Make primary care primary

The key is reversing the incentives that encourage overuse of specialists

The following is a transcript of the talk I will deliver at the virtual Primary Care Transformation Summit, which will take place on July 26-29. You can see the agenda here and register for the conference here.

It is highly appropriate that a Summit on Primary Care Transformation address why primary care physicians are among the lowest paid doctors in health care and look at the role that the American Medical Association’s Relative Value Scale Update Committee plays in setting physician pay.

I will kick off this session with a presentation on how fee-for-service medicine undermines the role of the primary care physician and how the Relative Value Scale Update Committee, colloquially known as the RUC, plays the dominant role in setting the physician pay scales that undervalue primary care. I will conclude my brief talk with a policy agenda that can address some of the flaws in the current reimbursement system.

Let me start with first principles that I think have broad agreement in health care policy circles.

1. The American health care system is wasteful. Far too often, it delivers inappropriate and unnecessary specialty care while failing to deliver preventive and timely care to people with multiple chronic conditions.

2. Health care is poorly coordinated. Better care coordination led by primary care physicians is widely seen as the key both to reducing wasteful care and delivering appropriate care to those who need it most. And,

3. The prices of many individual health care services, especially those delivered by specialists, are far too high, often exceeding their actual medical value when we measure how much they improve patients’ health or the quality of their lives.

The fee-for-service reimbursement system isn’t responsible for all these problems. Many countries use fee-for-service payment for both physician and hospital reimbursement. But the way it operates here creates a huge incentive for doing too much of what’s pricey and potentially wasteful; and too little of what is appropriate and necessary.

We have to change those incentives if we want to improve the overall health of the U.S. population.

Perverse incentives

While there has been much experimentation in recent years with value-based payments to accountable care organizations and medical homes, an estimated 70% of physicians pay still comes through fee-for-service reimbursement. Under fee-for-service, every time you perform a service, you get a fee. The more times you perform that service, the more you make. If the fee for a particular service is high relative to other treatments for a particular condition, that creates an incentive to do more of the expensive procedure, and less of the poorly reimbursed intervention that might be equally or even more effective.

Medicare has over 10,000 codes in its fee-for-service reimbursement schedule. Yet it didn’t adopt its first codes for care coordination until 2014 and it remains among the lowest paid primary care codes. In 2021, an hour of care coordination would earn a physician $118, less than the price of an annual wellness visit. By way of contrast, an intervention cardiologist will earn more than three times more, $372, for a 30 to 60-minute cardiac catheterization.

Cardiac catheterization lab

Who sets those wide disparities?  

The legal answer is that the Centers for Medicare and Medicaid Services sets those relative fees through rulemaking. Each year, it proposes an updated physician fee schedule, asks for comment from the public, and then publishes a final rule based on those comments.  

But as a practical matter, CMS sets its physician service prices based almost entirely on recommendations by the RUC, which systematically overweight technical skills like surgery and underweight the cognitive skills used in primary care. It’s a textbook example of what economists call agency capture.

How does it work?

The RUC is composed of 32 members. It includes five AMA officials ex-officio and one voting member for each of the 27 medical specialty societies recognized by the AMA.

Politically, the RUC operates more like the U.S. Senate than the House of Representatives. Each specialty gets one vote. That means the nation’s 39,000 physicians belonging to the American Academy of Orthopaedic Surgeons have the same voting power as the 97,000 physicians belonging to the American Board of Family Medicine. Specialties considered part of primary care make up one third of all practicing physicians. Yet they hold just five of 32 votes on the RUC, less than a sixth.

I’ll explore their deliberations in a minute. But what’s the bottom line result? Orthopedic surgeons and invasive cardiologists wind up earning, on average, over $600,000 a year. Family physicians and pediatricians earn around $250,000. Moreover, the spread between the highest and lowest paid doctors has gone up by nearly $75,000 over the past decade — despite the AMA’s insistence that it is taking steps to redress that large and growing imbalance.

Taylorism in Medicine

The justification for the wide discrepancies comes from detailed surveys that each specialty society conducts of its members. How long does it take to perform the tasks associated with a particular billing code? How much skill is involved?

