First published 4/25/11 on the HCMS Group Blog
The situation has all the elements of a daytime drama: an exclusive cartel dictating price; a powerful committee with secret members and closed-door meetings trying to avoid exposure; members threatening mutiny; and media “spin” making it hard for the public to tell good guys from bad guys.
No, I am not referring to the NFL dispute between owners and players. This is medicine.
The soap opera around the RUC (Relative-Value Update Committee) is real and the stakes couldn’t be higher: this little-known group influences the allocation of 2.5 trillion dollars (1) in healthcare spending each year. But a closer look leads me to believe things are about to change.
A bit of background—What is the RUC?
Back in the 1980s, an academic group at Harvard took on the difficult task of developing a standardized, logical methodology to assess the “value” of healthcare services based on a consistent, scientific methodology (2).
The group created the Resource-Based Relative Value Scale (RBRVS) that assigns each individual medical service a number in RVUs – Relative Value Units. Today, the Centers for Medicaid and Medicare, along with nearly all major health insurance plans, use a monetary conversion factor based on this RVU scale to determine reimbursement rates to medical care providers (3). In short, the RVU scale determines the financial value of nearly every healthcare service paid for by insurance or the government anywhere in the US.
The group assigning the all-important RVU scores to medical services consists of 29 providers, representing many different specialties, who meet regularly to revise and set prices (4). Great effort has gone into calculating RVUs based on equations that reflect 1) the amount of physician work, 2) practice expense (including equipment), and 3) professional liability insurance required for the service. Physician work includes time, mental effort, technical skill, judgment, stress and an amortization of the physician’s education (i.e., more specialty training equals more units).
Incentives created by RVUs
Since RVUs emerged in the early 1990s, there have been many criticisms. Among them are accusations that an over-representation by specialists (26 of 29 committee members) results in a bias toward low payments for primary care professions. Nevertheless, the “mental effort” (i.e., RVU score) assigned to coordinating ongoing primary care for a family with chronic conditions is far less than the value placed on a single, highly-technical procedure.
There are also the matters of secrecy and conflict of interest. RUC meetings are not public, and its members have a personal stake in the values assigned to medical services. Yet all of this aside, we would argue that how the committee does its job is not the main problem. Even if we presume that RVU values are carefully and precisely derived, the underlying methodology creates incentives for over-spending. Because the system bases value on volume, provider training, and equipment expense, it will always preferentially reward medical practitioners for:
- Expensive procedures rather cheaper ones that are equally effective,
- Technical procedures in place of spending time communicating with patients, and
- Becoming highly-trained specialists instead of primary care generalists.
The stated goal when the RBRVS system was created and adopted was to develop an equitable system that could be applied uniformly across all types of medicine. However, its original definition of “value” has fueled disproportionate growth in specialty training and specialty care to justify higher reimbursements, even on services that are not ‘specialty’ by definition. The system defines value based on effort and expense, with no value placed on results or efficiency.
For a thorough review of RUC criticisms and its defense against those criticisms, visit the Replace the RUC! website (5).
No respect for blocking and tackling
So, imagine if this were the NFL using the same method of designing a new contract! A committee of 29 players would decide the value of activities during games. Three members out of 29 would be linemen, and the other 26 would be higher-profile positions. As a group they would set a value for passes, receptions, carries, and interceptions—but not touchdowns or points. They would decide collectively that simple blocking and tackling has limited value, so rewards remain very small for linemen.
Then imagine that this committee’s recommendations were rubber-stamped by team owners. Linemen would quickly realize that the players’ committee was not truly advocating on behalf of all its members, but instead serving some positions more than others. Under these rules, even when applied consistently, compensation for linemen could never approach that of their teammates.
For primary care providers, the linemen of the medical profession, this is not a game but a reality. They never score a miraculous touchdown from a surgical “Hail Mary.” Occasionally they block a punt by avoiding a hospitalization, or recover a fumbled diagnosis. But mostly, they return to the same spot, set themselves in a solid stance and look into the eyes of a relentless opponent.
Let us not forget that high-quality primary care has been shown to decrease overall costs by helping patients avoid the need for more expensive specialty care, arguably a solid value.
Nevertheless, among their peers, primary care givers get little respect. It is not surprising that only 2-3% of doctors in training today plan to go into primary care. Indeed, in July of 2010, Forbes released a report: “The ten worst-paying jobs for doctors.” The number one worst job: family practice (6).
Against this backdrop, primary care doctors may be ready to secede from the RBRVS union. Three different possibilities are emerging:
1) Walk away from the RUC. There is growing momentum behind this action, with the American Association of Family Physicians making its objections known. This would be a blow to the credibility of the RUC and put pressure on the AMA to offer an alternative (7).
2) Revise the RBRVS. One proposed bill in congress calls for the RUC to alter some of the current practices, providing more transparency and potentially different representation from other experts, such as economists (8).
3) Reject fee-for-service as the payment mechanism for primary care. Several models in government and commercial settings are growing in popularity where primary care providers are paid by salary for covering a set number of patients. In some cases, these fees are removed from the insurance plan, and primary care is provided at no or low cost to patients (9, 10).
Whether any of these developments change how we pay for primary care, calling attention to RBRVS serves a valuable purpose. More payers and policy makers should question whether RVU methodology best serves the country as we reign in accelerating costs and ask ourselves whether public health is actually improving. Viewed in the full light of day, it is likely we would decide that our medical linemen deserve more credit than they get today.
Why this matters: Among the many reasons our country has higher medical costs Tthan any other nation, but not better health, RBRVS may be the least known. Regardless of its original intent, policy makers today should review and reconsider whether prices should be set by the same people benefiting from payment, and whether the value scale should favor more, expensive care in place of true results. We might also question whether payments should be “set” at all, or if health care providers deserve a chance to set their own prices and attract patients based on their ability to provide the best value for the least money—no committee required.
Wendy Lynch is a health care analyst.