What, The RUC, Again? - One of the World's Most Prominent Medical Journals Also Leaves Some Important Things Out

With health care reform continuing as a hot topic in the US, more discussions of issues of interest to Health Care Renewal are appearing. We previously posted about a prominent expert's discussion of how the US Medicare system pays physicians. We noted that he seemed to avoid critical issues, and thus may have failed to suggest changes that would address the real problems. Finally, we noted that his undisclosed financial relationships with several companies which have profited from the status quo may have affected his arguments, and failure to disclose these apparent conflicts of interest muddied the discussion.

In a similar vein, we will discuss an article just published entitled "Reforming Medicare's Physician Payment System," by Gail R Wilensky, PhD(1). [Note that the discussion will be formatted in the same manner as the previous post, and we will unashamedly borrow some language from that post.]

Ms Wilensky's summary of the main problems afflicting the payment system was:

Medicare originally based its reimbursement to physicians, like all its reimbursements, on the amounts that had historically been charged for particular health care services. In 1984, when the program moved away from a charge-based per-diem rate for hospitals, it introduced the use of the Medicare Economic Index — a measure of the annual change that physicians face in the costs of practice — for updating physicians' reimbursement. This change marked the start of an increasing divergence between Medicare's reimbursement of physicians and its reimbursement of other providers.

In general, however, physicians are paid for providing discrete services, according to a disaggregated fee schedule that uses more than 7000 billing codes. In 1989, a major change was made in physician payments: the disaggregated fee schedule based on historical charges was replaced with the Resource-Based Relative Value Scale, which is based on relative values for physicians' work effort, physicians' practice expenses, and malpractice liability insurance expenses. Although the scale was intended to correct for a historical undervaluing of primary care and overvaluing of procedures (which it does not appear to have done very successfully) and for larger differences between urban and rural reimbursements than could be justified by differences in the costs of practice, it retained the use of a largely disaggregated fee schedule.

Because the risk of inappropriate volume increases is much greater with a disaggregated billing system, as the experiences of the 1980s showed, updates to the fee schedule have followed a top-down strategy. Since the early 1990s, overall Medicare spending has been tied to a preset target — initially to the volume performance standard (an amount that was set into law each year) and now, through the sustainable growth rate (SGR), to the rate of growth in the economy. Fees are adjusted whenever overall spending is greater (or less) than the target level....

Most recent discussion of reforming physician payment has focused on the SGR, which has caused the pressure to lower physicians' fees.

Her main solution to these problems:

I believe the key to reforming physician payment is to develop a more aggregative payment strategy. In the near term, payments need to be developed that cover all the services that a single physician provides to a patient for the treatment of one or more chronic diseases. This approach is consistent with, and could be related to, the work that CMS and others are doing on medical homes. In addition, bundled payments should be developed for high-cost, high-volume DRGs, to include, at a minimum, the reimbursement for all physician services associated with the DRG and perhaps the hospital payment as well.

Ms Wilensky suggested the main problem with Medicare's current system for paying physicians is that the sustainable growth rate (SGR) forces reductions in physicians' fees whenever total payments to physicians grow faster than the optimal rate. However, she avoids discussing why those payments grow so fast.

Increases in Fees Paid for and Volume of Procedures

As we have discussed, the current system pays physicians much more to do procedures than provide "cognitive" services, and these discrepancies are increasing over time. The amounts it pays for particular procedures are frequently raised. Meanwhile, physicians increase the number of procedures they do, partially because they find ways to do procedures faster. Thus, the amount being paid for procedures increases rapidly over time. But then the SGR mechanism is used to cut fees across the board, including those for cognitive services, which did not contribute to the overall increase in costs.

Why does Medicare continue to behave seemingly so irrationally? As we have discussed before, it seems to do with the machinations of the shadowy RUC (RBRVS Update Committee).

The Shadowy RUC

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for "cognitive"medicine, i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.

For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(2) and Goodson.(3)

By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.


What Wilensky Left Out, and Why?

Ms Wilensky, a distinguished health care policy expert, barely touched on the biggest problems with how the US fee-for-service payment system works, and why these problems occurred. Thus, it is not surprising that the few solutions she recommended seem irrelevant to these problems.

