Features

July/ August 2013 Special Deal

The shadowy cartel of doctors that controls Medicare.

By Haley Sweetland Edwards

But, of course, that specialty society also has the most to gain by inflating that value. For one, it’s in that society’s direct interest to get its members paid as much as possible. For another, the most affected specialty society often receives a good chunk of its funding from pharmaceutical and medical device companies—companies that also have a direct stake in the RUC’s proceedings. When the RUC offers up generous reimbursement rates for a specific procedure, doctors generally do it more often, and that means they use more of certain drugs and devices, too. It’s a positive feedback loop—and everyone knows it.

And then there’s the fact that much of the “data” these affected specialty societies trot out in front of the RUC would not pass the laugh test in a high school stats class. After all, these specialist societies get their data from surveys of their own membership—a group of people who stand to gain directly and materially from making a procedure seem as difficult, time-consuming, and stressful as possible. And respondents can’t exactly plead ignorance. They know darn well how the results of those polls will be used, and in case they forget, the surveys are printed with a reminder: your response is “important to you and other physicians because these values determine the rate at which Medicare and other payers reimburse for procedures,” according to a 2010 Wall Street Journal article.

What’s more, RUC rules require as few as thirty survey responses—a meager sample size, even if everyone involved weren’t both self-selected and personally invested in the results. “You wouldn’t use the results of thirty surveys to determine anything, much less billions in taxpayer cash,” a former adviser to the RUC told me.

There’s good reason to take into account the experience of those doctors who perform the procedure in question, said John Goodson, a primary care physician and associate professor at Harvard Medical School who has written about the RUC, “but if the process of assigning values to physician services is to be trusted, then the profession should hold itself to the same high, evidence-based standards that it does in other domains.”

cartoon

Another flaw in methodology comes from the fact that the RUC often relies on records from teaching hospitals in determining how long an operation takes, even though teaching hospitals often have longer surgery times than nonteaching hospitals. A 2006 study by the nonprofit health care research firm RTI International compared the amount of time the RUC suggested for sixty surgeries to data from 148 hospitals’ actual surgery logs. The RUC’s estimated times were often longer—sometimes by up to two hours.

Perhaps the most damning aspect of the RUC’s methodology, however, is that, while its members often spend quite literally hours debating if a certain procedure takes three minutes or just two, the RUC never so much as flicks at the question of how much—or even whether—a procedure actually benefits patients. This failure, which is part of a broader flaw in federal health care policy, is enormously damaging to the practice of American medicine. Among other things, it means that many patients wind up undergoing expensive procedures for which more effective and less costly alternatives are available.

The AMA’s main defense against the charge that the RUC skews health care spending toward specialists’ costliest procedures is that the system is self-policing. The members are working within a fixed budget, the AMA says, so they keep each other in check: if the RUC votes to raise the RVU of one procedure, it has to account for that increase by decreasing RVUs of other procedures elsewhere. And that’s true—as far as it goes. The process does indeed involve much squabbling among specialist societies, and RUC representatives do sometimes end up voting to lower codes that would positively affect their own societies. “There’s a certain calculation that happens, and people definitely vote against themselves,” a former RUC member told me.

But this inter-society bargaining occurs in a context in which there’s already a baked-in directional bias toward increasing the value of technical procedures, which are updated regularly and constantly fine-tuned, rather than cognitive or diagnostic services, which are mostly left alone. It also occurs in a context in which one side is politically weaker than the other. The most important cleavage within the RUC is between specialist doctors, who make the bulk of their money billing for procedures, and primary care doctors, who generate most of their income from office visits. While the primary care docs make up roughly 40 percent of physicians nationwide, they have only 14 percent of the votes on the RUC. Primary care physicians now have four rotating seats on the committee—up from just two seats a few years ago—out of a total of twenty-nine voting seats. (Of the thirty-one-doctor panel, two permanent seats are nonvoting positions.) Since a vote passes with a two-thirds majority, their political clout is extremely limited.

