The RUC Is Bad Medicine; It Has to Go

By Brian Klepper, PhD.

RUC Is a Deep Root of Our Healthcare Crisis. 

“One of the biggest mistakes we made…is that we took the RUC…back in 1992 and gave it to the AMA…It’s incredibly political, and it’s just human nature…the specialists that spend more money and have more time have a bigger impact.”[1]

This quote was from Tom Scully, former Administrator, under President George W. Bush, of the Centers for Medicare & Medicaid Services (CMS), previously the Health Care Financing Administration (HCFA). Scully was a panelist in a May 2012 Senate Finance Committee roundtable discussion by former HCFA/CMS Administrators and has become one of the RUC’s most outspoken critics.

He was explaining how the American Medical Association (AMA) Relative Value Scale Update Committee (RUC), a group that sought to help the government by overseeing a valuation process for medical services, came to dominate and distort the pricing used in Medicare, Medicaid, and commercial health plans.

Mr. Scully shared this sentiment recently: “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…Having the AMA run the process of fixing prices for Medicare was crazy from the beginning.”[2]

Gail Wilensky, HCFA Administrator under the first President Bush, was wistful. “It happened innocently enough.”[3]

It is remarkable and compelling to hear these federal health program ex-stewards express regret about a fiasco that they had a hand in. Their mea culpas are almost palpable. Mr. Scully, in a recent Washington Post video interview, gave a quick aside: “It’s partially my fault.”[4]

The RUC Becomes Exposed to America

Before last month, hardly anyone in America had ever heard of the RUC, much less understood how it works. For almost 20 years, it mostly flew under the mainstream media radar. Then, in October 2010, the Wall Street Journal’s Anna Mathews and Tom McGinty delivered a scathing exposé[4] that described the RUC’s manipulation of healthcare pricing. Mr. Scully memorably called the RUC “indefensible.”

Time passed. Then last month, Washington Monthly editor Haley Sweetland Edwards resurrected the topic with a witty explication of the RUC’s “Special Deal.” This was rapidly followed by a Washington Post front-page article[2] in which Peter Whoriskey and Dan Keating showed how the RUC’s valuations are sufficiently skewed such that they permit Medicare to pay some physicians for more than 24 hours of work each day.

For a brief moment, the RUC was front and center in the American media. Here was a secretive, 31-physician, specialist-dominated healthcare star chamber, operating under the auspices of the AMA and directly complicit with CMS. It values medical services, often spun to panelists’ interests. CMS historically has accepted nearly 90% of the RUC’s recommendations, with no further due diligence.[5] A deliciously grand scandal, and one of the deep roots of America’s healthcare crisis, taking advantage of us all.

The question, though, is whether anyone can do anything about it.

The Best Assumptions Money Can Buy

The RUC’s work follows the design of the Resource-Based Relative Value Scale (RBRVS), a formulaic system of inputs weighing the contributions of physician work (54%), practice expense (41%), and malpractice expense (5%), devised by a Harvard team in the late 1980s. One assumption here is that the relative weights are approximately accurate across specialties and services. Barbara Levy, MD, a gynecologist and the RUC’s Chair, insists that they are. “None of us believe the numbers are fine-tuned. We do believe we get them right with respect to each other.”[2]

Of course, this assumes that you accept that primary care is less demanding and time-consuming than specialty services, and that quickly diagnosing and managing a patient presenting with an array of complicated symptoms is easier and less valuable than doing a procedure.

A couple of years ago, David Kibbe, MD, and I explored this assumption by comparing a moderately complex primary care visit[6] in which a physician must address at least 3 different problems in 25 minutes, vs an ophthalmologist’s cataract extraction and intraocular lens implant. The cataract procedure, which in basic form is now more than 50 years old, is highly refined, automated, and often performed in assembly-line fashion. Using this comparison’s RUC valuations, Medicare pays ophthalmologists at 12.5 times the hourly rate paid to primary care physicians. The demands on the generalists are arguably greater.

Another problem with RBRVS is that it bases payments purely on what physicians subjectively decide that they should be paid, without considering other factors, like value to the end user. Of course, even if Medicare’s input-only-based valuation method made sense, there is the question of whether a self-interested panel — meaning, those who know that their payments will be tied to their recommendations — can credibly oversee an objective valuation methodology.

