “over-the-shoulder” supervision, but in remoteareas where the p hysician and the PA may be in dif-ferent locations, the physician is often required toregu larly visit the facility wh ere the PA w orks. Whenthe Miller and Byrne study (58) was published, fourStates had no gu idelines to regulate PAs.

The legal restrictions placed on NP an d PA prac-tice are a significant barrier to their integration intomedical delivery. Such restrictions can make it im-possible for physician extender s to pra ctice at a levelcommensurate with their training. Moreover, thelack of uniformity in State laws limits the m obility of physician extend ers. While all training programsmu st meet minimum standard s for accreditation, thecontent of such programs tends to reflect the law of the States in which they are located. While an NP orPA trained in on e State may be capable of perform-ing au thorized functions in other States, their specifictraining experience may not fulfill licensing re-

quirements outside their State of training. Althoughthis does n ot pr ohibit relocation, it does create a major d isincentive. Moreover, since most ph ysician ex-tender training programs ar e concentrated on the eastand west coasts, it may be d ifficult to achieve a dis-tribution of graduates from areas where they weretrained to other areas of the country w here their serv-ices are most need ed.

ReimbursementReimbu rsemen t remains a m ajor obstacle to the ex-

pand ed u se of physician extenders. Insurers are gen-erally reluctant to extend coverage to new servicepr oviders becau se of either legal restrictions or d esireto control costs and to avoid en couragement of otherhealth workers who provide similar services fromseeking compensation (18,58). While some private

third-party payers su pport the concept of reimburse-ment for physician extender services, virtually noneprovide payment.

App roximately half the States provide some typeof reimbursement for physician extender servicesund er their medicaid program s. In all cases, paymentis made to the sup ervising p hysician or institution.Federal reimbursement und er the medicare programhas allowed institutions to include physician extendercomp ensation in th eir calculation of reasonable costfor reimbu rsement pu rposes. Federal paym ents forprimary care services provided by physician ex-tenders, however, have been restricted by provisionsenacted before these new professions were estab-lished. In most cases, services traditionally, per-formed by physicians are not reimbursable underFederal programs when provided by physician ex-tenders (64). Under medicare part B, reimbursementfor medical services rendered by physician extendersis restricted to those “furnished as an incident to aphysician’s professional services, of kinds which arecommonly furnished in physicians’ offices and arecommonly either rendered without charge or in-cluded in p hysicians’ bills” (213).6

In 1977, the Rural Health Clinic Services Act(Public Law 95-210) waived such r estrictions in themed icare and med icaid p rograms for ph ysician ex-tenders practicing in certified rural health clinicslocated in designated underserved areas. The Actprovides payment for physician extender serviceseven when not directly sup ervised by a ph ysician atall times. This allows such clinics staffed only byphysician extenders, with p hysician backup, to p ro-vide reimbursable primary care services to medicareand medicaid beneficiaries. Payment is on a reason-

able cost basis and is restricted to those p hysician ex-tender services authorized under State legislation.Because of variation in legal and reimbu rsemen t pol-icies am ong States, the imp act of Public Law 95-210on each State will d iffer (105).

Changes in reimbursement policy, while signifi-cant, have come slowly and on a very limited basis.The result has been to tie ph ysician extend er pr acticeto the supervising physician or institution. Becausemost ph ysician extenders are currently employed inorganized settings, reimbursement restrictions h avenot p revented the growth of their p rofessions. With-out expand ed emp loyment opportu nities in physicianprivate practices, however, physician extenders will

not be able to assum e an imp ortant role in m edical



32 q Bac kg round Paper #2: Case Studies of Medical Technologies

care delivery. Current reimbursement restrictionsmake such an expansion unlikely. Modifications of current reimbursement policy could address thisproblem. A nu mber of questions includ ing the scopeof services to be reimbursed, method of payment toph ysician extend ers in p hysician offices, level of pay-ment for services that both ph ysician extenders an d

physicians can provide, payment levels in under-served v. adequately served areas, and the recipientof paymen t for physician extender services must firstbe resolved (64).

