Physician Panel Prescribes the Fees Paid by Medicare

This article will only be available this week.  A few excerpts:

The RUC, as it is known, has stoked a debate over whether doctors have too much control over the flow of taxpayer dollars in the $500 billion Medicare program. Its critics fault the committee for contributing to a system that spends too much money on sophisticated procedures, while shorting the type of nuts-and-bolts primary care that could keep patients healthier from the start—and save money.

“It’s indefensible,” says Tom Scully, a former administrator of the Medicare and Medicaid agency who is now a lawyer in private practice. “It’s not healthy to have the interested party essentially driving the decision-making process.”

I have written previously about the RUC.  This article explains the power that this committee has.  What have they done?

Still, the impact of the decisions made by the doctors on the RUC goes well beyond physician fees for cardiac surgery or back procedures. When Medicare pays more for something, doctors have an incentive to do more of that something—with all the associated costs for hospitals, lab tests and drugs.

“Overvalued codes can lead to spending growth,” says Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services.

A Wall Street Journal analysis of Medicare and RUC data suggests that services were paid too generously in some cases because the fees were based on out-of-date assumptions about how the work is done. The analysis found more than 550 doctor services that, despite being mostly performed outpatient or in doctors’ offices in 2008, still automatically include significant payments for hospital visits after the day of the procedure, which would typically be part of an inpatient stay.

Say WHAT?  Here is the problem.  Procedures become defined when they first start being done.  As proceduralists learn to do them more efficiently, the payment does not automatically change.  We generally see a major lag between increased speed and decrease payments.

For those activities that require talking with patients, examining them and thinking (activities that all physicians do), time should not change, and may even extend as we have more to do.  Thus, the payments for procedures often become inflated through advances in skill.

“This system pitted specialty against specialty, surgeons against primary care,” says Frank Opelka, a surgeon and former RUC alternate member who is vice chancellor at Louisiana State University Health Sciences Center in New Orleans.

Primary-care groups have pushed for more representation on the committee, and their leaders have argued its results are weighted against their interests. (Please see accompanying article on WSJ.com/US.)

Dr. Levy says the committee is an expert panel, not meant to be representative, adding: “The outcomes are independent of who’s sitting at the table from one specialty or another.”

A recent analysis for the Medicare Payment Advisory Commission, or MedPAC, a Congressional watchdog, calculated how much American doctors would make if all their work was paid at Medicare rates. It found that the primary-care category did the worst, at around $101 an hour. Surgeons did better, at $161. Specialists who did nonsurgical procedures, such as dermatologists, did the best, averaging $214, and $193 for radiologists.

The imbalance has stoked fears of a shortage of primary-care doctors, as well as a relative shortfall in the amount of primary-care services patients receive, compared to specialist procedures. “The fee schedule we use to pay physicians in Medicare leads to the wrong mix of services and the wrong mix of doctors,” says Robert Berenson, vice chair of MedPAC and a researcher at the Urban Institute. “It produces increased spending for Medicare and for the rest of the system.”

Now most physicians do well financially, but some primary care physicians find that they can do much better by changing jobs.  That is why many outpatient internists are becoming hospitalists.  That is why some family physicians are adding cosmetic procedures to their practices.

Given the impending SGR adjustment, expect to see even more primary care physicians leaving their practices if Congress does not fix the problem.  The sad truth is that the RUC has created much of this problem.  Try to read the article today.