Most of the posts I do here have a take-home message tailored to the rollout of the health law: here’s something going on that you can take and write about in your community. So initially I didn’t write about three very good pieces about fee-setting for physician payments. But after thinking about it some more, I decided to draw them to your attention. They may not be all that easy to localize, but they do explain a lot about how doctors are paid, why specialists get so much more than generalists, and why the system is so broken. They are worth your time.
All three articles focus on something called RUC (rhymes with truck) – Relative Value Scale Update Committee, which is run by the American Medical Association and makes recommendations (almost all of which are accepted because there isn’t really a good alternative system) to Medicare about prices of specific physician services. The RUC is dominated by specialists, not primary care physicians, and it favors high-intensity procedures over cognitive medicine. The prices are set based on both the time and the complexity of a physician service. Putting in a stent has higher value than having a good long talk with a cardiac patient about diet, exercise and lifestyle, to come up with one simple example.
None of the three stories I’m spotlighting here are the first to look at this – RUC cycles through the spotlight every now and then. But two pieces were very good and the third investigative one (by The Washington Post) was superb. They all raise some timely issues as the Health Policy law promotes new models of care that may nudge the system away from fee for service medicine and toward more integrated care teams. All this is also playing out as Congress once again grapples with the “doc fix” – how to replace the flawed physician payment formula for Medicare. (You may have heard about the Sustainable Growth Rate or SGR.) A change could get away from volume-based fee for service toward payment criteria that is at least somewhat more quality-based.
The first story came out in May and it was by Margot Sanger-Katz of The National Journal. She explains how the RUC came about, who controls it, and how its approach adds to rising health care costs, and promotes high medical utilization – subtle incentives for people to get more care than they need, or the wrong care. She writes:
These unofficial, unelected advisers are at the heart of what experts call our “fee-for-service” health care system. By helping to set prices for medical care, they can determine which doctors earn the most (typically, those who do lots of procedures) and which ones earn the least (those who do lots of office visits). They also help shape doctors’ practices, because poorly compensated visits may lead some physicians to cram many patients into a day, and highly paid diagnostic tests may cause providers to order extras. RUC advocates say its varied membership and expertise ensure that no specialty can scam the others: In a zero-sum system, overpayments to one specialty mean underpayments somewhere else.
A second piece by Haley Sweetland Edwards at The Washington Monthly goes into more detail about who is on the RUC, how little transparency there is, and how the committee and its deliberations benefit the AMA itself, in prestige, clout and dollars. (Note: She draws a brief comparison to Medicare drug pricing that isn’t quite right – and she doesn’t seem to realize there’ s a ton of price-setting in Medicare, but that’s a side issue.) Much of what she reports about the AMA itself was new to me:
The AMA spends at least $7 million a year running the RUC, according to its own estimates, and that includes maintaining about six full-time staff members. For that, it gets a very good return on investment. The first boon is that, in order to be on the RUC, specialty societies must become dues-paying members…
The second boon for the AMA is that by controlling the RUC, it controls much of the source code that our health care system uses to operate. Every single one of those roughly 9,000 medical services and procedures has its own five-digit code, known as current procedural terminology (CPT), and the AMA owns them all. That means that anyone—physicians, labs, hospitals, you name it—who wants to bill Medicare, Medicaid, or a private insurance company has to purchase either AMA books and products, or products from other software companies that pay AMA royalties and licensing fees to use the CPT codes. According to its annual report, in 2012 the AMA made $83.1 million in “royalties and credentialing products,” a large chunk of which comes from licensing CPT. Again: cha-ching.
The Washington Post multimedia package, “How a secretive panel uses data that distort doctors’ pay” covers all that ground and more. The investigation by Peter Whorisky and Dan Keating looks not just at the RUC process – but on precisely how distorted or inflated the actual calculations are.
They open with a story about a Florida gastroenterologist who typically does a dozen colonoscopies and four other procedures in a typical day – services that, according to the RUC definitions, would take 26 hours of his day. Some of the RUC time estimates, they report, are 100 times off. They looked at medical journal articles, publicly available clinic records and supplemented the data with interviews. They looked at how procedures, like colonoscopies and cataract surgery, have changed and improved over the years, becoming faster and simpler. But that doesn’t reflect how they are evaluated by the RUC.
As former Medicare chief Tom Scully told the Post: “The idea that $100 billion in federal spending is based on fixed prices that go through an industry trade association in a process that is not open to the public is pretty wild.”
Keep in mind that the doctors aren’t breaking the law – this isn’t the same as those brazen fraud headlines we see. Dr. Smith may bill Medicare for 10 colonoscopies – and maybe they take him only five or six hours. But he’s billing for a fee for each service, each colonoscopy. He’s not saying, “Medicare, please pay me for 26 hours of colonoscopies (even though I only did five hours).” See the difference? The fee schedule is the problem; the doctor, in this case, is not.
One last note: The RUC piece in the Washington Monthly ran with a related piece by Phil Longman on the reasons the residency system is producing specialists and giving primary care short shrift. There are a few programs nationally addressing this problem – you may be able to explore what’s going on in your community – and if the answer is nothing, report on the obstacles to change.
