Drivers of Cost Differences Between Nurse Practitioner and Physician Attributed Medicare Beneficiaries

Background: Although recent research suggests that primary care provided by nurse practitioners costs less than primary care provided by physicians, little is known about underlying drivers of these cost differences. Research Objective: Identify the drivers of cost differences between Medicare beneficiaries attributed to primary care nurse practitioners (PCNPs) and primary care physicians (PCMDs). Study Design: Cross-sectional cost decomposition analysis using 2009–2010 Medicare administrative claims for beneficiaries attributed to PCNPs and PCMDs with risk stratification to control for beneficiary severity. Cost differences between PCNPs and PCMDs were decomposed into payment, service volume, and service mix within low-risk, moderate-risk and high-risk strata. Results: Overall, the average PCMD cost of care is 34% higher than PCNP care in the low-risk stratum, and 28% and 21% higher in the medium-risk and high-risk stratum. In the low-risk stratum, the difference is comprised of 24% service volume, 6% payment, and 4% service mix. In the high-risk stratum, the difference is composed of 7% service volume, 9% payment, and 4% service mix. The cost difference between PCNP and PCMD attributed beneficiaries is persistent and significant, but narrows as risk increases. Across the strata, PCNPs use fewer and less expensive services than PCMDs. In the low-risk stratum, PCNPs use markedly fewer services than PCMDs. Conclusions: There are differences in the costs of primary care of Medicare beneficiaries provided by nurse practitioners and MDs. Especially in low-risk populations, the lower cost of PCNP provided care is primarily driven by lower service volume.