• What’s being done (and not) to fix Medicare physician payment problems

    The story of the American Medical Association (AMA) committee that updates the relative payments by Medicare to physicians has been told before. It’s the Relative Value Scale Update Committee (RUC), and you can read all about it in a recent Washington Monthly piece by Haley Edwards, which was followed this weekend by a similarly-themed Washington Post piece by Peter Whoriskey and Dan Keating.

    Unknown to most, a single committee of the AMA, the chief lobbying group for physicians, meets confidentially every year to come up with values for most of the services a doctor performs.

    Those values are required under federal law to be based on the time and intensity of the procedures. The values, in turn, determine what Medicare and most private insurers pay doctors.

    But the AMA’s estimates of the time involved in many procedures are exaggerated, sometimes by as much as 100 percent, according to an analysis of doctors’ time, as well as interviews and reviews of medical journals.

    If the time estimates are to be believed, some doctors would have to be averaging more than 24 hours a day to perform all of the procedures that they are reporting. This volume of work does not mean these doctors are doing anything wrong. They are just getting paid at the rates set by the government, under the guidance of the AMA.

    No, doctors aren’t doing anything “wrong,” but something is obviously very wrong with how relative Medicare payments to doctors are updated. Problems also exist with the how the overall level of Medicare payments to physicians is updated. The issue arises in Congress approximately annually, as the body confronts what to do about the latest delay in implementing the Sustainable Growth Rate (SGR) formula that governs it. So, there is ample opportunity for Congress to address issues with the RUC.

    And, as it happens, a new SGR fix (aka, “doc fix”) is making it’s way through the hallowed halls. What would it do?

    The bipartisan measure provides 5 years of stable Medicare payments starting next year, with reimbursements growing 0.5% for each year between then and 2018. […]

    The “Update Incentive Program” would — starting in 2019 — place at risk a certain amount of fee-for-service (FFS) payments and base those reimbursements on quality measures.

    Quality measures would compare physicians with their subspecialty peers. Measures are to be based on clinical care, safety, care coordination, patient experience, and population health.

    Physicians scoring in the top third of their group will receive a 1.5% bonus. Those landing in the middle third will receive a 0.5% bump in Medicare pay. Doctors who score in the bottom third will receive a 0.5% penalty in payments. […]

    Physicians may opt out of this quality-incentive program if they participate in an alternative payment model such as a patient-centered medical home (PCMH), accountable care organization (ACO), or bundled payment program.

    “Providers may submit proposals on an ongoing basis for innovative [alternative payment models] through a newly developed, streamlined process that encourages high-quality, high-value healthcare,” the committee said.

    Physicians who decline to report their quality data or participate in a alternative model will receive a 5% cut in payments starting in 2019.

    In other words, it’d do many things — arguably good — but not touch the RUC (unless I’ve missed something). Meanwhile, Medicare is planning a quicker route toward performance-based pay.

    The changes would affect nearly 500,000 physicians working in groups. The federal health law requires large physician groups to start getting bonuses or penalties based on their performance by 2015, with all doctors who take Medicare patients phased into the program by 2017.

    The program is a major component of Medicare’s effort to shift medicine away from its current payment system, in which doctors are most often paid for each service regardless of their performance. The current system, researchers say, financially encourages doctors to do more procedures and is one of the reasons health costs have escalated. The health law required Medicare to gradually factor in quality into payments for hospitals, nursing homes, physicians and most medical providers.

    Again, no RUC changes here. Also, the AMA is opposed to the program.


    • No, doctors aren’t doing anything “wrong,”…

      Actually they are. When I was a lawyer in MA, it came out that there were public defenders billing for more than 24 hours in a day. They had to pay it back. The system required you to bill for .25 hours if you went over 6 minutes of legal activity. This of course led to enormous hours being billed. They system was changed to limit the number of hours you could bill. Period.

      This needs to be done with docs. If your billing rate is 200 bucks an hour, you can bill for x amount of hours and that is all. The question is how many hours do we want to pay docs for? 30? 40? 50? 60? I would think anything over 60 would be insane. But that’s me.

      • The scare quotes were meant to suggest “illegal.” “Wrong” is an overloaded term. It can mean too many things.

      • Docs aren’t billing for hours. They’re billing for procedures, or codes. It’s the RUC that’s determining the hours assigned to each of these codes. So, doctor’s aren’t doing anything wrong, but the RUC (and by extension, the AMA, CMS, and Congress) is.

