Tuesday, September 30, 2014

Price Fixing, Regulatory Capture, Crony Capitalism - Will the New Public Citizen Report Succeed in Outing the RUC?

Just last month the RUC made it back into the headlines.  Then we posted  Politico made another attempt to shed some light on this obscure committee and its outsize effect on health care. Now the watchdog organization Public Citizen has stepped into the breach, publishing a report on the RUC (Research Based Relative Value Scale Update Committee), with an accompanying press release and op-ed

Introduction - Why the RUC is Important

To explain why this issue is important, I can simply repeat what I wrote before

In 2007, readers of the Annals of Internal Medicine could read part of the solution to a great medical mystery.(1)  For years, health care costs in the US had been levitating faster than inflation, without producing any noticeable positive effect on patients.  Many possible reasons were proposed, but as the problem continued to worsen, none were proven.

The article in the Annals, however, proposed one conceptually simple answer.  The prices of most physicians' services, at least most of those that involved procedures or operations for Medicare patients, were high because the US government set them that way. Although the notion that prices were high because they were fixed to be so high was simple, how the fixing was done, and how the fixing affected the rest of the health system was complex, mind numbingly complex.

Perhaps because of the complexity of its implementation, the simplicity of the concept has not seemingly reached the consciousness of most American health care professionals or policy makers, despite the publication of several scholarly articles on the subject, efforts by humble bloggers such as yours truly, a major journalistic expose in the Wall Street Journal in 2010,  another major expose in Washington Monthly in 2013, congressional hearings in 2013, and yet another major expose in Politico in 2014.  The lack of much public discussion of this issue despite its importance and the above attempts to start discussion seemed to be a prime example of what we have called the anechoic effect, that important causes of health care dysfunction whose discussion would discomfit those who are currently personally profiting from the current system rarely produce many public echoes.  (For a review of what is known to date about how the offputtingly named Resource Based Relative Value Scale Update Committee (RUC) works, and previous attempts to makes it central role in fixing what US physicians are paid public, see the Appendix.)

Once Again...  the Public Citizen Report

The latest report draws on the earlier exposes and journal articles, and repeats again all but one of the major points in the Washington Monthly 2013 article.  Here are the points with quotes from the new report.

The RUC is Well Hidden

After describing the RUC as "secretive" in its introduction, the report reviewed the specifics:

most of its proceedings occur behind closed doors and without public scrutiny. Minutes from each of the RUC’s three annual meetings are not made publicly available. Additionally, when the RUC votes each spring to assign work RVU values to CPT codes, the voting results are not released to the public.


One critical piece of information that is not disclosed to anybody (including RUC members) is any indication of how each member of the RUC voted.

The RUC Fixes Prices

The RUC has enormous power in setting health care prices,...

The Government Enables the RUC to Fix Prices

The key data point in the formula that is used to set Medicare payment rates is largely determined by a secretive committee that is managed and funded by the American Medical Association....


CMS is not required to accept the RUC’s recommendations. In fact, the RUC is insistent that its role in the process is only to exercise its right to petition the government. However, studies have demonstrated that CMS accepts RUC recommendations at overwhelmingly high rates.

The Government Fixed Prices are Endorsed by the Private Sector

The RUC’s influence over physician payments extends well beyond Medicare payments because private insurers also use the Medicare payment framework as a baseline for determining their payments. Private insurance companies often set their payments based on the underlying Medicare fee schedule.

The Price Fixing Drives Up Costs and the Use of Services

The RUC has been accused of overstating many of the factors used to determine a physician payment.


When the RUC has recommended adjusting the values that determine physician payments, it has been more than five times as likely to increase pay for a procedure as decrease it.

These Incentives Cripple Primary Care

To the extent that the RUC’s members are biased towards their own specialties, this results in the overvaluing of specialty procedures at the expense of primary care. Because there are significantly more specialty procedures than primary care procedures, the overvaluation of specialty and procedural services has caused U.S. specialists’ pay to rise much more rapidly than primary care physicians since the formation of the RUC.

Higher pay to specialists creates greater incentives for medical students to practice specialty or procedural medicine, resulting in a shortage of primary care physicians.

These Incentives Benefit Big Corporations, not just Medical Specialists

This was the only issue not directly addressed in the 2014 Politico article or in the new Public Citizen report.  (But see our 2013 post.)

Anechoic So Far

So in some sense the Public Citizen report on the RUC sang the same old song.  However, as the report itself noted, previous attempts to inspire action about the RUC have generated no echoes.  Thus, maybe it should be no surprise that so far there has been no press coverage of the Public Citizen report (at least as far as I could tell by using my usual search techniques as of this morning). 

Of course, as we have discussed ad infinitum, that which discomfits those who are making so much money from our current health care system often manages to create few echoes, that is, what we have dubbed the anechoic effect.

This is all the more interesting because there are aspects of the RUC that could outrage both left- and right-wingers.  First of all, the RUC is a major component in a system of government price fixing.  Enabled by the RUC, CMS fixes the prices of medical care.  Many on the right, but particularly those of the more libertarian or free market fundamentalist persuasion say they hate government price fixing.

Second of all, the RUC exemplifies regulatory capture.  The report quoted

 Thomas Scully, an administrator of the Centers for Medicare and Medicaid Services under President George W. Bush, also has been highly critical of the RUC, and particularly the power the AMA has over the process. 'The idea that $100 billion in federal spending is based on fixed prices that go through an industry trade association in a process that is not open to the public is pretty wild,' Scully said in 2013.

