Outing the RUC: Medicare reimbursement and Primary Care

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Along with many others, I have written extensively about the need for more primary care physicians in the US. I have also addressed the various disincentives that exist for medical students to enter primary care specialties, such as family medicine, rather than narrower subspecialties or procedural specialties. One of these is the lower income earned by doctors in primary care; this is felt by many to be one of the major issues in specialty selection, and is increasing in importance as students graduate from medical school with larger and larger debt burdens, often exceeding $200,000. A study by the Robert Graham Center of the American Academy of Family Physicians (AAFP), “Income disparities shape medical student choice”, finds that the difference in income between primary care on subspecialists has been increasing since 1981, and that by now there is a difference of $3.5 million in the lifetime income of the average subspecialist (not even the most highly paid) and the average primary care physician.


So why is there such great variation in the reimbursement of different specialists? It is not on hours worked; many studies have taken this into account and found that on an hourly basis there is a great variation. The Wall St. Journal’s Anna Wilde Matthews and Tom McGinty, in “Physician panel prescribes the fees paid by Medicare”, describe a study done for the Medicare Payment Advisory Commission, MedPAC, that found a wide-range in per-hour reimbursement, from $101 for primary care physicians to $161 for surgeons to $193 for radiologists and $214 for dermatologists. It is not on the basis of length of training; all physicians go to medical school and the training, for example, for surgeons is considerably longer than that for dermatologists. Is it how hard the work is? After all, not everything is brain surgery. Well, to an extent, but there is considerable latitude in how “hard” is valued. What about “necessary to the health of a person” or “necessary to the health of the population”? Hardly. Let’s discuss this some more.


First, it is important to understand that the reimbursement paid to physicians by Medicare is essentially the basis for payment from all payers; contracts and reimbursements are almost always based upon multiples of what Medicare pays. Depending upon the size of the physician group negotiating with an insurance company, the particular multiplier may be greater or smaller, but Medicare reimbursement is the yardstick. Medicare payment itself is based on a formula that is primarily based upon the work that a certain activity involves, with several smaller modifications (regional variation, malpractice cost, etc.). This formula is described by health economist Uwe Reinhardt in his December 10, 2010 Economix blog for the NY Times, “The little-known decision makers for Medicare physicians fees”. Based on complex (or not) scenarios constructed for this purpose, the amount of “work” involved in over 7,000 “procedures” (for this purpose, “procedure” includes things like office visits of varying length and complexity) are assigned relative value; indeed they are assigned “relative value units” (RVUs).


But over time things change. A surgical procedure that might have taken a long time and required a hospital stay may now be done quickly in an outpatient setting. Counseling and managing several complex diseases in a primary care setting may take a lot more work and time. So the relative values may change, and reimbursement could go up or down for any of these “procedures”.


Except that, in order to keep Medicare spending from spiraling even more out of control than it has, the total number of RVUs has to stay constant. So when the number of RVUs (specifically, work-RVUs, or wRVUs) for one procedure goes up, those for others have to go down. Enter the RUC.


Several recent articles, included the Matthews and McGinty and the Reinhardt pieces cited above, have addressed the role played American Medical Association’s (AMA) Relative Value Scale Update Committee, or RUC, an organization most physicians, not to mention most other Americans, have never heard of. This group of appointed doctors makes recommendations to the Center for Medicare and Medicaid Services (CMS) about the relative amount that Medicare should pay for different physician activities. While not required to do so, CMS takes the recommendations of the RUC more than 95% of the time. While about half the services provided by physicians are in primary care, primary care doctors, according to an article in the New England Journal of Medicine by Washington state Congressman and physician Jim McDermott, “Harnessing our opportunity to make primary care sustainable”, only 6% to 13% of the 29 physicians on the RUC are in primary care. While they are supposed to be unbiased toward their own specialties, this does not seem to be what happens. Psychologically, even when they are trying to be fair, they know more about what they do and how “hard” it is than they do about what others do. Concretely, it may be easier to measure the work involved in “1 colonoscopy” or “1 gall bladder surgery” or “reading one chest x-ray” than the complex variation in primary care visits. In any case, the record demonstrates that RVU assignment, and thus reimbursement, has continued to go up for specialist procedures and thus down for primary care.


So we have a bunch of physicians, appointed essentially by their specialty societies, making recommendations on how much physicians should get paid, and a bunch of specialists deciding how to value what they do compared to what others do (certainly a conflict of interest, as defined by Howard Brody and discussed by me in The AAFP, Coca-Cola, and Ethics: Serving the public interest?, August 20, 2010), and a tremendous dominance of non-primary care over primary care physicians among this group. Why should we be surprised that we get the results that we get?


More important, for the health of the American people, the decisions made about reimbursement drive what procedures are done and what activities physicians pursue. Since reimbursement is based on “work”, not “benefit” – to the individual or certainly to the population – we get the bizarre mix of health care services that we have. Writing in Kaiser Health News, Brian Klepper and David C. Kibbe, in an article titled “Quit the RUC”, note this:


“But there is a more insidious and destructive issue at hand. The perverse incentives that are embedded in fee-for-service physician payments influence care decisions and are a principal driver of the health system's immense excesses. Encouraged by the RUC, sometimes unnecessary specialty procedures may appear more valuable and appropriate than primary care services. 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 led the industry and the larger economy to the brink of instability.”



Different solutions have been proposed. Klepper and Kibbe suggest that the primary care professional groups drop out of participation in the RUC altogether (“Quit the RUC”). Reinhardt feels that there is value in getting advice from this independent group, but that CMS should be much more cautious about taking its recommendations. McDermott agrees, or suggests that at least the number of RUC members be adjusted or increased to include a much larger percentage of primary care physicians.

One or more of these solutions needs to occur. Most importantly, the solution needs to look at overall benefit when assigning reimbursement value. I considered titling this piece “Wreck the RUC” (alliterative and less offensive than the other obvious, rhyming, option). If we are interested in improving the health of the American people, we need more primary care doctors, and we need to address all the open and hidden factors that are in place to work against such change. The RUC is a good place to start.
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