Bias Exists

Dr. Levy has admitted that special-interest bias is part of the process. “We assume that everyone is inflating everything when they come in. They are wanting to fight for the best possible values for their specialties.”[7]

Horse trading on the valuations apparently is common. Neil Brooks, MD, a family physician and RUC panelist for 4 years, reported, “If radiology presented a new set of codes that had to do with imaging procedures, there was a feeling that some people would go along with that if radiology would go along with other things.”[7]

And Roy Poses, MD, who studies financial conflict in medicine and is Clinical Associate Professor of Medicine at Brown University, has documented RUC panelists with financial conflicts that could influence their valuations. “It appears that many of the RUC members have significant conflicts of interest with respect to their roles as de facto setters of the rates at which physicians are paid by the government.”[8]

The AMA is fierce about protecting its franchise and has argued strongly that no other interests, even those with a strong stake in care and cost (eg, patients, purchasers, health economists), should participate in the valuation process. Only doctors can understand the value of a medical service, and so they alone must create the basis for what the rest of us pay.

FACA and the Public Interest

But the RUC has a deeper structural problem. It has evaded the niceties that we normally demand of federal agencies’ external advisors.

The federal government typically insists that advisory panels follow the rules set up under the Federal Advisory Committee Act (FACA). The composition of the panel should reflect the real-world percentages of its constituents. Proceedings should be publicly open and transparent. Analytical methods should be scientifically credible.

In other words, the structure and function of advisory committees should be required to operate in the public interest, protecting us from special-interest lobbying’s inevitable excesses. (Remember, for example, when Vice President Cheney met in closed meetings with energy-industry lobbyists to formulate energy policy?)

The RUC adheres to none of these rules. Its proceedings are closed to the public and no transcript is made available. Invitations to the meetings may come only from the Chair and are contingent on signing an onerous nondisclosure form. Valuations have been made with as few as 30 survey responses.

And the committee’s composition is overwhelmingly dominated by specialty physicians, though the AMA selectively allocates seats at the table. “Minor” specialties, like gastroenterology, may be excluded from the discussion. Even though Medicare is a program primarily dedicated to senior care, geriatrics was not invited to participate until February 2012.

Medicare’s refusal to hold the RUC accountable was the basis of a legal challenge by 6 Augusta, Georgia, primary care physicians.[9] The suit argued that the RUC was a “de facto Federal Advisory Committee” and therefore subject to the FACA rules. Like the district court rulings before it, the appeals court’s decision dismissed the plaintiffs’ claims on procedural grounds, with almost no discussion of content or merit. The courts ruled that the RUC’s relationship with CMS was beyond their jurisdiction and can only be remedied by Congress.

Potential for Meaningful Congressional Action

Given the strong influence that the health industry has had on Congress, the prospects for meaningful policy-based change that can bring healthcare back into balance are poor. In 2009, the year that the Affordable Care Act was formulated, Congress accepted $1.2 billion in campaign contributions from healthcare interests in exchange for influence over the shaping of the law.

Recently, Rep. Jim McDermott (D-Wash.) introduced the Accuracy in Medicare Physician Payment Act (HR 2545), which would require the RUC to adhere to the public-interest requirements of FACA and supplement the current valuation panel with nonphysicians: patients, purchasers, and health economists. It would also provide CMS with more resources to oversee the valuation program. These steps would go a long way toward improving healthcare and cost. But passage would require buy-in from a Congress largely beholden to the healthcare industry. All in all, the chances seem remote.

What’s Overvalued, What’s Undervalued

Over time, the RUC’s overvaluing of specialty services and undervaluing of primary care has had serious real-world impact. Excessive valuations of certain procedures — cardiac stenting, colonoscopies, back surgeries — have created lucrative incentives for specialists to overtreat. For example, 2008 international health system comparison data[10] showed that we do revascularization procedures at twice the rate of other developed nations. Other data show a clinically inexplicable 15-fold increase in complex spinal fusions between 2002 and 2007, with adjusted mean hospital charges of $81,000. Paul Fischer, MD, the lead plaintiff in the failed lawsuit against CMS, has argued that “practicing to the codes” has narrowed specialists’ care palette, compromising outcomes and medical professionalism.[11]

Lower primary care reimbursements have resulted in shorter visits and a doubling of the specialty referral rate over the past decade. Rushed schedules have also inhibited primary care’s ability to moderate inappropriate specialty care. And the growing pay gap between primary care and specialist physicians has driven all but the most idealistic medical students away from primary care into the more lucrative specialties. This has fueled a national primary care labor shortage that will plague the United States for decades.

But the RUC’s payment distortions have damaged far more than primary care physicians’ work lives. Patients receiving unnecessary services are needlessly exposed to physical risk. Purchasers — taxpayers, businesses, and individuals — shoulder relentlessly excessive and rapidly growing healthcare costs.

A 2010 RAND study showed that 79% of the past decade’s growth in household income has been siphoned off by healthcare, leaving few resources for other important societal needs, like infrastructure replacement and education. Healthcare has become the most significant threat to our national economic security, and the RUC, while not the only healthcare problem, remains a key driver of unnecessary health cost.
Can We Fix the RUC?

Two questions come to mind:

By what logic should overt financial conflict be a default methodology for any American program?

