Fixing America’s Health Care Reimbursement System

Brian Klepper

First published 3/3/11 on Kaiser Health News

A tempest is brewing in physician circles over how doctors are paid. But calming it will require more than just the action of physicians. It will demand the attention and influence of businesses and patient advocates who, outside the health industrial complex, bear the brunt of the nation’s skyrocketing health care costs.

Much responsibility for America’s inequitable health care payment system and its cost crisis is embedded in the informal but symbiotic relationship between the Centers for Medicare and Medicaid Services and the American Medical Association’s Relative Value System Update Committee — also known as the RUC. For two decades, the RUC, a specialist-dominated panel, has encouraged national health care reimbursement policy that financially undervalues the challenges associated with primary care’s management of complicated patients, while favoring often unnecessarily complex, costly and excessive medical services. For its part, CMS has provided mostly rubber-stamp acceptance of the RUC’s recommendations. If America’s primary care societies noisily left the RUC, they would de-legitimize the panel’s role in driving the American health system’s immense waste and pave the way for a more fair and enlightened approach to reimbursement.

As it is, though, unnecessary health care costs are sucking the life out of the American economy. Over the past 11 years, health care premium inflation has risen nearly four times as fast as the rest of the economy. Health care costs nearly double those in other developed nations have put U.S. corporations at a severe competitive disadvantage in the global marketplace.

Many health care experts believe that half or more of all health care expenditures — the costs of bloated transactional processes as well as inappropriate procedures, service sites and prescription drug levels — provide no value. For perspective, this year we’ll unnecessarily spend nearly $1.5 trillion on health care, an amount equivalent to the budget deficit. Though we continually have given physicians and the health care industry a pass on this issue, its impact can be understood as the difference between our national prosperity and decline.

The current system’s under-valuing of primary care is one of three structural flaws — the other two are fee-for-service reimbursement and a lack of cost, quality and safety transparency — that produce excess spending and block the health care sector from working as a true market. Overwhelming evidence shows that allowing physicians to serve as patient advocates and guides throughout the entirety of care results in better outcomes at significantly lower cost. Recently, patient-centered medical homes, super-charged primary care practices, have demonstrated measurable cost and quality successes, also proofs of the approach. These facts are indisputable and are, by the way, the reason why America’s corporations are stepping up the use of on-site primary care clinics.

Meanwhile, a spate of recent articles about the RUC have produced swift, strong responses within key circles. They have been passed virally among primary care physicians. Discussions have begun with people who might have influence over the process. And sensible changes in this advisory system seem possible.

Seizing that opportunity would first require mobilizing primary care doctors to demand that their professional societies, such as the American Academy of Family Physicians and the American College of Physicians, abandon the RUC. Then these physicians also would call on CMS to replace it with a more independent advisory panel. That effort would also launch a national discussion about how to more fairly value and pay for America’s health care.

But one man’s waste is another’s income. The current reimbursement system handsomely serves most of the health care industry: health plans; hospitals; specialists; and drug, device and technology firms. Threaten that revenue stream, and those organizations would direct their considerable resources to its protection. In 2009, records show that some members of Congress collected $1.2 billion in health care lobbying contributions – more than it had ever received from an industry on an issue – from health care interests. America’s 350,000 primary care physicians are simply no match for the combined power and influence of the rest of the health care industry.

In an influence-driven government like ours, it is the non-health care business sector that has the organization and leverage necessary to drive the health care changes America so desperately needs. The health care industry represents one dollar of every six dollars in the U.S. economy, but industries outside health care represent the other five. If American businesses, led by groups like the National Business Group on Health, the Pacific Business Group on Health, the Business Roundtable, the National Retail Federation, the U.S. Chamber of Commerce and the National Federation of Independent Business were to advocate for the same policies in national health care reimbursement policy that their members are often implementing in their own on-site clinics, it would have a dramatically positive impact on the nation’s physical and economic health.

Ironically, health care reform specifically avoided addressing the carnage that has been wrought by the RUC. If America’s primary care physicians, backed by the nation’s corporations, all working out of enlightened self-interest, were to focus on addressing this one structural defect, the corrective impact on our health system would be greater than all the reform bill’s cost-reduction provisions combined.

One thought on “Fixing America’s Health Care Reimbursement System

  1. As someone who has been living in the physician compensation issue “weeds” for over 20 years, your points are well taken. What has slowly emerged during this period of “undermining the financial integrity of the medical practice” – particularly primary care – has been a series of “collectively ignorant” strategies attempting to pay less for individual services, not spend less in the aggregate. Why? Because, for those who have controlled the conversation, which has never really included primary care or the patient, reducing spending in the aggregate has not been in their “enlightened self interest.”

    Having successfully taken 12 “independent” primary care practices through the PCMH recognition process both in Michigan and upstate New York, I have seen first hand primary care physicians become re-energized about the prospects of restoring both value and meaningful revenue to and for their efforts to effectively “manage” their patients in a way that ultimately makes them less costly to insure, but more importantly, less costly to employ. That being said, it truly must be the employer, both public and private, that partners with primary care and patients in more creative and innovative ways that includes developing an improved understanding of primary care services and programming for the entire population not just for those with diagnosed conditions.

    In addition, I for one believe that if we can successfully restore value to those primary care practices capable of demonstrating performance we can also restate the value of those specialists, hospitals and ancillary providers who support them by creating an environment whereby the primary care physician can clearly document and report that value. It is only when we recognize this positioning in the delivery of meaningful, sustainable and affordable healthcare will we consistently get it right. True population health improvement begins “one patient at a time.” Investing in and enhancing primary care is the right direction – finally.

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