What's a doctor worth?

Rather than reform the AMA's committee for setting fee-for-service pay, let's scrap it entirely and put docs on salaries that reflect their contributions to overall health

This year marks the 30th anniversary of Medicare’s physician reimbursement system, which, as I wrote last summer, is:

• Shrouded in secrecy;

• Riven by conflicts of interest;

• Overpays specialists, thus incentivizing overuse of expensive and often unnecessary tests and procedures;

• Underpays primary care physicians, thus disincentivizing preventive care and the early interventions that save lives; and

• Undermines America’s ability to deliver more affordable health care and achieve better outcomes.

Thanks to Bob Herman at Stat News (subscription required), I was alerted this morning to a long critique of that system by some of its original supporters and architects. Sadly, in reading over their comments to Medicare’s proposed physician fee schedule for 2023, I was disappointed by their minimalist recommendations for change.

The 28-page letter’s primary authors are Robert Berenson, a former Centers for Medicare and Medicaid Services official who is now at the Urban Institute, and Paul Ginsburg, who ran the Physician Payment Review Commission from 1986 to 1995 and is now at the University of Southern California. Their critique takes direct aim at the American Medical Association’s resource-based relative value scale update committee (the RUC), whose annual recommendations to the Centers for Medicare and Medicaid Services largely determine how much doctors get paid.

The researchers admit the RUC’s advice leads to “the provision of too many procedures, tests, and imaging services and too little time spent with patients.” The AMA’s recommendations also are often at odds with CMS’s attempt to move provider organizations into alternative payment arrangements that are not wholly dependent on fee-for-service medicine. “The current distortions in the physician fee schedule pose a major barrier to alternative payment models achieving their potential,” they write.

So why not scrap the RUC?

Yet the commenters’ recommendations to CMS do not include eliminating the RUC, whose 32-person roster is dominated by high-paid specialists. Rather, they would add an outside advisory panel that would still rely on the RUC’s experts for most of the technical details for what each specialty’s work entails.   

“The RUC serves as a valuable source of expertise that otherwise CMS would lack, specifically, technical, clinical expertise on more than 8,000 payment codes included in the physician fee schedule. No independent panel or panels can readily provide comparable expertise,” they write.

The outside panel would instead review recommendations from a new research division inside CMS that would develop better methods for collecting more accurate data about the time and expertise needed to perform the work of specific activities within individual specialties. Those improved methods for determining “relative values” would then be used by the RUC in making its recommendations for who will get paid how much for each one of those 8,000-plus services. CMS accepted 75 percent of the RUC’s recommendations in its proposed physician payment rule for 2023, according to the AMA.

The idea that an outside advisory panel created under the Federal Advisory Committee Act would remain an independent arbiter of different specialties worth is a chimera. I spent five years (2004-09) monitoring FACA committees across the federal government when I ran the Integrity in Science project for the Center for Science in the Public Interest. The law’s requirement that advisory committee participants be free from conflicts of interest was routinely ignored. The agency appointing the committee simply determined that the person’s expertise was required and couldn’t be obtained from someone without a conflict of interest.

A committee of outside advisors hired by CMS will quickly become captive to the same forces that now dominate the RUC. Agency capture is alive and well in the nation’s capital.

Why not fixed-pay arrangements?

Berenson, Ginsburg and their four co-authors also reject the idea, raised by last year’s National Academies of Science, Engineering and Medicine report on primary care, that primary care physicians receive a set percentage of all fees spent on physician care. Ideally, according to the report, that should be at least twice the five percent they receive now.

The commenters also dismissed the NASEM report’s call for shifting primary care reimbursement away from pure fee-for-service medicine. CMS should add a set fee for each patient large enough to hire the additional staff needed to meet patients social needs and coordinate care, the NASEM report said.

“From our perspective, the objective of physician fee schedule modernization should be to improve processes to correct distortions (payments that vary too far from marginal costs) across the board to improve the accuracy of the fee schedule overall, rather than advocating on behalf of particular subgroups of physicians,” the Berenson-Ginsburg letter said.

How would that solve anything? A needless back surgery, stent implantation or skin mole removal that is closer to marginal cost would still be a total waste of money.

We need a reimbursement system that moves physician practices closer to taking on full actuarial risk for the patients under their care — where they make money when they keep people well; where they make money when they eliminate unnecessary tests and procedures; and where they and their patients reap the rewards of investing in preventive care and the necessary services (like home visits and social services) that prevent expensive hospitalizations.

In the examples they gave in an appendix to their comments, the authors noted that even primary care physicians are prone to overusing well-paying codes that take little time to perform, even as they oftentimes ignore the more important consultation services that either are poorly paid or have no codes.

Will paying more for “evaluation and management” codes be a better solution to that problem than including a flat fee for each practice that is designed to cover the care coordination and enhanced consultation and support services needed by their sickest patients? I don’t think so. The AMA and CMS are already quarreling over when physicians can use the 2021 expansion of E/M codes, with CMS proposing to postpone its proposed changes for another year at the AMA’s request.

I have great admiration for Berenson and Ginsburg. Over many decades of reporting on health care, I have benefited greatly from my interviews with them. But I’ve come to believe that the incentives created by fee-for-service medicine – at least the way that form of reimbursement is used in the U.S. – is one of the major reasons why physicians overuse many expensive interventions on the not-so-sick and well-insured, while those who really need preventive care and intensive oversight are too often ignored.

CMS through its annual update to the Medicare physician fee schedule sets the ground rules for physician reimbursement in our society. We’re now in the season when the agency is accepting comments on next year’s proposed schedule. Asking CMS officials to tinker with the current system is the inside-the-beltway way of kicking the can of payment reform down the road.

Creative thinkers in the health care think tank world need to take a bolder approach payment reform. The time has come to develop reforms that will move physicians toward annual salary arrangements, where a physician’s pay accurately reflects his or her specialties’ skills, of course, but more importantly, is based on their specialties’ contributions to promoting the overall health of individuals and the nation as a whole.