Physician Payments: The Not-So-Secret Secret

August 9, 2013

physicians and medicare paymentsOn July 20th, The Washington Post did an expose on the process for setting the Medicare physician payment schedule entitled, How a secretive panel uses data that distorts doctors’ pay.  The article by Peter Whoriskey and On July 20th, The Washington Post did an expose on the process for setting the Medicare physician payment schedule entitled, How a secretive panel uses data that distorts doctors’ pay.  The article by Peter Whoriskey and Dan Keating pointed to the practice of Harinath Sheela, MD – a Florida gastroenterologist – who performed on average 12 colonoscopies and 4 other procedures in the typical day, which according to the American Medical Association procedure valuations would be the equivalent to a 26 hour day.  Not only did the number of hours exceed the number of hours in the average day (sic) but Sheela evidently worked an average of 10 hours or so a day – far short of the “average” for the number of procedures performed.

The example – promulgated on the front page – highlighted the fundamental problem with the existing system.  The system is devised by a committee organized by the American Medical Association in response to Medicare legislation that stipulates that the physicians should be involved in determining the “relative value” – in terms of time and complexity – of all care provided under the Medicare program.  In fact, the Centers for Medicare and Medicaid Services (CMS) has been involved in the process since the beginning and actively participate in the meetings. The valuation process has been around a long time and well known throughout the profession, but under the covers of healthcare and away from the public.  So, the process has been there … but, the public simply was not aware.

Once the system – which was developed by the Harvard researchers – was initiated the Medicare system faced a critical problem: how to update the point system on a regular basis to maintain validity.  Who could do that?  So, the AMA volunteered to be the coordinator.  Actually, the AMA more than volunteered, but that’s another story.

And, as many of those in the healthcare field know, the system is fraught with problems.  Problem #1 – when physicians are surveyed, they are informed that the survey is for the purposes of gathering information for the payment valuation process.  As a result, time inflation has crept into the system so much so that the AMA committee has had to reduce the time estimates submitted by physicians on a regular basis. One or more specialties with a vested interest in the procedure under review present their data and respond to the questions of the rest of the committee who frequently scrutinize the data with a high degree of skepticism.  A trip through the RUC is never pleasant for the presenting specialties who actually prepare for weeks to make their points before a group who are looking for flaws in the data.

Problem #2 – the Post article highlighted the fact that the valuation committee is seven times more likely to raise work time requirements than it is to lower them for the procedures.  And, the system has gotten downright complicated as noted by a recent colleague in an editorial in The Boston Globe.  In defending the methodology, Barbara Levy, MD noted that “all of the times are inflated by some factor” and that the committee works carefully to make assure that the “relative value” of the system has integrity.  In other words, while the time and intensity valuations may be inflated they are comparable to one another.  Furthermore, the RUC does not set fees.  Setting fees is a separate process done by CMS and downstream by private insurance companies.

Problem #3 – the setting of the point system is done by the AMA, a trade association.  Some would call it the fox guarding the hen house!  Again, Dr. Levy noted that it is up to Congress and the private payers to set the reimbursement schedules that coincide with the relative value scale.  In sum, Levy offered that “None of us believe the numbers are fine-tuned.  We do believe we get them [i.e. the value of the procedures] right with respect to each other.”

Problem #4 – the number of Medicare officials overseeing the entire process ranges from 6 – 8 part-time professionals versus the literally hundreds of AMA and specialty society professionals who are involved in the process.  In fact, the Medicare acceptance rate of the fee schedule put forward by the AMA committee approaches the 90 – 95 percent level in most years.

According to MedPAC, the independent federal advisory group that provides Congress with advice on Medicare, spending by the program grew at a rate of 58 percent for the period 2001 to 2011.  The reason?  It was primarily because the number of procedures increased dramatically during that time period along with overall inflation of the relative value scale.  What the Post article points to, however, is a major flaw in the system which the healthcare community should address quickly if we are to maintain our credibility.

Beyond the appearances of the system, the approach is flawed from any number of perspectives.  Why should the profession open itself up to such criticism?  The other fly in the ointment is that the insurers set the fees.  The people who obtain the services (i.e. patients) do not generally “shop around” for the best price.  It’s time for a re-evaluation of the system which was developed back in the early 1990s.  In essence, each procedure is given a number of points based on the time/intensity equation.  The price per point for 2013 is set at $34.02 with some modifications made for geography (e.g. the cost for rural areas is less than for major cities like New York) and other factors.  The end result is a “relative value unit (RVU)” for each procedure.  And, in the practice world – the number of RVUs you generate determines your compensation – across the board – not just for Medicare!!  The other point is that the Medicare fee structure has been stagnant for a long time.

The Medicare law stipulates the importance of time in creating the “value” for services offered by the physicians, specifically stating that “physician time and intensity in furnishing the service” are to be included in the formula.  Furthermore, the Medicare time estimates are available for all to review so, in fact, the information is open.  The only problem is that no one really looks at the time estimates except us, the physicians.  Also, I have long been very critical of the current system which I believe is heavily biased toward “procedures” and “doing” things to people.  In fact, I frequently describe the current system as a “pass-a-tube-and-get-a-payment” reimbursement model.

For all of the specialties, the RUC or Relative Value Update Committee members hold an especially important role because these individuals determine the compensation for their colleagues on a national basis.  Within the profession, the RUC receives lots of attention, but not much from others – until now.  In the Post article, for example, the authors took the amount of time estimated by the AMA time for various procedures and estimated that 41 percent of gastroenterologists, 23 percent of ophthalmologists and 17 percent of orthopedic surgeons were typically performing 12 hours or more of procedures in a day.

The end result of the whole debate is that medical payments will – and should – be placed under the microscope.  An open, transparent approach toward payments is essential across the board, not just for physicians.  However, the debate may be short lived.  As we move toward the bundling of payments in the form of accountable care, patient centered medical homes and other value-oriented reimbursement models, the traditional fee-for-service approach may go by the wayside. Of course , any system should clearly involve those who actually provide the services and actions under review.  The question is how?  The process needs to be open.  It needs to involve the doctors.  But, at the end of the day, we need a revised process.

The statements in The Fickenscher Files are the personal views of Kevin Fickenscher, MD and do not reflect the views or policies of any organization with which he is affiliated.

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