In 2005, this baked-in two-faction system erupted into a full-blown war during a RUC meeting when the two representatives from primary care threatened to leave the committee if it did not increase compensation for office visits, according to people who were present at the time. Powerful specialty societies, who didn’t want to see the amount of the pie remaining to pay for procedures decreased, vehemently opposed the idea.

Dr. Tom Felger, a former director of the American Academy of Family Physicians who was on the RUC at the time, told me that the American College of Surgeons had even created a spreadsheet, which they shared with other surgical specialties, illustrating exactly how much the RUC could increase the value of the office-visit CPT codes without affecting surgeons’ income. “They had done the math. They knew the facts,” said Felger, who represented the AAFP at RUC meetings for a decade. “When I saw it, I thought, ‘Wow-ee, this is it—now that’s collusion.’ ”

In 2007, the RUC did finally vote to increase the RVUs for office visits, redistributing roughly $4 billion from different procedures to do so. But that was only a modest counter to the broader directionality of the RUC, which spends the vast majority of its time reviewing, updating—and often increasing—the RVUs for specific, technical procedures that make specialists the most money. Because of the direct relationship between what Medicare pays and what private insurers pay, that has the result of driving up health care spending in America—a dynamic that will continue as long as specialists dominate the committee.

And despite the RUC’s vote to increase office-visit codes, the large payment gap between primary care doctors and specialists still exists. In 2012, radiologists and orthopedists made on average nearly twice as much ($315,000) as pediatricians ($156,000), while family doctors and those specializing in diabetes and endocrinology made nearly $140,000 less than urologists. “If … a primary care doctor is making a fraction of what an orthopedist is making, then that distorts the health care system in a whole variety of different ways,” said Vladeck, the former head of the CMS under Clinton. “You really have to think about what that’s doing down the line.”

Haley Sweetland Edwards is an editor of the Washington Monthly.

Comments

  • JackD on July 08, 2013 2:42 PM:

    Interesting in light of this price fixing that a number of physicians, including many specialists, threaten to and sometimes actually refuse to treat medicare patients.

  • mnemos on July 10, 2013 6:46 PM:

    @JackD - For the cases I was involved in, those physicians were generally primary care - which is understandable from the article.

    What's the difference between "the sober policy community", "the Easter bunny" and an honest Zeke Emmanuel? There isn't any, they are all equally fictitious. My point isn't really about Zeke Emmanuel deliberately lying so much as pointing out the flaw in assuming the policy community is 'sober'. Not only are there billions of dollars involved in the issues, there are important ideas about ideology, government power, legal rights and individual autonomy. For the 'sober policy community' those things can be as intoxicating as money. Case in point is the "CLASS Act" which has already been scrapped.

    I'd like to think the bundling idea makes sense, but I'm hesitant. There is a certain logic to saying "I am providing this service, and it costs so much." I can look at my bill and see they charged me for an x-ray, and I got an x-ray. What does it mean to be payed for "care" when there is no particular definition? Does it just mean the patient didn't die yet? How do you judge it?

  • NPA Project Manager on July 10, 2013 10:55 PM:

    The Washington Monthly and the National Physicians Alliance (NPA) agree...let's move from valuing inputs to valuing outputs of care. See NPA's blog for more on RUC reform: http://npalliance.org/blog/2013/07/10/a-call-to-reform-or-replace-medicares-relative-values-scale-update-committee-ruc/.

  • physician on July 12, 2013 8:50 PM:

    The one point you left out of the article is that all changes to the RVU system are revenue neutral. So if the total RVU value of all the codes is increased, there is an automatic across the board reduction in the values of all the codes. So unless there is an automatic increase in the number of higher RVU procedures (which probably happens), the updates by the RUC don't automatically increase overall spending. This unfortunately also exacerbates the gap between cognitive and procedural codes.

