More On Disparities Between Reimbursement of Primary Care and Proceduralist Physicians

We recently posted a summary of an article in the Annals of Internal Medicine by Bodenheimer and colleagues(1) which helped explain the increasing gap between how US primary care, generalist, and "cognitive" doctors are reimbursed by Medicare, and how proceduralists are reimbursed. Hard on the heels of that comes an analysis of the 10 year trends in Medicare spending,(2) with an accompanying editorial in the New England Journal of Medicine.(3) The first article provides new data about how the Resource Based Relative Value Scale (RBRVS) system has functioned (dysfunctioned?) to create this disparity, mainly because of how reimbursements are updated, and now new procedures are valued.

The editorial does a nice job summarizing the main points. As author Joseph Newhouse noted, "The resource-based relative-value scale was introduced amidst a widespread view that physicians who performed evaluation and management services were underpaid as compared with those who performed procedures, in part because physicians performing new procedures tended to become more adept at them over time, and therefore the cost per procedure decreased (alternatively, physicians could perform more such procedures in a day). Medicare fees, however, often did not decrease commensurately with any reduction in cost. As a result, many procedures were thought to have become highly remunerative and perhaps were performed too often as a result. Moreover, there was some concern that the underpayment for evaluation and management services was leading to a dearth of primary care physicians."

The RBRVS system was meant to fix these problems. However, it has apparently failed, so the concerns mentioned above are still operative. "Maxwell and colleagues report that in 2002 the share of Medicare spending on physicians for evaluation and management was exactly where it was in 1992 — 49.5%. How could this be....?"

• Imaging services grew far faster than evaluation and management (cognitive services, i.e., office and hospital visits). "The disproportionate increase in the quantity of imaging services offset the relative increase in the fees for evaluation and management services."
• Many new procedures were introduced, most of which commanded high fees. "Moreover, Maxwell et al. show that almost a quarter (10.4% of 44.9%) of the growth in the total quantity of physicians' services was attributable to the introduction of new codes, few of which were for evaluation and management services, since new codes are much more likely for imaging, procedures, and tests."
• The overall cost-control formula, a kind of "global budget" of which single-payer advocates are so fond, penalized cognitive and generalist services for the growth in imaging and procedures. "Among the reasons is a formula that Congress has used since 1998 to limit the growth in spending on physicians' services per Medicare beneficiary to approximately the rate of growth in the gross domestic product. Because of this limit, spending for evaluation and management services is reduced to accommodate the surges in imaging services and new codes."
• The process used to update the system, run by the rather secretive and obscure RV Update Committee (RUC), inflated fees for procedures and imaging relatively much more than those for cognitive and generalist services. "Since new procedures generally become less costly to perform as they become part of routine practice, on balance the reviews should have decreased more fees than they increased. Maxwell and colleagues, however, show that exactly the opposite happened. Relative fees are almost never reduced in the review process and are frequently increased; they rose fully 82% of the time in the first 5-year review."

So the results of these many dysfunctional aspects of the RBRVS and the RUC were basically the opposite of what was intended. This leads to further questions:

• How did the system become so perverse?
• Why did nobody notice?
• Why did private health insurance companies and commercial managed care companies go along with this perverse system?

For these answers we will have to look elsewhere. Newhouse concluded fatalistically,

Unfortunately, neither the spending limits nor the asymmetric review process is likely to disappear. The overall pressure on the federal budget and the large share of it that Medicare represents, 17% in 2007, will probably keep the increases in Medicare spending on physicians' services modest. Many procedures that become less costly over time may well continue to fly under the radar of the review process. With no easy fix in sight, Medicare spending on physicians will probably remain a thorny issue.

WHAT IS TO BE DONE?

Actually, fixing the system seems conceptually simple. We need an unbiased re-evaluation of the components of the RBRVS by people who are dedicated to doing it fairly, not benefiting one group of physicians, or the organizations that benefit from the increased use of procedures.

But what appears conceptually simple might not be politically simple. Presumably there are political reasons that the system malfunctioned. Medicare is, after all, the US single-payer insurance system for the elderly and disabled. Politics went into its design, and presumably politics went into the design of the RBRVS, and the design and operations of the RUC.

So it appears we also need an unbiased investigation of what went awry. Such an investigation, however, might disturb various vested interests. But that should be no surprise to readers of Health Care Renewal

By the way, one wonders if any of Prof Newhouse's fatalism comes from his position on the board of directors of, and hence requiring "unyielding loyalty" to the stockholders of Aetna Inc, one of the largest US commercial health insurance and managed care companies, and hence one of the companies that has seen fit to go along with the Medicare reimbursement system rather than trying to devise a better one? (That position is disclosed, albeit in fine print, at the end of his article.)

References
1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. (link here)
2. Maxwell S, Zukcerman S, Berenson RA. Use of physicians' services under Medicare's resource-based payment system. N Engl J Med 2007; 356: 1853-1861. (link here)
3. Newhouse JP. Medicare spending on physicians - no easy fix in sight. N Engl J Med 2007; 356: 1883-1884. (link here)