The truth about the RUC: Critics and advocates speak out

Physicians who treat Medicare patients know that there’s a process behind setting payment rates for services and a committee that’s responsible for helping Medicare complete the task. Depending on their perspective, industry observers have characterized the group-the American Medical Association (AMA)/Specialty Society Relative Value Scale Update Committee (or the RUC, for short)-as either:

• an obscure committee that holds 3 boring meetings each year to do tedious evaluations that help the Centers for Medicare and Medicaid Services (CMS) set Medicare rates for physician reimbursements; or

• a secretive, highly politicized group that wields enormous influence over physician reimbursements-from both CMS and private insurers-and one that has conflicting interests and little oversight.

The truth likely lies somewhere in the middle. According to the AMA, the RUC makes annual recommendations to CMS regarding new and revised physician services and performs broad reviews of the Resource-Based Relative Value Scale (RBRVS) every 5 years. The RBRVS is a function that weighs physicians’ services relative to their value and time investment to arrive at a benchmark for compensation on behalf of CMS. It’s not actual dollar figures, but relative values that translate to dollar figures using a complex formula involving a conversion factor (see Figure below).

What is most important to note is the broad influence the RUC has on how much physicians get paid-both by CMS directly and by private insurers who base their payments on a percent of Medicare payments. While the committee makes recommendations for relative value, those recommendations carry great weight as industry-wide benchmarks for actual-dollar payment rates.

Those who participate in the RUC and those who criticize it have polarizing views. Thus, we hope this article produces more light than heat, which would be an improvement over mainstream media coverage excoriating RUC recommendations.

For example, an article in the Feb. 20, 2007, issue of Annals of Internal Medicine discussing the income gap between primary-care providers (PCPs) and medical specialists took the committee to task for failing to do more to close that gap.1 Specifically, the article blamed the over-representation of specialty physicians on the RUC for the lower incomes of PCPs. The article did note other factors, however, such as private insurers “reimbursing specialists at large percentages and primary care providers at small percentages over Medicare rates.”

Perhaps the most vilifying headline appeared on a July/August 2013 article in Washington Monthly: “Special Deal: The shadowy cartel of doctors that controls Medicare.”² It and other articles are clear on a number of criticisms.

The critics: There is weak representation of primary care providers on the RUC. Therefore, the RUC’s deliberations are skewed in favor of specialists.

The negative articles criticize the RUC based largely on the same perceptions. Much of the focus specifically falls on the committee’s purported effects on reimbursements for PCPs.

The committee is in fact skewed toward specialists based on headcount, which may promote the ongoing tendency for procedural CPT codes to be reimbursed more generously than cognitive codes, such as those for patient Evaluation and Management (E/M). And because PCPs tend to engage in a higher proportion of activities that fall under E/M codes, a related criticism is that the updating process undervalues their work. Even so, there are also persistent issues surrounding payments for procedural codes versus those for cognitive codes. “RUC represents that tension, but it doesn’t define it,” says David Muhlestein, director of research for healthcare consultants Leavitt Partners LLC.

The RUC: Primary care compensation is increasing appropriately.

From 1991 to 2011, the portion of Medicare money paid to PCPs increased from 37% to 43% while the portion going to surgical specialties dropped from 32% to 21%, according to William L. Rich III, MD, FACS, an ophthalmologist and former RUC chair. Similarly, reimbursement for routine office visits with established patients (E/M code 99213) has risen from $32 to $66 since 1995, he says.

“There has been a redistribution of valuation by the RUC,” said Rich in an interview with Medical Economics magazine. “There has been an absolute shift of dollars to primary care, appropriately.” He adds that in the past 2 years and on its own initiative, the RUC has added valuations for care coordination, team education, and phone calls. There are still, however, “some distortions” in pay, he says. For example, cardiology, gastroenterology, and orthopedic/spine surgery “pay substantially more than primary care or general surgery.”

Glen Stream, MD, past president and former board chair of the American Academy of Family Physicians (AAFP), counters that though the tide is turning back toward primary care, it’s only “to a small and inadequate degree.” He points out that the common codes (E/M 99213 and 99214, which includes moderate-complexity medical decision making) are also embedded into many codes for surgical procedures, such as pre-op and follow-up visits. Therefore, increasing the pay for common codes helps PCPs less than might initially seem the case.