A few years ago, Columbia University professor Miriam Laugesen wrote a book about the RUC appropriately called “Fixing Medical Prices.” She reported the surveys get limited response from specialty society members. Physicians who do respond consistently overestimate the amount of time it takes to perform a task, which isn’t surprising given the obvious conflict of interest in having people evaluate their own work.

Imagine what would happen if you asked factory workers on piecework to conduct their own time-and-motion studies. Frederick Winslow Taylor, an industrial engineer, invented time-and-motion studies and the piecework system in the late 19th century to speed up factory work by financially rewarding workers who completed a task in less than the assigned time.

The same principles are still at work in medicine today, even though they have been eliminated in most industrial settings. The most successful managements today deploy workers in teams that collectively work at making constant, small improvements in their production processes, a system perfected at Japanese companies like Toyota.

Even the staid Government Accountability Office has called into question the paucity of data behind the RUC’s recommendations and the inherent conflicts of interests in letting specialty societies set their own pay scales.

Laugesen, who attended two years of RUC meetings and interviewed numerous participants before writing her book, reports the committee’s deliberations often break down into factions pitting interventionist specialties against cognitive specialties. It is like log rolling on Capitol Hill. The smaller but more numerous interventionist specialties band together to outvote the fewer but larger cognitive specialties.

The entire process lacks transparency. Other stakeholders are effectively excluded from having input at RUC meetings before it makes recommendations to CMS. And while people and organizations can comment on the proposed rule, few do since its details are so complex. Reporters rarely attend RUC meetings because they are required to sign a non-disclosure agreement prohibiting them from writing about anything proprietary, including the surveys.

One final point about the significance of the RUC. While its deliberations affect only Medicare, the government-set rates become the baseline for determining commercial rates.  A recent Urban Institute study of commercial physician rates found they ranged from 10% to 230% higher than Medicare’s rates. That’s a huge spread and, as it turns out, serves to further widen the pay disparities between specialties. The study found that commercial rates for cognitive specialties like family medicine and psychiatry were barely above the RUC-driven CMS rates. By contrast, commercial rates for high-priced specialties like radiology, neurosurgery, and anesthesiology were more than three times as high.

A reform agenda

As I noted earlier, high-priced specialties’ control over physician pay contributes to America having the highest prices for medical care in the world and undermines value-based care. Yet every effort at reform has foundered.

People like to talk about the waning influence of the AMA, especially among younger physicians. Most young doctors coming out of medical school are idealistic. They go into medicine because it is a caring profession, not because they want to start a small business. But they often emerge from medical school burdened by huge debts. Few of them understand that the politically influential physician specialty societies are deterring them from entering the more rewarding and in many ways more difficult primary care fields.

What would it take to change the system? CMS is woefully understaffed to set pay scales and would probably produce the same conclusions if it relied on the same survey methodology with its obvious conflicts of interest. 

Sadly, there’s almost no interest in changing the compensation system on Capitol Hill. The well-heeled specialist societies are far more generous in their campaign contributions and therefore more politically influential than the poorly-financed primary care societies.

But a legislative agenda exists, one that has the potential to rally health care reformers across the political spectrum since it does not require scrapping fee-for-service entirely. That would entail moving to a system based on set salaries, which, I should point out, are used by government agencies like the Veterans Administration and integrated delivery networks like Kaiser Permanente.

Last year the National Academies of Sciences, Engineering and Medicine outlined a comprehensive agenda for reinvigorating the U.S.’s faltering primary care system. At the federal level, it called for giving primary care physicians a partially fixed payment for every patient, sufficient to pay for the team-based care required to meet their needs. The report also called for accurately measuring the level of funding flowing into primary care – currently estimated at around 5% of all spending — so policymakers can set a higher target, ideally around twice that amount. Finally, the report suggested CMS downgrade the RUC’s role in setting payment policy by bringing in outside experts to advise Medicare.

Let me conclude with a quote from that report: “Without access to high-quality primary care, minor health problems can spiral into chronic disease, chronic disease management becomes difficult and uncoordinated, visits to emergency departments increase, preventive care lags, and health care spending soars to unsustainable levels.”

Changing the way we compensate physicians and narrowing the gap between specialties will go a long way toward addressing each of those issues.