Fixing America’s Health Care Reimbursement System

Brian Klepper

First published 3/3/11 on Kaiser Health News

A tempest is brewing in physician circles over how doctors are paid. But calming it will require more than just the action of physicians. It will demand the attention and influence of businesses and patient advocates who, outside the health industrial complex, bear the brunt of the nation’s skyrocketing health care costs.

Much responsibility for America’s inequitable health care payment system and its cost crisis is embedded in the informal but symbiotic relationship between the Centers for Medicare and Medicaid Services and the American Medical Association’s Relative Value System Update Committee — also known as the RUC. For two decades, the RUC, a specialist-dominated panel, has encouraged national health care reimbursement policy that financially undervalues the challenges associated with primary care’s management of complicated patients, while favoring often unnecessarily complex, costly and excessive medical services. For its part, CMS has provided mostly rubber-stamp acceptance of the RUC’s recommendations. If America’s primary care societies noisily left the RUC, they would de-legitimize the panel’s role in driving the American health system’s immense waste and pave the way for a more fair and enlightened approach to reimbursement.

As it is, though, unnecessary health care costs are sucking the life out of the American economy. Over the past 11 years, health care premium inflation has risen nearly four times as fast as the rest of the economy. Health care costs nearly double those in other developed nations have put U.S. corporations at a severe competitive disadvantage in the global marketplace.

Many health care experts believe that half or more of all health care expenditures — the costs of bloated transactional processes as well as inappropriate procedures, service sites and prescription drug levels — provide no value. For perspective, this year we’ll unnecessarily spend nearly $1.5 trillion on health care, an amount equivalent to the budget deficit. Though we continually have given physicians and the health care industry a pass on this issue, its impact can be understood as the difference between our national prosperity and decline.

The current system’s under-valuing of primary care is one of three structural flaws — the other two are fee-for-service reimbursement and a lack of cost, quality and safety transparency — that produce excess spending and block the health care sector from working as a true market. Overwhelming evidence shows that allowing physicians to serve as patient advocates and guides throughout the entirety of care results in better outcomes at significantly lower cost. Recently, patient-centered medical homes, super-charged primary care practices, have demonstrated measurable cost and quality successes, also proofs of the approach. These facts are indisputable and are, by the way, the reason why America’s corporations are stepping up the use of on-site primary care clinics.

Meanwhile, a spate of recent articles about the RUC have produced swift, strong responses within key circles. They have been passed virally among primary care physicians. Discussions have begun with people who might have influence over the process. And sensible changes in this advisory system seem possible.

Seizing that opportunity would first require mobilizing primary care doctors to demand that their professional societies, such as the American Academy of Family Physicians and the American College of Physicians, abandon the RUC. Then these physicians also would call on CMS to replace it with a more independent advisory panel. That effort would also launch a national discussion about how to more fairly value and pay for America’s health care.

But one man’s waste is another’s income. The current reimbursement system handsomely serves most of the health care industry: health plans; hospitals; specialists; and drug, device and technology firms. Threaten that revenue stream, and those organizations would direct their considerable resources to its protection. In 2009, records show that some members of Congress collected $1.2 billion in health care lobbying contributions – more than it had ever received from an industry on an issue – from health care interests. America’s 250,000 primary care physicians are simply no match for the combined power and influence of the rest of the health care industry.

In an influence-driven government like ours, it is the non-health care business sector that has the organization and leverage necessary to drive the health care changes America so desperately needs. The health care industry represents one dollar of every six dollars in the U.S. economy, but industries outside health care represent the other five. If American businesses, led by groups like the National Business Group on Health, the Pacific Business Group on Health, the Business Roundtable, the National Retail Federation, the U.S. Chamber of Commerce and the National Federation of Independent Business were to advocate for the same policies in national health care reimbursement policy that their members are often implementing in their own on-site clinics, it would have a dramatically positive impact on the nation’s physical and economic health.

Ironically, health care reform specifically avoided addressing the carnage that has been wrought by the RUC. If America’s primary care physicians, backed by the nation’s corporations, all working out of enlightened self-interest, were to focus on addressing this one structural defect, the corrective impact on our health system would be greater than all the reform bill’s cost-reduction provisions combined.

Brian Klepper is an independent health care analyst, Chief Development Officer forWeCare TLC Onsite Clinics and the editor of Care & Cost.


1 Comment

Filed under RBRVS, RUC

One response to “Fixing America’s Health Care Reimbursement System

  1. alan lazaroff

    “For every complex problem, there is a solution that is simple, plausible, and wrong”. Usually attributed to HL Mencken.

    I am a geriatrician. No medical specialty has suffered more under the payment system than mine. So six years ago I began representing the American Geriatrics as its RUC Advisor. It was an outlet for my anger and frustration. Who were these SOB’s who were doing this?

