Physicians and the Relative Value Committees

By September 3, 2019 Commentary

It is somewhat astounding that physicians have historically been the key representatives on the groups that set basic terms of their compensation by Medicare and other payers, given that the conflict of interest should be pretty obvious.  A study in Health Services Research illustrates the issues caused by this approach.  (HSR Research)   The Resource-Based Relative Value Scale is a basic input for the physician fee schedule.  The RBRVS takes various physician work procedural codes and assigns three components to the code; one for malpractice liability costs, one for practice expenses and one for actual physician work.  Each component gets a “relative value unit” number and the sum of those numbers is then multiplied by a set dollar amount to get the actual fee schedule payment.  There is also a geographic adjustment.  The relative value units are generated primarily by physician input, with a periodic review of each code through a committee composed of American Medical Association members and the committee surveys physicians for their perspective on the RVUs to be assigned to a code.  In 2012 the committee had 31 members, 24 of whom were specialists, with 20 being permanent representatives of a specialty and the other four rotating.  Almost all of the recommendations made by the Committee are accepted by the AMA and for whatever bizarre reason, used as-is by Medicare, and subsequently by other payers.  Primary care doctors, as you might imagine, have not been happy with the specialist-heavy tilt of the committee.  Others have suggested that the physicians on the committee might have an incentive to exaggerate RVUs, because, shockingly, that might increase their compensation.

There is a cap on how much of a total increase in annual Medicare spending can be caused by a change in RVUs, so there is a further incentive for committee members to create changes that direct more money to their specialty.  The authors used the rotating nature of some of the seats to test whether this incentive appeared to be operating in practice.  They looked at committee membership and associated RVU changes in the years 2003 to 2013.  They find that having a rotating seat assigned to a particular specialty does indeed tend to increase physician work RVUs, but not the practice expense and malpractice ones,  for codes billed by that specialty, with the increase heavily skewed toward codes that are only billed by that specialty.  The obvious solution is to dump the whole method.  We have lots of government bureaucrats in HHS, so why not put them to work on an independent assessment of physician work.  Or better yet, why not junk that whole approach to reimbursement in favor of one that simply says the target income for a physician should be x, which might vary among specialties, and given average volume, here is what we will pay per service.  The whole thing seems absurd when we are trying to get away from paying for single services anyway, but it is really hard to understand letting doctors set their own pay.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

More posts by Kevin Roche

Leave a Reply