As an aside, her discussion is not atypical of what is seen in most writings about health care policy that have to do with costs. It appears that it is politically incorrect to say that incentives are skewed, that this skewing appears to have resulted from the acts of a few individuals, and that these acts occurred with little outside attention or accountability. Why do health care policy experts follow these dictates of political correctness?

I don't know, but one possible explanation is that they are themselves biased by their own incentives. So let us further consider the case of Ms Wilensky.

Ms Wilensky's Conflicts of Interest

The New England Journal of Medicine article identified Ms Wilensky as "a senior fellow at Project HOPE, Bethesda, MD, a former administrator of the Health Care Financing Administration (now the CMS), and a former chair of MedPAC." It also noted, "no potential conflict of interest relevant to this article was reported."

So it did not acknowledge the following relationships:

- Ms Wilensky is a member of the board of directors of Cephalon, which claims to be "one of the world’s top ten biopharmaceutical companies." According to the 2008 company proxy statement, her total compensation for this position was $347,395 in 2007, and she owned 65,000 shares of Cephalon stock or equivalent.
- Ms Wilensky is a member of the board of directors of Gentiva, which claims to be "the nation's leading provider of comprehensive home healthcare and related services." According to the 2008 company proxy statement, her total compensation for this position was $125,031 in 2007, and she owned 33,205 shares of Gentiva stock or equivalent.
- Ms Wilensky is a member of the board of directors of Quest Diagnostics Company, which claims to be "the world’s leader in diagnostic testing, information, and services." According to the 2008 company proxy statement, here total compensation for this position was $291,112 in 2007, and she owned 122, 224 shares of Quest stock or equivalent.
- Ms Wilensky is a member of the board of directors of SRA International, a multi-purpose consulting company which "provides health consulting services for global clients, both public and private." SRA International also has a subsidiary, SRA "Global Clinical Development [which] is a full-service, global CRO [contract research organization]" providing services to pharmaceutical, biotechnology and device companies. According to the 2008 company proxy statement, her total compensation for this position was $179,659 in 2007, and she owned 20,000 shares of SRA stock or equivalent.
- Ms Wiilensky is a member of the board of directors of the UnitedHealth Group, one of the largest US health care insurers/ managed care organizations. According to the 2008 company proxy statement, her total compensation for this postion was $322,591 in 2007, and she owned 312,560 shares of UnitedHealth stock or equivalent.

All these corporations benefit from how the health care system currently runs. In particular, our current procedure-heavy style of medicine, driven by the incentives dictated by the RUC, favors the extensive use of expensive pharmaceuticals, laboratory tests and devices. The companies Cephalon, Quest Diagnostics, and SRA International thus especially benefit from this style. As a member of the boards of these companies, Ms Wilensky has a duty to advance their financial performance. Thus, it seems that Ms Wilensky's legal responsibilities to these companies might tend to bias her against actively questioning how physicians are currently paid, or proposing solutions that might upset the status quo.

Ms Wilensky's leadership roles in US publicly traded corporations are public, but not easily found unless one knows where to look. (A previous post on Health Care Renewal did document Ms Wilensky's board relationships at the time, 2006, as they related to a report she helped author on pay-for-performance [P4P]). However, the New England Journal of Medicine did not choose to make these apparent conflicts of interest public.

Without the knowledge of these financial relationships, one might suppose Ms Wilensky's opinions are only based on her disinterested expertise as a well-known health care policy scholar. Without knowledge of these financial relationships, one might think that a secretive, opaque process skewing physicians' payments toward procedures is not an important problem for our health care system.

We have come to a critical time in the history of attempts to reform the US health care system. Whether reform occurs, and whether it does any good will depend on the quality of the debate that precedes it. Such a debate should be robust, but those involved ought to make clear where their biases and interests may lie.

Unfortunately, it may be that some of the most prominent voices in the debate are those of people with strong personal financial interests in having health care reform go in certain directions, not others. Furthermore, people with particular interests may not want certain issues to be even brought up. If these interests are not revealed, the debate becomes deceptive.

In a previous post, I said "I fear that much of the debate up to now has been deceptive, and will not lead to good outcomes." Since the current post is also about a prominent health care expert published in a leading international forum whose arguments seem to obfuscate a major cause of our health system dysfunction, possibly due to conflicts of interest which were not disclosed, my fear has become stronger.




References

1. Wilensky GR. Reforming Medicare's physician payment system. New Engl J Med 2009; 360: 653-655. Link here.

2.Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.

3. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.