    The RUC Advisor role is like that of an expert witness. I present the data obtained by AGS and recommend a relative value to the RUC itself, which acts like the jury. I have spent about 60 very long days sitting and observing and sometimes participating in RUC activities. I have never been a fan of the AMA, and never joined until I had to for the RUC, or so I assumed.

    I don’t recognize the picture of the fat-cat surgeons and proceduralists using their numbers to screw primary care. The payment system is very sick but I think you have the wrong diagnosis. And I want to explain why I have changed my mind and think we should stay in the RUC.

    We have a “resource-based” relative value scale, that was mandated in OBRA ’89 and implemented in 1992. Resource-based means that the relative value is supposed to be computed based on the resource inputs (costs) of providing a service. This is what the RUC tries to do. Costs comprise physican work, practice expense and malpractice expense. Each of these is further multiply subdivided. That’s it- nothing else is considered.

    Many other factors might be considered in payment decisions. Some examples might be the value of the service to the patient, effectiveness, cost-effectiveness, impact on the workforce, impact on access to the service, how much doctors earn. The RUC never considers any of these. These are policy decisions outside of the purview of the RUC. If you believe, as I do, that these factors should be considered, it would require a change in the law. So in part, the problems of payment are inherent in the kind of system federal law requires.

    The RUC has technical problems which have been elucidated by MedPac and others, especially Bob Berenson. Take the example of figuring the physician work RVU for a new high tech procedure. In calculating physician work, the RUC considers the time required to perform the service, technical skill, stress due to potential for complications, mental and physical effort. When the procedure is new and considered by the RUC, it is hard and stressful to do, takes a long time, requires a lot of skill. After a few years, physicians gain experience. The procedure is easier to perform, takes less time, less stressful. The relative value should DECREASE (although I note many specialists gasp when this is explained). If the value does not fall, these productivity gains make the service increasingly profitable over time. The doc generates more RVU’s per hour.

    Historically the RUC lacked an adequate process to address this issue. The “five-year review” process was supposed to deal with it. The AMA specialty societies and CMS were to submit codes that were potentially misvalued due to changes in medical practice. CMS seldom recommended codes but the specialty societies did for the first three “5 year reviews”(the just completed 4th 5 year review was different). Lo and behold, nearly all the codes recommended by the specialty societies received increases in value. For some reason the specialty societies did not propose re-assessment of codes they suspected were overvalued! And CMS, the theoretical counterbalance, was asleep. Since a scathing review of the RUC in 2006, this has been radically changed; the 5 year review has become more of a continuous process, and CMS is aggressively proposing codes that may be overvalued. Many will drop.

    Budget neutrality rules influence the ultimate effect of RUC recommendations. If a re-valuation increases projected spending by more than $20 million, everything else must go down, usually by reducing the conversion factor. When the RUC recommended increases of 25-30 percent for 99213 and 99214 in 1997, the actual impact was more like 6%. Every increase in E and M has huge budgetary impact. When specialty services decline (e.g., cardiac cath codes), E and M’s will increase, but the effect will be blunted over the enormous universe of E and M users.

    About 800 new codes have been introduced since 1992. Most involved new technology and many are likely overvalued because of the problems discussed above. Primary care docs use a few dozen codes; the rest of the nearly 7000 codes are used by specialists.

    There are many other examples of technical problems that are now finally being addressed. You will see a redistribution happening as a result of the RUC changes.

    But the impact will be muted, because the RUC’s influence is limited. Want to get paid for telephone calls, e-mail, team conferences? The RUC has established values for all these. But CMS says they are already paying for these things as part of E and M, and declines to pay separately (unbundle)for them. Most payers follow.

    So long as there is a FFS system, you must have a rational basis for paying for individual services. It’s going to be hard to get rid of FFS in the near future. Let’s say we move to bundled payments. A very likely way such payments will be calculated is to estimate the individual FFS elements needed and sum them. Thus the accuracy of the underlying payments remains important.

    It might be better to attack the inadequacy of the existing E and M codes to distinguish among various levels of physician work across specialties. And there can be no greater enemy of primary care than the E and M coding guidelines, which are redefining medical care as the mindless robotic notation of largely irrelevant information, a trend exacerbated by EHR’s. This is not RUC territory.

    So reform the RUC. Make RBRVS payments more accurate. Or consider something other than an RBRVS. Pursue policy changes that advance societal goals. But so long as at some level doctors are paid piecemeal, you somehow need to establish relative values for more than 7000 unique services. Who can do this? It should not be arbitrary.

    The payment system is a catastrophe. The RUC proces is flawed but it isn’t rape. And it isn’t arbitrary.

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