Again, many on the right, and also, probably many on the left worry about regulatory capture.

Third, the RUC represents a particular species of regulatory capture, crony capitalism.  This was not emphasized in the report, but we have written before about how many RUC members have personal financial ties to health care corporations, and how these constitute conflicts of interest (look here).  The Washington Monthly noted that RUC members are sponsored by medical societies that in turn have institutional conflicts of interest involving big health care corporations, and that the way the RUC sets prices could benefit such health care corporations (look here.)  Both left- and right-wingers say they loathe crony capitalism, although the left emphasizes the undue influence of big business, and the right emphasizes the bad actions of government resulting from it.

Yet very few on the right or left seem to have noticed, much less have become outraged by the RUC

The new Public Citizen report suggested

The most important policy change is for CMS to stop relying on the AMA to maintain the existing system for determining the value of Medicare payments to physicians.

Maybe this time someone will listen.  As I have written too often, I hope the latest attempt by Public Citizen to make the RUC less anechoic will succeed in increasing awareness of the RUC and its essential role in making the US health care system increasingly unworkable.  Of course, such awareness may disturb the many people who are making so much money within the current system.  But if we do nothing about the RUC, and about the ever expanding bubble of health care costs, that bubble will surely burst, and the results for patients' and the public's health will be devastating.

APPENDIX - Background on the RUC

 We have frequently posted, first here in 2007, and more recently here,  here, here, and here, about the little-known group that controls how the US Medicare system pays physicians, the RBRVS Update Committee, or RUC.

Since 1991, Medicare has set physicians' payments using the Resource Based Relative Value System (RBRVS), ostensibly based on a rational formula to tie physicians' pay to the time and effort they expend, and the resources they consume on particular patient care activities. Although the RBRVS was meant to level the payment playing field for cognitive services, including primary care vs procedures, over time it has had the opposite effect, as explained by Bodenheimer et al in a 1997 article in the Annals of Internal Medicine.(1) A system that pays a lot for procedures, but much less for diagnosing illnesses, forecasting prognoses, deciding on treatment, and understanding patients' values and preferences when procedures and devices are not involved, is likely to be very expensive, but not necessarily very good for patients.


As we wrote before, to update the system, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee. 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 were opaque for a long time, and the proceedings of the group are secret.  As Goodson(2) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."

In fact, the fog surrounding the operations of the RUC seems to have affected many who write about it. We have posted (here, here, here, and here) about how previous publications about problems with incentives provided to physicians seemed to have avoided even mentioning the RUC. Up until 2010, after the US recent attempt at health care reform, the RUC seemed to remain the great unmentionable. Even the leading US medical journal seemed reluctant to even print its name.

That changed in October, 2010.  A combined effort by the Wall Street Journal, the Center for Public Integrity, and Kaiser Health News yielded two major articles about the RUC, here in the WSJ (also with two more spin-off articles), and here from the Center for Public Integrity (also reprinted by Kaiser Health News.) The articles covered the main points about the RUC: its de facto control over how physicians are paid, its "secretive" nature (quoting the WSJ article), how it appears to favor procedures over cognitive physician services, etc.

In 2011, after the "Replace the RUC" movement generated some more interest about this secretive group, and its complicated but obscure role in the health care system, the current RUC membership was finally revealed.  It was relatively easy for me to determine that many of the members had conflicts of interest (beyond their specialty or sub-specialty identity and their role in medical societies that might have institutional conflicts of interest, and leaders with conflicts of interest).  

Then that year a lawsuit was filed by a number of primary care physicians that contended that the RUC was functioning illegally as a de facto US government advisory panel.  It appeared that things might change.  However, it was not to be.  A judge dismissed the lawsuit in 2012, based on his contention that the law that set up the RBRVS system prevented any challenges through the legal system to the mechanism used to set payment rates.  The ruling did not address the legality of the relationship between the RUC and the federal government.  The eery quiet then resumed, only punctuated briefly in early 2013, when a Senate committee held hearings with no obvious effect.      

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


Bruce said...

The RUC may be secretive but some of the records it leaves behind are public. This past summer, CMS asked for public comment on 64 potentially overvalued codes (79 FR 40338). I looked through many of them. The biggest whopper I found - Code 95004, Allergy Skin Testing. This is a $6 code and $4 is represented by the value of skin prick allergen. The RUC used "dust mite allergen" ...which vender tables show is by far the most expensive allergen and not the "average" cost. Nobody else on the RUC panel would be able to figure this out. A psychiatrist? An obstetrician? Nobody at CMS would likely have the insight or time to figure this out either. The stuff is laying in plain sight. This code is usually billed in multiples of 40 or more (CMS data) and in March 2014 data, some allergists billed Medicare Part B over $100,000 (imagine how many total insurers they billed across their practices).

Judy B said...

It is very disheartening that this mess has continued for so long despite being exposed by many, including you! Those controlling the medical industry have too much power and it appears that they do not care if they drive the whole industry into the ground...

Rout the RUC said...

Too much money involved and not one power center wants to see that change. How about an across the board cut, a higher % for expensive codes and a lower percent for cheaper codes. Rather than individually, how about code $ times frequency so that bigger total dollar codes are reduced.

Doesn't volume = better efficiency?