Medicare Physician Payment: The RUC’s Hollow Victory

Brian Klepper

Posted 5/18/12 on The Health Affairs Blog

On May 9th, William Nickerson, Senior Judge in the Southern Maryland Federal District Court, issued a 15 page ruling against the six Augusta, GA primary care physician plaintiffs who challenged HHS’ and CMS’ longstanding relationship with the American Medical Association’s Relative Value Scale Update Committee (RUC). The opinion did not weigh the substance of the case, but instead focused on a procedural provision in which Congress bars the judicial system from considering how the relative value units (RVUs) of medical services are determined. Judge Nickerson wrote:

Accepting as true that RUC plays a major role in the formation of the PFS [Physician Fee Schedule] and also accepting as true that this role unfairly skews the PFS toward certain medical professions and procedures, the Court, nonetheless, finds that Congress has precluded courts from reviewing, not only the final relative values and RVUs, but also the method by which those values and units are generated.

Judge Nickerson acknowledged the physicians’ core argument in the opening summary of the case facts: As CMS’ sole advisor on medical services valuation for two decades, the RUC is a “de facto” federal advisory committee that should fall under the public interest rules of the Federal Advisory Committee Act (FACA). The physicians argued that this flawed process has resulted in an over-valuing of specialty care, an undervaluing of primary care and a distortion of health care markets, utilization and cost. But the ruling ignored their argument, explicitly avoiding any evaluation or discussion of the requirement that federal advisory bodies adhere to FACA.

Ironically, the previous week a Health Affairs study confirmed that CMS has accepted almost 9 of every 10 RUC recommendations. When combined with information about the RUC’s non-adherence to FACA – its lack of transparency, shoddy scientific methodologies, conflicts of interest, and non-representative panel composition – this finding validates concerns about the RUC’s tremendous influence over public payment policy.

Even so, the court’s analysis was based on Congress’ prohibition against judicial challenges to the determination of the mechanisms used in developing the Physician Fee Schedule, and backed by some previous cases.

Effectively, Judge Nickerson faced two conflicting federal laws: one that he says prohibits the courts from considering the current process established by Congress, and another that requires federal advisory groups to adhere to FACA. He addressed the first but ignored the second, focusing on procedure to avoid the substance of the RUC issue, which is fraught with controversy and could be a lightning rod for powerful interests. This maintains the status quo but leaves the problem of the RUC’s tremendous special interest influence over public policy.

If Judge Nickerson’s interpretation is correct – that Congress prohibits lawsuits that consider the medical services valuation process – then the RUC can use any means, no matter how inappropriate or lacking in credibility, to value services without challenge. While HHS has argued that this lack of accountability may adhere to the letter of Congressional intent, it is hard to believe it reflects Congress’ spirit.

It is unclear at this writing whether the plaintiffs will appeal. Important legal challenges like this one are expensive and typically funded by large organizations, but this one was mounted by a few private physicians. The primary care physician community (along with patients and purchasers) is most likely to benefit from making the CMS-RUC relationship more accountable, but no primary care societies joined the suit. Instead, and against the weight of past evidence, they continue to believe that their best strategy is participating on the RUC.

It is important to place the campaign to reform the RUC in context. Over the past year and a half, the RUC has been publicly scrutinized, and the American health care community, if not the general public, has become much more aware of its activities, methods and influence.

Failing a successful appeal or some other mechanism that circumvents the CMS-RUC relationship, Medicare’s medical valuation process will be the status quo, which is a black box lobbying process dominated by medical specialty societies.