        • This is to both you and Austin: it is fraud if the procedure is based on you working X hours and you bill based on that; that is fraud. Now, I grant you it is fraud akin to the situation lawyers were placed in by having to bill the way they had to but the lawyers had to pay it back and I don’t see why the docs should not pay back any work done in excess of say 10-12 hours a day.

          Public defenders in MA are limited to around 1800 hours a year with exceptions granted on a case by case basis. Perhaps we need a similar rule for docs. You can bill insurance companies and Medicare/Medicaid whatever number of hours a year realistically possible to work at X dollars per hour.

          • elboku – I don’t disagree with you, but I think you’re missing the point. Unlike lawyers, physicians don’t bill by the hour. When a doc bills for a procedure or code, it’s highly unlikely that she has any idea how much time the RUC assigned to that code. It’s pretty unlikely that she even knows of the existence of the RUC. What she does know is that she gets paid $100 (or whatever it may be) for the procedure, whether it takes 5 minutes or 5 hours.

            The point of the original post and the article that Austin discusses is to shine a light on the secretive and arbitrary nature of the RUC and how it sets prices. I expect a committee comprised almost entirely of specialists to make recommendations that benefit specialists. CMS and Congress, however, don’t have to accept these recommendations.

            So, we should direct our criticism to the RUC and to CMS and Congress. Criticizing physicians for using the codes they are required to use for billing purposes gets us nowhere.

            • I am not picking on docs; the system blows. I still think if we went to an hourly system we could do better.

      • I like the concept. Disallow billing that indicates the Doctor is adding hours to the day. In most other professions, billing hours beyond the available workday is a sign of fraud. Fraud in billing the Federal government is a crime.
        Of course this isn’t fraud because the doctors don’t bill by the hour, but since their rate is based on hours one would expect there to be a relationship between billings and available hours in the day!

    • Has the Medicare fee schedule been compared to the rates paid by governments in other countries for the same services? Here’s the publicly available physician fee schedule for the province where I live. http://www.health.gov.bc.ca/msp/infoprac/physbilling/payschedule/index.html

      I assume that a computerized version is available rather than the .pdf files in this link.Here’s the 5-year history of physician charges by each individual procedure (if you don’t believe the fee schedule). http://www.health.gov.bc.ca/msp/paystats/pdf/ffs_fee_items.pdf

      • Don,

        Unfortunately, the professional fee is a very small part (in many cases ~10%) of the overall cost to the patient so even if we shifted the schedule to the same costs as your schedule, the impact would be small.

        Also, since the input costs (e.g., rent, opportunity costs for physicians, overall wealth of population, etc.) are very different, isolated comparisons don’t tell us much of any value.

        • But rent is often a function of the choice of space. The difference between US clinics and hospitals and NHS clinics and hospitals is striking. All US clinics seem to have a glassed in atrium with plenty of plants and comfortable and attractive chairs. In the UK, those spaces would have been converted to health-delivery space long ago.

          Ditto physician pay structure, which has to accommodate the high cost of med school and debt to pay for it.

          It’s certainly worth comparing with other countries — then looking at why our costs differ.

        • These should be EXACTLY comparable because they are payments made directly to physicians, not to hospitals or drug companies or device makers. Conceptually, a Medicare patient visiting his/her family doctor should be no different from me visiting my Canadian family doctor. If the American physician is providing some additional services, these could be accounted for in the pricing; this is included in the provincial fee schedule for complex cases which are generally applicable to seniors with multiple chronic conditions.

          These fee schedules are not cooked up in some secret meeting but are the result of direct negotiations between the provincial Medical Associations and the government health care (monopoly) provider. Both have “skin in the game” – governments want to minimize their costs and physicians want to maximize their revenues. I have no skin in this game – to me a comparison of rate schedules is no different from the international comparisons of the total cost of medical procedures that have been addressed on this site on numerous occasions.

    • Austin
      The new payment models suggested in the SGR fix could theoretically render the RBRVS codes, and by default, the RUC, less relevant.

      By bundling payments to IDSs, local care units would need to allocate pay as they see fit. As volume and FFS becomes more difficult to parse, salaried positions with built in incentives (including volume) will rise.

      Also, to clarify:

      For simplicity:

      4 RVUs pay $100, with a conversion factor of $25.

      The RUC increases a service value to 5 RVUs. The conversion value then drops to $20.

      The SGR determines the $100 cap.

      Over the years, the cap should decrease or remain flat. Congress increases.

      When proceduralists gobble up the RVUs, via higher multiplier or volume, they consume the $100. Nothing left for the generalists.