The Relative Value Scale Update Committee is secretly setting physician prices

I should have plaque on the wall of some hospitals stating I was there and we (the hospital) made out like bandits. Some of the procedures and meds they do and give me are not in your average Tylenol category. Not much I can do about it. Merril at GoozNews posted this exposé on how the pricing for physicians is set and to which there is no outside attendance. If you do attend, you sign an agreement not to reveal information.

If you are wondering how doctor office visit pricing is set, you come to the right place.

How an AMA secret society sets physician prices, GoozNews, Merrill Goozner 

The request seemed innocuous enough. Last week, I asked the American Medical Association (AMA) if I could attend a meeting of the committee which largely determines the relative pay of various medical specialties.

The Relative Value Scale Update Committee (RUC) meets three times a year to consider changes and additions to the “relative value” of more than 10,000 billing codes in the Medicare physician fee schedule. Each year, in a textbook example of what economists call agency capture, the Centers for Medicare and Medicaid Services sets physician service prices based almost entirely on the RUC’s recommendations, which systematically overweight technical skills like surgery and underweight the cognitive skills used in primary care. The RUC’s 32-person roster includes one voting member for each of the 27 medical specialties recognized by the AMA.

The results are one of the primary roadblocks to achieving better health outcomes at lower costs from America’s wildly overpriced health care system – the dearth of primary care physicians. Orthopedic surgeons and invasive cardiologists wind up earning, on average, over $600,000 a year. In comparison, family physicians and pediatricians earn around $250,000, according to the latest Modern Healthcare survey of physician compensation consulting firms (subscription required). The spread between the highest and lowest paid doctors has gone up by nearly $75,000 over the past decade — despite the AMA’s insistence that it is taking steps to redress an imbalance that discourages more young doctors from entering primary care.

The AMA’s public relations official, someone I’ve known for a long time, said he’d check if I could attend. A few hours later, he informed me via email that registrations for the meeting had closed two weeks earlier, and I needed to apply for media credentials at least a month in advance. Moreover, I would have to sign a non-disclosure agreement to prevent me or any other reporter from writing about “proprietary information” discussed at the meeting. 

Since votes placing values on individual services are based on detailed surveys conducted by the various medical specialty societies of their memberships, virtually everything discussed at the meetings is proprietary. It’s no wonder not a single reporter attended last week’s meeting, the first to discuss the 2024 physician fee schedule. 

Well, what about the recommendations for the 2023 physician fee schedule, whose first draft will be issued by CMS this summer? Could I at least get access to the minutes of the January meeting when those recommendations were made?

No dice. The website RUC’s recommendations won’t be released until the proposed 2023 rule comes out this summer, the spokesperson said.

Specialists in control

Books have been written about how the AMA’s RUC distorts the Medicare fee schedule, which serves as the baseline for physician payments made by commercial insurers and their insured patients. Those rates range from 10% to 230% higher than Medicare’s rates, according to a recent Urban Institute study, and reflect the rigged nature of the system. Commercial rates for cognitive specialties like family medicine and psychiatry are barely above the CMS-set rates. In contrast, high-priced specialties like radiology, neurosurgery, and anesthesiology can be more than three times as high.

High-priced specialties’ control over physician prices contributes to America having the highest prices for medical care in the world and undermines value-based care. “We should be concerned about the accuracy of payments that Medicare makes for … services, both in terms of paying too little for some services and overestimating the work associated with others,” wrote Miriam Laugesen, author of “Fixing Medical Prices: How Physicians Are Paid.” Progressive think tanks have taken aim at their distortions. For over a decade, journalists have written exposes, including in the Washington Monthly.

Even the staid Government Accountability Office has called into question the paucity of data behind the RUC’s recommendations and the inherent conflicts of interests in letting specialty societies set their own pay scales. “Given the process and data-related weaknesses associated with the RUC’s recommendations, such heavy reliance on the RUC could result in inaccurate Medicare payment rates,” the government’s auditors concluded in 2015.