  • Stephen A. Kardos on July 13, 2013 8:27 AM:

    Despite many fees for medical services being dramatically reduced over time, health expense as a proportion of GDP has steadily risen over the past 50 years. Payment for cognitive efforts now lags dramatically behind payment for procedural efforts. Our nation has focused on the amounts paid for ICD9 or CPT4 codes, rather than on the quality of medical decisions made by caregivers and their patients. Surgical specialties have been more successful lobbying for higher payment than cognitive specialties. Yet, it is just this sum of medical procedures that reflects clinical decisions for an individual over time that determines individual healthcare costs and, in turn, the nation�s healthcare costs. Therefore, fees should be based on physician-patient comparative efficacy rather than unit costs. Hsiao�s RBRVS should be implemented to overcome inappropriate disparities in physician payment and be augmented by comparative efficacy for primary care cognitive services.

  • platon20 on July 13, 2013 8:19 PM:

    This article ignores 1 very important fact:

    The RUC does NOT control the amount of money that goes to doctors, it only controls the RATIO of money that goes to doctors from a FIXED AMOUNT SET BY THE FEDERAL GOVERNMENT.

    Every year, there's a total fund of money approved by the federal government that is set aside for doctors (SVR). The RUC committee simply determines how this pie is split up. But they have ZERO CONTROL over the absolute amount of money spent.

    If CMS wanted to, they could cut down the SVR total in half and the RUC couldnt do anything about it.

    The amount of money that doctors gets paid isnt set by the RUC, it is set by CMS. RUC simply controls how that fixed amount of money is split up.

  • poor journalism on July 14, 2013 9:17 AM:

    This is an example of poor journalism.

    The government decides how big the financial pie is going to be. This determines the level of service that will be provided to medicare patients for the next fiscal year.

    The doctors wrestle among themselves to determine the best way to split the money.

    This is no different than someone given foodstamps and then the family deciding on how to best to split the foodstamps to feed the family.

    Medicare is rationed care. Patients dont get the level of service that private patients are getting. As a result these doctors are finding ways to split the foodstamps to determine how they are to get paid. This is NOT price fixing.

    This is legal. This is government approved.

    This article is trash sensational journalism.

    One of the doctors feels like he got a smaller piece of the pie so he complains to a "journalist".

    The Washington Monthly prints this garbage propaganda.

  • Robert Malthus on July 15, 2013 9:15 AM:

    There is a third option for reforming this system: privatize it. That is, every patient, whether covered by Medicare, private insurance, or subsidized insurance would use a "medical expenses account" to cover their medical expenses. Medicare, employer-provided insurance, or ACA-subsidized insurance would all put funds into this account. The account could be spent only on medical expenses. The idea would be to use market-mechanisms to allocate resources and drive innovation and efficiency.

  • Socrates Lockhelm on July 15, 2013 7:27 PM:

    Price-fixing? Doctors concede that the objective is to set the parameters around which the government payments will be set. Quacks like a duck. Cut and past from the article: "The purpose of each of these triannual RUC meetings is always the same: it�s the committee members� job to decide what Medicare should pay them and their colleagues for the medical procedures they perform. How much should radiologists get for administering an MRI? How much should cardiologists be paid for inserting a heart stent?" Quack, quack! This is a price-fixing scheme that is shameful.

  • Jim Homes on July 15, 2013 7:30 PM:

    So let me get this straight... the folks who posted above (who undoubtedly are physicians) are arguing that because the doctors don't control the SIZE of the pie but instead control what codes get the BIGGEST slices of the pie that's OK? Give me a break. That's exactly the problem and it's still price fixing. Imagine... if big pharma execs got together and decided cancer drugs would be double the price but other drugs would be half off? How would that be any different? The fact is doctors and their manipulation of the reimbursement system are as responsible for the inflation in healthcare costs as anyone other player involved in the system. They simply have been better at protecting their turf and their own. The AMA RUC process is just one of the previously sacred cows that needs to get slaughtered. And the time is coming... It might be just Washington Monthly now but I predict mass media will soon wake up and start opening up the public's eyes to this fraud.

  • Matt on July 16, 2013 2:53 AM:

    The article did mention that it was a fixed sum of money which is split up. It actually went into detail about it and the resulting collusion among different specialties for many paragraphs.

    And it's not that far-fetched to see how pushing down primary care's relative payments makes the pie as a whole bigger. Primary care payments are pushed down, which lessens access for primary care. These Medicare patients then complain about lack of access, which then pushes up the absolute pie. I'm not sure of the details, but I'm sure there's some of this going on with the annual "doc fixes."

