Wednesday, October 27, 2010

RUC's Role in Medicare

Frank Pasquale

Earlier this month, Ian Ayres questioned Medicare's procurement auction rules. The Center for Public Integrity recently released an article that suggests Medicare's process for deciding physician payments may also need a second look. Just as critics have charged that HHS relied excessively on a physician-allied group (the Council on Graduate Medical Education) in determining future health care work force needs, the CPI report makes a case that too much responsibility has been devolved from governmental decisionmakers to a private sector group, the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC). RUC's dominant role in suggesting payment levels raises hard questions about price-setting in the health care sector.

Administered pricing can be a important tool of health care cost containment. However, the process of setting prices for various health care services is always at risk of capture by those who would profit from overpayments. By way of background, here is an excerpt on the resource-based relative-value scale [RB-RVS] that gave rise to committees like the RUC:

[In 1989], Congress directed [the Centers for Medicare and Medicaid Services, then known as the HCFA] to pay physicians according to a fee schedule based on a resource-based relative-value scale [RB-RVS]. . . . Congress authorized the creation of a uniform fee schedule for some 7,000 medical procedures . . . in the belief that diagnostic and surgical procedures [by specialists were being overpaid while] evaluation and management [services by primary care physicians were being underpaid]. The Physician Payment Review Commission estimated that by 1996 fees paid to generalist physicians would be 39 percent higher than they would have been under the previous payment method, whereas those paid to thoracic surgeons and ophthalmologists would be 35 and 25 percent lower, respectively.

As Hall, Bobinski, and Orentlicher explain, "A relative value scale attempts to achieve some degree of parity in the amount that physicians charge for various services by measuring the relative costs of each service according to the time, mental effort, and technical skill required, as well as differences in the costs of malpractice premiums and specialty training." According to some sources, the IPAB established in the ACA will also be looking at specialist pay, perhaps in order to defragment care, as well as to reduce costs. (I don't want to take any particular position on the merits of specialty pay cuts in this post; suffice it to say for now that a) unilateral Medicare reductions may have quite a few unintended consequences and end up being self-defeating, and b) we may well want to reduce, say, finance professionals' income, before focusing on doctors; both groups depend on federal support.)

With this background in mind, consider the following report from CPI's Joe Eaton:

Early this month, a group of 29 doctors gathered in a modern conference room at the Hyatt Regency Chicago. . . Over the course of four days, the little-known group of mostly specialists made a series of decisions crucial to the massive government entitlement program known as Medicare — issuing recommendations for precisely how Medicare should value more than 200 different medical procedures.

As the members of the organization waded through technical discussions ranking procedures by how much time, skill, and mental effort they required, more than 100 invitation-only consultants, lawyers, and medical society representatives hunched over their laptops taking notes.

Known as the American Medical Association/Specialty Society Relative Value Scale Update Committee, or RUC, the group is unknown to much of the medical profession. Yet for almost two decades, the committee has had a powerful influence on Medicare payment rates. Since 1991, the RUC has submitted more than 7,000 recommendations to the Centers for Medicare and Medicaid Services (CMS) on the value of physician work. CMS has overwhelmingly rubber-stamped RUC recommendations, accepting more than 94 percent, according to AMA numbers. That record, critics say, means CMS is handing over some of its payment policy decisions to a physician organization with a massive and obvious conflict of interest.

The article is particularly valuable because it describes in some detail the RVSUC's process of recommending values:

To develop the suggested work values for the new and revised services it passes on to CMS, the RUC directs specialty societies first distribute physician surveys that rank procedures based on time, difficulty, skills required, and other criteria. Members of the RUC advisory committee review the surveys, then propose a work value to the RUC committee. . . . After sometimes heated discussions of each value, RUC members vote by secret electronic ballot. If the value passes the RUC, it is sent to CMS. If CMS accepts the value, it is included in the Medicare physician fee schedule. New values are open for public comment and are considered final after one year.

As the article explains, primary care physicians feel outnumbered during the deliberations. They claim that "specialists avoid increasing the value of the procedure codes that are primary care’s bread and butter" in order to leave more of the pie for themselves. Taxpayers may also be RUC-rolled by the process. Critics claim that the RUC acclerates medical inflation, since, "among the 2,739 procedure codes for which the RUC made recommendations during the first three five-year-reviews, only 400 led to work values that decreased."

When the RUC next meets at the Naples Grand Beach Resort, it will do well to consider more objective ways of measuring procedure value, especially given that the ACA will require HHS to "periodically review and adjust potentially misvalued codes." It should also open up its deliberations to more public scrutiny. As this Wall Street Journal story shows, both citizens and government officials are growing wary of opaque aspects of the Medicare payment system.