AAFP has recommended that CMS create primary-care–specific E/M codes. The academy’s position is that evaluation and management work in primary care is more demanding and complex than in specialties, especially with an aging population that often presents with multiple or chronic conditions.

 But the whole idea behind the RUC and its value determinations is to arrive at relatively fair compensation for time and skill. Each CPT code-created exclusively by AMA to document healthcare services for the purpose of reimbursement-has a Relative Value Unit (RVU) assigned to it. When the RVU is multiplied by a conversion factor and a geographical adjustment, it creates the compensation for a particular service.

RVU numbers are translated into actual reimbursement dollars by the CMS conversion factor, which is flat, or the same for all specialties, says Barbara S. Levy, MD, the current RUC chair and vice president of health policy for the American College of Obstetricians and Gynecologists. She adds that private insurers’ conversion factors are affected by market forces, such as the availability of a given specialty in a certain area, and aren’t necessarily flat.

Barbara S. Levy, MD

Although it’s not the only formula, private insurers often use Medicare rates as a baseline for their separately negotiated rates with providers. Market forces, quality programs, pay for performance, and other factors figure in as well.

The critics: Service time metrics can become out-of-date with medical advances.

Other criticisms of the RUC cover a wide range of issues. For example, the amount of time attributed to many procedures has remained high even as the procedures have advanced to become more routine, requiring less of a physician’s time than previously documented. A Washington Post article noted that 78 physicians in Florida had-on paper-performed at least 24 hours’ worth of procedures in a single work day based on RVU figures, which would clearly be impossible in the real world.³ And reportedly, certain ophthalmologists performed 30 to 40 procedures in a single day, which would have been 30-plus hours’ worth of work based on RVU figures.

The RUC: The numbers must be examined in context.

In a press release shortly after the article appeared, the AMA stated that it had asked to see the magazine’s cited data for the Florida physicians, but that the documentation was not provided.⁴ Regarding the ophthalmologists, the association noted that the procedures cited appeared to have included LASIK, for which RVU values have never been determined, because the procedure is not covered by Medicare.

As to the system not addressing procedures that have become more efficient, Rich says that over a 10-year period, he went from doing 3 cataract surgeries in about 7 hours to doing 10, but his reimbursement per surgery declined significantly. The Medicare reimbursement for cataract surgery was $941 in 1995 and is $578 currently (figures not adjusted for inflation), Rich says.

The critics: RVU numbers assigned to procedures always go up.

Reimbursement just keeps growing over time, say the critics. A Washington Post analysis of records for 5700 procedures reportedly showed that work RVUs are seven times likelier to increase than to fall.

The RUC: The values are relative.

The AMA and the RUC have repeatedly emphasized that the RBRVS and its updates are based on relative values. In other words, if everything is inflated by a similar factor, the RVU figures are still valid, compared to each other. And RUC leadership insists that the committee’s RVU recommendations are largely in line with each other in those relative relationships.

It’s a common misperception that the RUC is somehow jacking up physicians’ fees in absolute terms, according to AMA. With the various steps between an RVU allocation by the RUC and a final dollar figure in the following year’s Physician Fee Schedule, accusations of “price-fixing” are off the mark. “The RUC does not control revenue,” Rich says, “it just determines valuation.” Further, Rich says, since 2010, the RUC has reviewed 1553 codes. Of those, only 5% increased. Forty-three percent decreased, 34% stayed the same, and 18% are still under review. Most of the redistribution of value was to primary care, he says.

The critics: There is overvaluation of certain procedures.

Overvaluation encourages overuse, not only under Medicare, but under private insurance, too. Many insurers use the RBRVS as a baseline for their own payment scales, with some using a percentage of Medicare payment-such as 125%-as a final rate. This “Medicare spillover” effect does exist, Muhlestein says. Medicare is the payer with the most clout, and its rates do influence private insurers.

The RUC: The RBRVS as administered by the CMS is budget-neutral, as reflected by annual adjustments in the conversion factor.