Practice With Physicians v.Independent Practice

The functions of NPs are directly influenced bytheir employment setting. NP training encourages in-depend ence, responsibility, and autonom y as impor-tant asp ects of professional developm ent. As a result,NPs generally prefer employment settings which of-fer increased self-sufficiency and greater decision-making responsibility in patient care. Organized set-tings tend to offer less opportunity to meet these ex-pectations, but because such settings are more recep-tive to hiring NPs, the major portion of NPs areemp loyed in them (1o00. NPs m ight prefer to wor k inphysician p rivate practices or in ind ependent prac-tices, but the opp ortun ities to do so are limited. Themajor portion of p hysicians are in p rivate solo orgroup pra ctices, and yet a 1976 survey by Sultz, et al.(99) found only 14 percent of NPs em ployed in p hysi-cian private practices. While the actual number of NPs in independ ent practice is not known, the Amer-ican Nursing Association estimates that there areabout 300 privat e indep end ent N P pra ctices (18).

For many N Ps, employment in p hysician private

practices presents several perceived advantages overless flexible institutiona l settings. In particular, gr ouppractices which emp hasize a “team” ap proach seemto allow NPs increased participation in m any aspectsof practice (11,12), However, physicians may be dis-couraged from using NPs in their private practicesbecause of legal restrictions or am biguities and lack of third-party r eimbur sement for NP serv ices, Also,the increase in the number of medical school grad-uates may further redu ce physician interest in NPs orPAs.

The experience of NPs in physician private prac-tices varies considerably, since the ph ysician d eter-mines the exact nature of their responsibilities. In

some situations, NPs may actively participate indiagnosis and treatment of illness, provide counsel-ing and p atient edu cation, and perform a w ide rangeof other duties. In other settings, however, the physi-

cian m ay be un willing to d elegate a broad spectrumof tasks, and the functions of the NP m ay be limitedto mor e trad itional nur sing tasks (11,12).

As an alternative to their interest in employment inphysician private practices, a small number of NPshave attemp ted to establish independ ent p ractices.There are many difficulties in u ndertaking su ch prac-

tices. Initially, an independent practice requires asubstantial financial investment. Startup costs can be$15,000 or more, and the NP must be prepared tooperate at a deficit until an adequate clientele can bedeveloped (2). Moreover, since in the limited caseswhere th ird-party reimbursement is available for N Pservices, the payment is made to the supervisingphysician or institution, rather than directly to theNP, virtually all independent practices mu st rely onout-of-pocket payments from patients. As a result,very few indep endent p ractices have attained finan-cial self-sufficiency. Those that have been successfulusually have either been located in metropolitanareas or have provided a particular service not wide-ly available otherwise in the community, such ashom e visits (2,110). How ever, more often NP s in pri-vate independent p ractice report that they mu st sup-plement their incomes through speaking engage-ments, teaching, and other nursing emp loyment (2,4,6,23,95).

In addition to serious financial problems, the ap-propriateness of independent practice by N Ps is ques-tioned by physicians, nurses, consumers, and policy-makers. It has been noted that nu rses may perceiveNPs as taking on a more dominant role, similar tothat of physicians, and therefore may be reluctant tosupport independent practice (18). In one stud y, 73percent of nu rses and 2 per cent of physicians felt thatthe prop er role for an N P is to practice with a physi-

cian (18). Since NPs’ ind epend ent p ractices wou ld d e-pend on physician referrals to establish a clientele,the concerns expressed by physicians suggest thatsuch referrals generally will not be forthcoming.Consumer reluctance to use independ ent NPs comesfrom inherent resistance to any new provider, fromunfamiliarity with a nonp hysician providing m edicalservices, and because, wh en given the choice, man ywould continue to prefer a physician. Some inde-pend ent NPs’ practices have w aited several monthsfor their first patients (87).

Independent practices will not d evelop u nder exist-ing characteristics of NP pra ctice. As a result of cur-rent legal sp ecification of th e kind s of services NPs

can perform w ithout the su pervision of a p hysician,the majority of NPs in independent practice providetraditional nursing care rather than prim ary med icalcare (50).



Since the introduction of NPs, there have beensome chang es in licensu re laws to allow them to pr ac-tice in a m anner m ore commensurate w ith their train-ing. NPs have sought statutory changes w hich w ouldallow them to pra ctice more broad ly. In some cases,States have resp ond ed t o these efforts (e.g., Califor-nia recently acted to allow nu rses to become m em-bers of a medical corporation). ’ Whether or notpolicy makers agree on the degree of independ ence tobe prescribed legally for ph ysician extend ers, a grow-ing number sup port the position that reimbur sementpolicies should be revised to encourage NP an d PAemployment. With the existing structure of health

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