    But let's say that the RUC is doing everything correctly. Why should such a powerful body operate in complete secrecy? Medicare was not set up for doctors, but for patients by taxpayers. The doctors work for the taxpayers, not the taxpayers for the doctors. To have a system which sets reimbursement and allows procedures regardless of effectiveness and price means that taxpayers are getting a raw deal. To be successful, Medicare needs some version of a committee independent from special interests which will hold the purse strings.

  • robertsgt40 on July 16, 2013 4:35 PM:

    How about Rahm Emanuel's brother, Dr Ezekiel Emanuel, advisor to Obama on healthcare "issues"?

  • Barbara Levy, M.D., Chair of the RUC on July 17, 2013 12:43 PM:

    The constant evolution of health care requires clinical expertise to assess medical services, and by tapping into the front-line knowledge of physicians, Medicare gains credible insights into the complexities of patient care and at no cost to taxpayers.

    When considering how to provide the best value for limited Medicare dollars, there is simply no substitute for relying on the medical expertise of physicians. No one knows more about what is involved in providing services to Medicare patients than the physicians who care for them.

    The physician members of the RUC apply their considerable medical expertise to develop an evidence-based approach for making fair and objective recommendations that the government can consider when making determinations for the Medicare program.

    The RUC will continue to make recommendations to Medicares decision makers on the work physicians do to care for an aging population and also continue its strong support for primary care physicians. Many factors beyond the control of the RUC contribute to the current income differentials between primary care and specialty medicine. Despite this challenge, adoption of RUC recommendations during the last ten years have increased annual payments to primary care physicians by $6 billion.

    More than 300 attendees, including physicians, other health professionals, researchers and representatives from the government participate in RUC meetings that provide Medicare with recommended medical service values. More information is available at www.ama-assn.org/go/rbrvs.

  • PaulArt on July 18, 2013 7:45 AM:

    There is a very easy way to fix this � dead easy in fact. Approve an immigration program for a new H1-B visa program for Doctors to come here from India and all over the English speaking world. Allow companies like Tata Consultancy Services, Cognizant and Wipro to ship in boatloads of Doctors or all varieties and kinds to the USA. These companies bring in boatloads of Software Engineers into the USA every year. This was the main reason that salaries for software engineers went down the tubes two decades ago. So, let them bring in Doctors per the same kind of resume scrutiny and minimal certification requirements. Let the CMS hold a qualification exam in India and other countries which is along the lines of the Board certification exams held here in the US. You can bet good money that we will soon have the �Free Market� in medical care in the USA. Case closed � no one has to travel to India and Mexico for cheaper medical care anymore. If you are wondering why such a H1-B program does not exist for Doctors, well, you can blame the AMA again for this. They have worked very hard behind the scenes to control the levers of power so that visas are not handed to anyone who even smells like a Doctor in a US Consulate abroad.

  • justaveterinarian on July 18, 2013 11:19 AM:

    So, if we're destined to have price-fixing, how about rigging the system to promote wellness care? Let's find out how much the average internist or family practice physician thinks is fair compensation for every senior to have two intermediate-level consults, two brief rechecks and two sickness-related visits a year. Let's set reimbursement at the level where 90% of primary care docs are willing to take Medicare patients. Let's calculate what this would cost and deduct it from the "pie" referred to above. Then let the specialists duke it out for the remaining share.

  • Dr Duh on July 19, 2013 11:54 PM:

    Wow a giant article about how physicians divvy up the *PRE-EXISTING* pie by deciding on the relative value of different procedures. I'm shocked, shocked, that we would have the physicians who actually make the diagnoses and perform the procedures make these decisions rather than 'neutral' civil servants, er, future lobbyists for the insurance/pharmaceutical/device industries.

    Still, this is 'very important' because 'serious people' tell us so. After all physician compensation represents a whopping 7.6% of medical expenditures and even though that number has been on the decline, everything is their fault. Right?

