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The Invisible Hand of Health Care Costs

By Dr. Sachin D. Shah

This is the second part of a 2-part series of posts on the value of primary care physicians.

So why is primary care so undervalued?  A major reason is the way the provision of health care is reimbursed in the United States.  Since 1992, Medicare has paid physicians according to the Resource Based Relative Value Scale (RBRVS), a system that determines the reimbursement rate of every kind of medical encounter based on an assigned relative value unit (RVU).  The determination is made according to a complex formula that purportedly accounts for physicians’ time and effort, practice expense, and cost of malpractice insurance.  The time and effort determination is based on technical skill, physical and mental effort, and judgement required, plus the stress incurred on the physician due to the potential risk to the patient. 

Since medicine is constantly evolving, and new developments are constantly making once complex endeavors much simpler, RVUs must be periodically updated.  There have been a number of excellent pieces written recently in the New York Times, Wall Street Journal, and Kaiser Health News about the workings of the AMA’s Relative Value Scale Update Committee (RUC -- pronounced ‘ruck’), which, since 1991 has been the main (albeit unofficial) adviser to the Center for Medicare and Medicaid Services (CMS) on Medicare physician reimbursement and RVU determinations.  They meet every 5 years to provide suggestions on how to revise reimbursement rates. 

To give an idea of their influence, CMS has accepted the RUC’s recommendations on RVU changes over 90% of the time.  And since Medicaid and many private health plans often follow Medicare’s lead on payment, their power is impressive.

The problem is that of the committee’s 29 members, 23 are appointed by major national medical specialty societies.  Even more troubling is the absence of transparency in this enormously influential process: not only are the identities of the members withheld, the proceedings are closed and confidential. 

The composition of the committee is dominated by subspecialists who tend to focus on procedures and expensive, higher tech tests and treatments.  It’s not surprising, then, that the RUC has contributed to the undervaluing of cognitive services such as coordination of care, counseling, preventive health measures, and management of chronic medical conditions, while overvaluing procedures.

The result is a perversely incentivized medical system that places a higher value on more expensive, sometimes unnecessary specialty procedures at the expense of primary care services.  To quote the eloquently argued Kaiser Health article: “The system pays more for invasive approaches, so conservative treatment choices that are lower cost and lower risk to the patient may be passed over, especially near the end of life.  The resulting waste, half or more of all health care dollars, has fueled a cost explosion that has the industry and the larger economy to the brink of instability.”

The current Medicare reimbursement system, unduly influenced by a secretive committee dominated by subspecialists, plays a major role in encouraging the health system’s enormous excesses and unfairly penalizes primary care physicians.  The downstream consequences are many, not the least of which is a major shortage of primary care physicians and an economy staggering precariously under the weight of uncontrollable health care expenditures.

I agree with the calls for primary care physicians to ceremoniously quit the RUC altogether, in hopes of delegitimizing it.  The evidence to support our position is strong that this process has been unfair to us and our patients.

It’s time for more accountability in the process of physician reimbursement.  The stakes are too high to sit by passively any longer.  It’s time for primary care physicians to say, ‘the RUC stops here.’

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