The amount that Medicare spends on physician fees, even fees per patient, continues to rise drastically, of course, but that’s being driven by other factors, such as utilization increasing overall. As for private insurers, the RUC has no control over whether they use the RBRVS values, or whether or how they modify them.

The critics: CMS essentially rubber-stamps the RUC’s recommendations.

Historically, CMS has approved more than 90% of the RUC recommendations. The raw numbers are hard to argue with, but the reasons for them are hotly debated. Many question whether new payment models will force CMS to push back on some of the RUC determinations.

The RUC: The committee is doing its job well.

The fact that CMS accepts the vast majority of the committee’s recommendations is an indication of how carefully and fairly the RUC does its job, according to the AMA. In addition, RUC leadership points to the fact that CMS “listens to every debate,” says Rich. So what the committee does and how it does it is completely transparent to CMS. Stream does agree that CMS has been “more discerning” lately about accepting the RUC’s valuations.

The critics: The RUC is “secretive.”

In not publishing the results of RVU votes and in requiring a broad nondisclosure agreement from any non-members allowed to attend a meeting, the RUC appears to be less than transparent in its decision-making process. The lack of transparency engenders much of the distrust of the committee, says Stream, who adds that the AAFP has pushed for more transparency within the RUC and outside of it.

Medicare is becoming somewhat more open about what it pays providers since a federal judge lifted a 1979 injunction that prohibited CMS from disclosing Medicare payments. In May, CMS released hospital charge data for 100 common procedures, but physicians remain divided on the issue of making the information public.⁵ The biggest favor the RUC could do for itself is to become more transparent, agrees Muhlestein.

The RUC: Some information is better kept within the committee.

RUC meetings are closed for good reason, say its members, principally that new CPT codes requiring an RVU recommendation often involve new medical devices, and the RUC doesn’t want its deliberations to become fodder for the stock market. “They [CMS] don’t want Wall Street responding to the debates in that room,” says Rich. The AMA also notes that RUC meetings typically are attended by 300 people, so the attendees hardly comprise a small, clandestine “cartel.”

Transforming the RUC from the inside

So is the RUC deservedly as controversial as mainstream media portray? Or is it more of a lightning rod for a variety of contentious, persistent issues around Medicare reimbursements specifically and concerns around fee-for-service (FFS) payments generally?

In an August post on the American College of Physicians’ ACP Internist Blog, Robert M. Centor, MD, FACP, an academic general internist and associate dean at the University of Alabama School of Medicine, writes: “. . . the RUC did not create the system. They try hard to balance a system that is designed to achieve the wrong outcomes. The RUC has become a very easy and attractive kicking post, but the problem comes from the idea of resource-based relative value units . . .”⁶ Although it is not perfect, members are working to patch a flawed concept.

Centor goes on to say he does not blame the RUC. And the RUC leadership has been moving to address at least a couple of the concerns highlighted by recent media coverage. For example, one allegation has been that RUC members vote in blocs and that surgeons or other specialists agree to vote in concert. Around 1999 and 2000, Levy says, “there were factions” that would meet separately the night before a meeting to plan their votes, but both she and Rich worked hard to drive that attitude out.

Levy says she tells RUC members, “When you sit on the RUC, you’re representing the house of medicine,” not a particular society or specialty. “People are not voting in blocs” currently, she says, adding, “most of our votes are overwhelming. Generally it’s not close.”

One way she and Rich brought about a cultural shift, Levy says, was procedural. The typical agenda book for a RUC meeting is massive, about 2,000 to 3,000 pages, so this material is now divided up and assigned to advance reviewers who are from specialties different from the ones that use the specific codes they’re reviewing. These reviewers also become the lead commenters on those codes during the meeting. The result has been more-informed discussion, Levy says. “People don’t come in as fearful.”

In another change, Levy says, RUC votes will be published for the first time after CMS publishes its final rule-likely in November. The votes will be reported only as totals for and against a given RVU assignment, however, and will not be traceable to individual members.

“We have to have” that level of anonymity, says Levy. She doesn’t want to risk RUC members being punished for voting against their specialty society’s narrow interests, which she says happens often.