In a policy environment that has been captured by special interests like the healthcare lobby, is it even possible to fix a national problem like the RUC?

Toward the end of the Senate Finance Committee roundtable discussion, Bruce Vladeck, President Clinton’s HCFA Administrator, summed up our dilemma. “I’m hopeful that some combination of the need to address overall deficit reduction strategies more generally and a different kind of political climate in the relatively near future will create the opportunity for people to say, ‘We made a mistake. We created a formula that produces irrational and counter-intuitive results, and we’re just going to abolish it and start all over again. It’s the only way we’re going to get out of this morass.'”[1]

August 12, 2013

Editor: Although the publication date of an article may not be current the information is still valid.

How One Small Group Sets Doctors’ Pay – By Pauline W. Chen, M.D.

Despite decades of warnings of a primary care crisis and the fact that some 60 million patients are without primary care doctors, the medical profession has continued to produce legions of specialists.

When asked, most of my colleagues will point to the system that determines how medical charges are reimbursed by insurance, and how doctors in different areas of medicine are paid.

Put simply, our payment system pays more for procedures performed by specialists. Specialists, therefore, have greater earning power, so more doctors choose to train to be specialists. Careers in specialties like radiology, dermatology and neurosurgery offer lifetime earnings several million dollars higher than those in primary care. It is no surprise that medical students emerging from the educational mole hole saddled with hundreds of thousands of dollars of debt choose more lucrative fields.

But simply blaming the reimbursement system and accepting the perverse payments as immutable is inadequate. It’s like believing that the current situation can only be repaired by the magical intervention of some Wizard of Oz.

Well, maybe it’s about time then that all of us, doctors and patients, take a hard look at the man –- actually, the 29 men and women — behind the reimbursement curtain. I’m talking about the Specialty Society Relative Value Scale Update Committee, commonly called the RUC.

RUC (rhymes with “truck”) advises the Centers for Medicare and Medicaid Services, or C.M.S., the government agency that is responsible for administering the most important health care payer in the United States. Medicare reimburses doctors according to a set schedule of fees for more than 10,000 physician services, ranging from removing a gallbladder to performing a colonoscopy to evaluating a new patient in the office. This fee schedule is crucial. It determines how taxpayers’ Medicare dollars are spent, and it sets the relative worth of one physician service versus another. Moreover, because many private insurers and Medicaid programs model their own payments on Medicare’s, its fee schedule ends up largely determining physician incomes.

The fees are roughly based on a formula developed in the mid-1980s to quantify the value of doctors’ work. When C.M.S. adopted the formula, it added a few adjustments and agreed to rely on a consensus process for updating the schedule of fees. Specifically, C.M.S. said it would turn to an expert committee organized by the American Medical Association for advice.

That expert committee is the RUC.

Critics have charged that the process has been riddled with conflicts of interest and stacked against primary care. It’s not hard to see their point. First, C.M.S. historically has approved 90 percent or more of the recommendations from the RUC. Second, while the RUC makes its recommendations based on an anonymous two-thirds majority vote, about 80 percent of those voting to begin with — accounting for 23 of the 29 seats — are physicians representing professional societies. Third, almost all of those physicians are specialists (currently only five RUC members are doctors from primary care fields).

Tom Scully, a former C.M.S. administrator, once described RUC meetings in this way: “Essentially, we sit down with [RUC] every year and say, ‘Here’s $43 billion and growing, how do you want to [divide it]? What’s the relative value of weights between anesthesiologists, gastroenterologists, surgeons?’ And set the relative values at what the physician community thinks the relative payment should be.”

It’s obvious why doctors might care about the RUC’s decisions. But why should patients?

One answer is that the dollars at the heart of these discussions — what is now the over $60 billion allotted for Medicare physician payment — come from the pockets of taxpaying patients. But it is a group of individuals representing those who stand to benefit the most, not the taxpayers themselves, that holds extraordinary sway in determining how those dollars are spent.

Another answer is that by allowing the continued devaluation of primary care services relative to work performed by specialists, the RUC perpetuates a health care system that not only fails to respond to patient demand but also, bizarrely, actually offers disincentives to attend to patient needs. “Surely there is something absurd,” writes the Princeton University economist Uwe Reinhardt, “when a nation pays a primary care physician poorly relative to other specialists and then wrings its hands over a shortage of primary care physicians.”

For the last few months, the American Academy of Family Physicians has been waging a battle to increase the number of primary care physician seats on the RUC. The academy has also suggested that to increase transparency and accountability, RUC members should no longer be allowed to cast anonymous votes. And it has proposed that the RUC diversify its membership and for the first time add seats for private insurers, employer health plan purchasers and patients.

Let’s hope someone is listening.

September 22, 2011

Editor: Although the publication date of an article may not be current the information is still valid.