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The Growing Ruckus Over the RUC and Medicare Fees

Little-Known Rate-Setting Physicians' Panel Draws Sharp Criticism

WASHINGTON -- A little-known panel of doctors that influences the way hundreds of billions of dollars are spent on health care has come under increasing scrutiny for what many see as its inherent conflicts of interest.

Since 1991, the Centers for Medicare and Medicaid Services (CMS) has relied on the panel created by the American Medical Association to help it set the fees Medicare pays to doctors.

Called the Relative Value Scale Update Committee, or RUC, it's composed of 29 physicians, most of them specialists
See the list of current RUC members.
representing the medical world's disciplines including cardiology, neurology, dermatology, orthopaedics and plastic surgery. Usually, the head of the professional association representing a medical specialty fills the RUC's seat for that specialty.

Secret votes
Since its creation as an outside consulting panel to CMS, the RUC has maintained a low profile. Its members meet several times a year and cast secret votes to recommend how much Medicare should pay for any given medical procedure.

But in a new world of politics so intensely focused on reducing health care costs, the RUC is being pulled into the spotlight.

In a November 2010 issue brief on the subject, Laura A. Dummit, principal policy analyst at George Washington University's National Health Policy Forum, concluded that "Concerns remain about medical specialty society involvement [in the RUC] and the lack of an effective 'counterweight' to vested interests in establishing and updating the relative values in the [Medicare] fee schedule." Dummit is the former health care director for Medicare payment issues at the U.S. Government Accountability Office, the investigative arm of Congress.

Fox and hen house
Democratic Congressman Jim McDermott's own assessment has been a bit less diplomatic. In his most recent Capitol Hill testimony on the issue, the psychiatrist from Washington State characterized the concept of having Medicare physicians set the
Specialty physicians dominate the RUC. Over a 20 year period their average income has far outpaced that of primary care physicians.
rates to be paid to Medicare physicians as "letting the fox decide what the keys to the hen house are going to be used for."

Meanwhile, on another front, the RUC has angered primary care physicians (PCPs) whose fees have risen much less than those of specialist physicians since 1991. A good sense of the dramatic gap can be found in the Medical Group Management Association data that shows, on average, specialist salaries grew from $160,000 a year to $340,000 a year from 1990 to 2008 while primary care physicians' salaries grew from $110,000 to $170,000 during that same period.

Sweeping reorganization demanded
The long-simmering dispute over this income disparity hit a new high this month when the American Academy of Family Physicians (AAFP) publicly demanded a sweeping reorganization of the RUC and launched a new task force to explore "alternative methods" of setting Medical rates for primary care doctors.

"We have concerns about participating in a system that works against us," said AAFP president-elect Glen Stream.

RUC Chairperson Barbara Levy, an obstetrician and gynecologist, said the
See examples of RUC-recommended Medicare rate values that the CMS rejected for 2011.
AMA is reviewing the AAFP's recommendations but she thinks criticisms of the RUC are off base. "We're an expert panel, not a representative panel," she said.

Much of the RUC's work involves determining the value of new medical procedures. But the RUC is also tasked with broader reviews of existing codes. Levy says fewer than two percent of the codes reviewed are related to primary care, so the RUC doesn't need increased representation of primary care physicians.

Skewed toward specialties
But the PCPs say the RUC's recommendations have resulted in a skewed system that rewards specialty care and procedures at the expense of primary care and prevention.

That drives up medical costs, discourages doctors from practicing family medicine and results in a less healthy population, says the AAFP.

While it decides whether to quit the RUC, the AAFP is pressing for reform,
Barbara Levy
RUC chairperson Dr. Barbara Levy says criticisms of the panel are off base.
demanding more seats on the panel for family medicine, general internal medicine and general pediatric medicine.

It asked for three new seats on the RUC to be filled by non-medical consumer advocates and representatives of business and private health plans.

The AAFP also asked the RUC for a permanent seat for geriatric medicine and greater transparency in the RUC's secret voting system.

RUC's broad financial impact
While the RUC's recommendations are used to set Medicare doctor fees -- which totaled about $58 billion last year -- its reach is far greater. States look to Medicare payment codes to help them set Medicaid fees while private insurers use them as guidelines in setting up their own payment schedules. While there is no available estimate of the RUC's overall financial impact, the panel's influence would appear to stretch across hundreds of billions of dollars of the nation's nearly $3 trillion annual health care spend.

The RUC determines how much a doctor should be paid for a certain service by considering the "work value" of a procedure, physician expenses and malpractice costs.

Since Medicare's physician payment budget is fixed, raising rates for some procedures means lowering rates for others. Primary care physicians emphasize how this hurts them.

Walter Larimore, the AAFP's representative on the RUC, agrees with some of his primary care physician
Walter Larimore
AAFP's RUC representative Walter Larimore says the current system favors 'procedures over thinking.'
colleagues' criticism of the RUC. But he says the real problem is a health care system that "favors procedures over thinking," or a surgeon's work in the operating room over a pediatrician's diagnosis in an examination room.

Whipping boy
"My sense is there's growing frustration with the process and the RUC has become a convenient whipping boy for that," Larimore said.

CMS has previously been criticized for essentially rubber stamping the RUC's fee recommendations. CMS spokeswoman Ellen Griffith acknowledged that her organization did accept about 90 percent of the RUC's suggestions. But, she said, "we're taking a much more aggressive stance with the RUC now," questioning its determinations more often and asking for more reviews to find misvalued codes.

52% less
A brief look at some of those misvalued codes provides further insight into how far apart the CMS and the RUC can be in their perceptions about a medical procedure's worth. In November 2010, a list of the latest recommended RUC fees was published in the Federal Register. Those charts included 74 recommendations that CMS rejected and reduced -- to amounts that were as much as 52% less than what the RUC wanted. (See chart)

Before Congress required CMS to overhaul its payment system in the late 1980s, Medicare payment rates were based on prevailing charges, a practice that led to annual rate increases. There's little talk of a return to that system.

But there's growing pressure on CMS to consider other methods of setting fee rates.

RUC-changing legislation
Congressman McDermott has introduced legislation that would reduce the RUC's influence by requiring CMS to use independent contractors to identify physician services that are believed to be incorrectly valued.

In an interview with, McDermott said he did not expect his legislation, or anything to do with health care, to move in Congress until the various legal challenges to the new health care law are settled.

But he said he's certain Congress will soon grapple with the continuing escalation of Medicare/Medicaid costs and "the RUC is one of the pieces we have to look at. And if you look at the RUC, I think you're going to determine it has to be changed."

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