The RBRVS update process is based entirely on effort, so it’s lacking any elements connected with health outcomes or the value to a patient of a procedure or E/M. The RUC’s leadership and outside observers agree-although it’s an improvement, the change is unlikely to happen any time soon.

Physician payments should be based to an extent on effort, as they currently are, says Roy Poses, MD, a clinical associate professor of medicine at Brown University, an internist and blogger who has followed the RUC for half a dozen years. But the most important thing to add to the RBRVS, he says, would be “some measure of value for the patient … Ideally, effectiveness ought to be part of it.

“The problem is, that’s really hard to measure,” he continues, and “right now, I don’t think we know enough” about outcomes.

When the RUC was established, there was supposed to be a valuation proposition to it, Rich says, but the committee didn’t have tools to measure this in 1989. “We’re starting to find ways to measure value to the patient,” such as quality-of-life scores or patient-related outcomes, he says.

Levy says that if she could recommend changes to RBRVS, she’d like to add factors for relative patient benefit, as shown by outcomes research, and add a factor for cost-effectiveness. By law, however, the only factors that can be considered currently in the RBRVS are work, practice expenses, and malpractice insurance expenses, along with “a bit of a geographic modifier,” says Levy. As a result, the RUC can’t yet consider a procedure’s value to the patient or to society.

Transforming the RUC from the outside

Section 3134 of the Affordable Care Act mandates that CMS establish a process to validate RVUs of Physician Fee Schedule services, and the agency has contracted with the Urban Institute and the RAND Corporation to do so.

The Urban Institute project is intended to give CMS a way to review proposed work RVUs, assess how reasonable they are in terms of external data, and ensure that the overall RBRVS fee schedule is internally consistent within families of services and specialties. The project will examine the work RVUs for 100 services in the Physician Fee Schedule. Clinical panels made up of physicians from a range of specialties will review the new data regarding the time necessary to perform specific services and procedures.

Over a 2-year period, the RAND project will build a validation model to predict work RVUs and their time and intensity components. “The model design will be informed by the statistical methodologies and approach used to develop the initial work RVUs and to identify potentially misvalued procedures under current RUC and CMS processes,” according to RAND. CMS will provide a sample of CPT codes to test the model.

One of the issues underlying these efforts seems to be the question: Who would be better qualified to determine physician work values than the physicians themselves? To put it another way: Could a body substantially different from the RUC do the same job, but better?

Levy is skeptical, noting that almost everyone on the RUC is a practicing physician. She questions how a non-physician could set RVUs, particularly those relating to aspects of a procedure’s intensity and potential harm. She says she would be more optimistic about changing other aspects of Medicare payment policy. For example, there’s a policy related to implantable defibrillators. Costing more than $100,000 installed, the devices are indicated only for congestive heart failure, but over time, their use has been extended to other conditions without supporting evidence. CMS has tried to rein in the extended use, she says, “but they get tremendous pressure” from Congress.

Health services researchers originally developed the RVU concept, so presumably they would be qualified to do the RUC’s work, says Muhlestein, although he isn’t aware of any significant current research efforts in this area.

“It’s hard to get non-physicians really interested” in this kind of work, he adds.

On one hand, Muhlestein explains, the reported $7 million that the AMA spends annually to operate the RUC is roughly one ten-thousandth of the approximately $60 billion a year that Medicare pays for physicians’ fees, so more effort in ensuring that RVU allocations are accurate wouldn’t be a big hit to the federal budget.

On the other hand, he points out, Congress has never given CMS the resources to replace or supplement the RUC.

Calling the RUC’s procedures “complicated and opaque,” Brown University’s Poses says RBRVS should be updated by a formal federal advisory committee whose members are appointed by the federal government, which accepts open, public comments, and which includes “some representation by patients and taxpayers.” He envisions something along the lines of the Patient-Centered Outcomes Research Institute, whose board includes representatives from patient-advocacy groups.