    Why don't we call a spade a spade?
    This is a politically motivated article designed to accomplish three things.
    1. Knee-cap potential physician critics of Obama-care by portraying them as 'price-fixers' who are only interested in money.
    2. Divide and conquer physician resistance by peeling off primary care from the specialties.
    3. Facilitate the de-professionalization of medical care, by destroying private practice. When physicians are employees of the hospital they will be unable to speak up for patients when the suits decide that cutting costs and making their bonus is more important than patient care.

  • Joe Claro on July 20, 2013 10:43 AM:

    I'm really put off by both the content and the tone of this article. What fundamental belief or principle leads to the conclusion that health care should be treated like any other service or product, subject to the whims of the free market? Isn't it obvious that treating illness and promoting health are different from marketing potato chips and cars? Does the writer really believe that "what the market will bear" is an appropriate principle for health care?

  • Shawn Eng on July 21, 2013 3:41 AM:

    The one recommendation I have is for Detroit and any other municipality, city or state that goes bankrupt in the future, is for the emergency manager to use their authority and break their local medical guilds. I mean allow out-of-state certifications, loosen scope-of-practice laws, promote medical tourism and most importantly of all, adopt the Singapore model of open pricing. Don't let an emergency go to waste. Only the power of an unelected technocrat has the ability to circumvent the lobbying power of the healthcare industry.

  • Wondering on July 21, 2013 1:29 PM:

    Even though the RUC is "only" deciding how to slice up the Medicare pie, is it not significant that this slicing is also the baseline private insurers use? This fact can hardly be lost on the committee.

  • Soprano on July 22, 2013 10:35 AM:

    I received an email on Saturday from the Washington Post with the screaming headline "Post Exclusive" reiterating all of the information in this article. The date on the "Special Report" was July 20. Perhaps someone should enlighten the Post editors on the meaning of the word "exclusive." Given that your article pre-dated theirs by a week and a half, their report may not be as "special" as they think it is. If you want to give them an undeserved hit, you can read their article at http://www.washingtonpost.com/business/economy/how-a-secretive-panel-uses-data-that-distorts-doctors-pay/2013/07/20/ee134e3a-eda8-11e2-9008-61e94a7ea20d_story.html

  • Terry Nugent on July 22, 2013 12:29 PM:

    One glaring error--AMA derives no material membership benefit from RUC administration. Specialists do not need to pay dues to reap any purported benefit from RUC activities and many don't.

    Bundled payments will simply shift the lobbying power and politicization of pricing from doctors to health systems. It is naive to believe that major medical systems such as Harvard and Northwestern will lack political influence.

    The ultimate answer to these issues is to get government and third parties in general out of the price setting business and reintroduce market pricing into healthcare. Price increases in healthcare track almost directly with increases in third party payment, although so do advances in medical science and access to it. Price competition in LASIK and the few other procedures where price competition prevails are the classic examples of how this would reduce prices and costs. In the current political climate there is no chance of such reforms in the foreseeable future.

    The one theme of this piece that makes sense is the need to recalibrate payment rates to incent more physicians to provide primary care.

  • Soprano on July 23, 2013 10:45 AM:

    Happy to see that this article got a shout-out in Ezra Klein's WaPo Wonkblog, this morning.

  • Soprano on July 23, 2013 10:49 AM:

    Sorry -- that was in Wonkbook, the email compilation with links to articles in Wonkblog, rather than in Wonkblog itself.

  • OLd Timer on July 25, 2013 2:41 PM:

    This is one of the most intellectually dishonest article I have ever read. Your suppositions show a total lack of knowledge about how physicians' fees are established. You need to do better research before to put yourself out as a journalist.

  • Read on on July 29, 2013 8:25 PM:

    U.S. health care is causing harm to education, infrastruture and the overall well being of public health. It could not happen soon enough for doctors to be
    salaried like a teacher or government employee. Cut out the money incentive and the health of the nation would improve over night. Medical schools would have to be made public and tution lowered as a start. Has anyone wondered why doctors are no longer called doctors but health care providers? Is that why you went to medical school? I suppose if the money is right a doctor could hardly care what he or she is called. Corporate medicine is here and its gonna get more ugly.