Yet every effort at reform has foundered. People like to talk about the waning influence of the AMA, especially among younger physicians. But few of those young docs, who often emerge from medical school with substantial debts, understand that the politically influential physician guilds, which have a stranglehold over the process for determining how much each specialty gets paid, are deterring them from entering the more rewarding and in many ways more difficult primary care fields.

While preparing to become a surgeon or other high-priced specialties requires additional years of training, their day-to-day activities, once in practice, are relatively narrow in scope and can be perfected to a high degree of predictability using treatment algorithms, checklists, and high-technology tools like surgical robots. Primary care physicians, on the other hand, are confronted every day by complex patients with symptoms of unknown origins requiring in-depth knowledge of a broad range of specialties to make a proper diagnosis.

On top of that, primary care docs are being asked today to coordinate care among those multiple specialties for the growing number of people with multiple chronic conditions, especially among the nation’s elderly. Studies have shown that the better care coordination that allows for earlier treatments leads to better outcomes and lower overall costs, especially for people of low-to-moderate income. 

Regrets from a founder

“Everyone’s complaining we have a shortage of primary care physicians. We only have 6,000 geriatricians for a country with 65 million seniors. That’s absurd,” said Dr. Robert Berenson of the Urban Institute.

“What the solution?

Change payment so people want to become primary care physicians and geriatricians. Yet that’s not allowed. You can’t change a fee to accomplish a policy objective,” according to CMS rules, he said.

Berenson, who served at CMS’ predecessor agency in the late 1990s, knows from whereof he speaks. An early backer of switching to a relative value-based system before its adoption in 1989, the physician-analyst saw it as a cure for the widely varying prices that Medicare paid for the same service around the country. While the new system evened out prices geographically, the methodology gave extraordinary power to colluding specialist physicians to set their own pay scales. 

How do they accomplish that? Politically, the RUC operates more like the U.S. Senate than the House of Representatives. Each specialty gets one vote. That means the nation’s 39,000 physicians belonging to the American Academy of Orthopaedic Surgeons have the same voting power as the 97,000 physicians belonging to the American Board of Family Medicine. While specialties considered part of primary care (including family medicine, pediatricians, and geriatricians) make up about a third of all practicing physicians, such specialties hold just five of 32 votes on the RUC.

Columbia University’s Laugesen, who attended two years of RUC meetings and interviewed numerous participants before writing her book, reports the committee’s deliberations often break down into factions pitting interventionist specialties against cognitive specialties. The smaller but more numerous interventionist societies invariably outvote the fewer but larger cognitive specialties.

An agenda for change

What would it take to change the system? CMS is woefully understaffed to set pay scales and would probably produce the same conclusions if it relied on the same survey methodology, which allows the doctors inside each specialty to estimate how much time and skill it takes to perform their tasks. 

There’s almost no interest in changing the compensation system on Capitol Hill. “The shiny new object gets all the attention,” Berenson said. “It never gets included in the discussion of moving to value-based payment, even though the incentives in the fee schedule are what doctors respond to.”

But a legislative agenda exists, one that has the potential to rally health care reformers across the political spectrum. Last year’s report on primary care by the National Academies of Sciences, Engineering and Medicine outlined a comprehensive approach for reinvigorating the U.S.’s faltering primary care system. 

At the federal level, it called for giving primary care physicians a partially fixed payment for every patient, sufficient to pay for the team-based care required to meet their needs. The report, “Implementing High-Quality Primary Care: Rebuilding the Foundation of Health Care,” also called for accurately measuring the level of funding flowing into primary care – currently estimated at around 5% — so policymakers can set a higher target, ideally around twice that amount. Finally, the report suggested CMS downgrade the RUC’s role in setting payment policy by bringing in outside experts to advise Medicare.

“Without access to high-quality primary care,” the report warned, “minor health problems can spiral into chronic disease, chronic disease management becomes difficult and uncoordinated, visits to emergency departments increase, preventive care lags, and health care spending soars to unsustainable levels.”