A potential step in the direction that Muhlestein and Poses suggest was taken in June, when US Rep. Jim McDermott, MD, (D-Wash.) introduced a bill that would create a new panel to oversee the RUC. In a press release, McDermott’s office said the RUC “is unevenly weighted by procedural specialists over primary care doctors and relies heavily on anecdotal and self-serving survey evidence, rather than forensic data.”

“Medicare certainly needs clinical expertise in order to fairly set reimbursements, but an outside organization … needs checks and balances,” McDermott said. “No matter how well-intentioned, structural biases are inevitable and we’re seeing that effect as new doctors flock toward specialty care and away from primary care.”

McDermott is a psychiatrist as well as the ranking member of the House Ways and Means Subcommittee on Health.

Based on a recommendation from the Medicare Payment Advisory Committee, the Accuracy in Medicare Physician Payment Act of 2013 introduced by McDermott in June would establish a panel of independent experts within CMS “to identify distortions in the fee schedule and develop evidence to justify more accurate updates.”⁷

The panel’s members would include patient representatives, and the group would be subject to the Federal Advisory Committee Act, which requires such bodies to hold open meetings and publish their minutes. Under the bill, Medicare could continue to request work from the RUC, but the new panel would both initiate such requests and review the RUC’s work.

The future of the RBRVS

It’s clear that the RUC is, for better or worse, handcuffed to the RBRVS, which was built on a fee-for-service model. With or without major changes, what might the future hold for the RBRVS? Even within group practices, accountable care organizations (ACOs), and other care models, rewards need to be divvied up somehow, says Rich, either by RVU or some equivalent, and the current RVU assignments are already commonly used for such purposes. “These are not going away. They’re always going to be needed,” he says, even if the FFS model fades somewhat. Levy adds that in addition to being part of how ACOs apportion salaries, the RBRVS is likely to be part of any bundled-payment valuations.

The RVU is “the default standard” for such purposes, Muhlestein agrees. He notes that Leavitt Partners’ Center for Accountable Care Intelligence has been tracking ACOs and their payment arrangements for about 3 years and concludes that most contracts are still fee-for-service based. In addition, the ACOs in the Medicare Shared Savings Program are all based on fee-for-service, he says. Catalyst for Payment Reform, a national, not-for-profit collaborative of large employers, in March found that 10.9% of commercial healthcare payments today are tied to value rather than volume.⁸

The biggest take-away from the current controversy about the RBRVS and its updates, Muhlestein says, is simply that “RUC is still very relevant and will be relevant for a long time.”

References

1. Annals of Internal Medicine. Ideas and opinions: The primary care–specialty income gap: Why it matters. http://annals.org/article.aspx?articleid=733345. Accessed October 8, 2013.

2. Washington Monthly. Special Deal: The shadowy cartel of doctors that controls Medicare. http://www.washingtonmonthly.com/magazine/july_august_2013/features/special_deal045641.php?page=all. Accessed October 8, 2013.

3. The Washington Post. How a secretive panel uses data that distort doctors’ pay. http://www.washingtonpost.com/business/economy/how-a-secretive-panel-uses-data-that-distorts-doctors-pay/2013/07/20/ee134e3a-eda8-11e2-9008-61e94a7ea20d_story.html?tid=pm_pop. Accessed October 8, 2013.

4. AMA Newsroom. Fact Sheet: Response to the Washington Post’s “How a secretive panel uses data that distorts doctors’ pay.” http://www.ama-assn.org/ama/pub/news/news/2013/2013-07-22-washington-post-ruc-fact-sheet.page. Accessed October 8, 2013.

5. CMS.gov. Medicare provider charge data. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/index.html. Accessed October 8, 2013.

6. Centor R. DB’s Medical Rants. Do not blame the RUC, blame RBRVS. http://www.medrants.com/archives/7440. Accessed October 8, 2013.

7. Govtrack.us. H.R. 2545: Accuracy in Medicare Physician Payment Act of 2013. http://www.govtrack.us/congress/bills/113/hr2545. Accessed October 8, 2013.

8. Catalyst for Payment Reform. Only 11 percent of payment to doctors and hospitals in the commercial sector today is tied to their performance. http://www.catalyzepaymentreform.org/images/documents/release.pdf. Accessed October 8, 2013.