Although Medicare is a national program, administration of Part B payments to physicians is in the hands of insurance organizations in ten Medicare regions. The carriers follow varying practices in using actual charges within localities as the basis for determining reasonable charges for physicians' services. While some of these practices have already been shown to influence fee levels, reasonable charge determination involves many more whose influence has not been systematically studied. This paper reviews preliminary findings from a study which examines carrier differences in discretionary practices as to specialties, localities and other claims data that may be merged or compared with Medicare data in determining customary and prevailing prices used to set limits on Medicare payments, and other practices reported in an official questionnaire to carriers. The effect on fee levels and other measures of program performance is being studied after taking into account social, economic and health resource variables extracted from the Area Resource File, that are expected to influence local medical prices through the demand for and supply of physicians' services. Dependent variables representing fees are the 50th percentile of the distribution of weighted customary charges of individual physicians in an area and Supplementary Medical Insurance expenditure per enrollee. The preliminary findings in this paper concern discretionary practices, socioeconomic variables and fee distributions.