Transforming Health Care Through Evidence and Collaboration
Transforming Health Care Through Evidence and Collaboration

Valuing Physician Work in Medicare: Time for a Change

Miriam J. Laugesen, Ph.D., Assistant Professor, Department of Health Policy and Management, Mailman School of Public Health, Columbia University
Miriam J. Laugesen
Miriam J. Laugesen

For more than 20 years, Medicare pay-ments to physicians have been based on a Resource Based Relative Value Scale (RBRVS) designed to capture the relative variation in physician work, practice expenses, and medical liability insurance costs for each of the more than 7,000 services provided by physicians. Not only do these valuations affect the relative profitability of specific services and the earnings of the specialties that provide them, their use by many Medicaid programs and commercial payers amplifies their impact well beyond Medicare. Despite the critical need to get the values right, however, there is considerable evidence that the values for many services are inaccurate, with misvaluations potentially encouraging provision of surgical and procedural services over primary care.1

The Centers for Medicare and Medicaid Services (CMS) makes annual updates to the RBRVS to reflect developments in technology and medical practice, which create new services and can change the time and effort required to deliver existing services. In addition, the law requires a comprehensive review of the fee schedule values every five years. Hundreds of annual updates and thousands of fee schedule codes make maintenance of the RBRVS a daunting task.

Since the inception of the fee schedule, CMS has relied on the American Medical Association’s Relative Value Scale Update Committee (RUC) to accomplish this work. The RUC is a non-governmental body with membership from the major specialty societies, primary care physicians, the AMA and the osteopathic and allied health professions. It meets three times a year to develop update recommendations for CMS. Between 1994 and 2010 CMS accepted almost 90 percent of RUC recommendations,2 although increasingly CMS has been more likely to disagree with the RUC.

Recent media reports have drawn attention to the role of the medical profession in the update process.3,4 Specialty societies and RUC leadership respond by emphasizing the unique expertise of the committee. What is the real story? In this essay, I provide insights gained from interviews with current and former RUC participants.* My observations confirm the dedication of the RUC members and staff but also reiterate concerns that have been raised by others5 regarding the reliability of the evidence underpinning the RBRVS.

Questionable Data, Selectively Used

To make its work-value recommendations, the RUC largely relies on specialty society surveys that collect data on the intensity of effort and amount of physician time required to provide specific services. Intended to reflect factors such as technical skill, physical exertion and mental stress, estimates of intensity of effort are necessarily subjective and prone to error. Time should be more easily measured, but as early as 2006 researchers used operating room logs to show RUC time estimates were off base.6,7 My comparison of those measured times to 2014 RUC times shows that RUC times remained longer than actual times for 20 of the 24 services studied (Figure 1).Across all 24 services, RUC times overstate real-world times by an average of 33 percent and by as much as 127 percent in one instance. Several problems with the methodology of the surveys and the way the data are used likely contribute to at least some of these discrepancies.

Small and Non-Random Samples

Until this year, the RUC required societies to survey a minimum of 30 physicians (it is now 50). At times, however, it has accepted even smaller samples and permits use of standing panels of physicians who complete surveys regularly. Such panels may not be broadly representative of physicians or specialty society members. For example, one society has used a panel drawn from its practice management section, whose members are likely to have a better understanding than most physicians of reimbursement policy and how survey results can influence payment rates. The problems introduced by small purposive samples are likely compounded by low response rates.

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