SGIM Urges "Chuck the RUC"

This week, Society of General Internal Medicine (SGIM) members received the 5 August, 2009, Update in Health Policy that urged we "chuck the RUC," (quoted in its entirety below, italics added for emphasis):

Who will assign the value of primary care services? Chuck the RUC!

How does Medicare determine physician payment rates? The answer to this question is a core element of the ongoing debate about health care reform. Changing how Medicare sets payment rates for physicians is especially critical since Medicare rates also guide the rates set by private insurers. Since 1992, Medicare has paid physicians according to the Resource Based Relative Value Scale (RBRVS), a fee schedule that multiplies relative values for physician services by a conversion factor to determine the amount of payment. The Centers for Medicare and Medicaid Services (CMS) has historically used the Relative Value Scale Update Committee, or RUC, as the sole source of recommendations. This committee within the AMA performs broad reviews of the RBRVS every five years. Twenty three of the RUC's twenty nine members are appointed by major national medical specialty societies, including those that account for high percentages of Medicare expenditures for procedures. All meetings are closed and discussions are confidential. The over-representation of procedure-driven subspecialties and under-representation of generalist physicians in the RUC has contributed to the current undervalued cognitive services (especially for primary care) and over-valued reimbursement for procedures. In March 2007, the Medicare Payment Advisory Commission (MedPAC) identified the RUC process as a major reason for undervalued primary care services and a significant contributor to the crisis in primary care. MedPAC has recommended that an independent expert panel of economists, technology experts, physicians and private citizens be created to supplement the RUC's recommendations to CMS regarding fee schedules. Health reform discussions have included moving MedPAC into the executive branch and giving it authority to review and recommend Medicare payment policy, thus reducing the RUC's influence. Not surprisingly, both the AMA and the American College of Surgeons have opposed this proposal. Groups representing primary care physicians, including SGIM, are in favor of this proposal which could ensure fair and unbiased assignment of work RVUs to all the service codes used by physicians. We believe that this will correct the payment inequalities of the current fee scale and ultimately renew trainees' interest in primary care. In the coming weeks, SGIM may ask you to act on this issue and contact your legislators to urge them to support these transformative proposals for primary care. Please monitor your e-mail for action alerts and be prepared to act.

We have previously posted (most recently here in considerable detail) about the perverse incentives given US physicians by the payment schedule dictated by the US Medicare system. These incentives have been largely responsible for the increasingly dire status of primary care/ generalist care in the US. Revisions to the Resource-Based Relative Value System (RBRVS) disproportionately reward physicians for performing procedures and diagnostic tests instead of talking with, examining, thinking about, diagnosing, recommending decisions for, and counseling patients. The US Center for Medicare and Medicaid Services (CMS) uses the RBRVS Update Committee (RUC) de facto as its sole source for advice on revising the system. The RUC is dominated by representatives of medical societies whose members predominantly perform procedures and do diagnostic tests. The RUC is secretive. The identities of its individual members are difficult to ascertain. Its proceedings are secret.

Thus, the RBRVS updating process run by the RUC is opaque, unaccountable, and not representative of patients and "cognitive" physicians. The result of this process has been perverse incentives that have driven up health care costs without obvious improvements in quality or outcomes.

I applaud SGIM for being the first medical society to challenge how the RUC controls payments to physicians, and the perverse incentives the RUC process has generated.

As the Update above says, meaningful health care reform in the US will not occur unless we address the perverse incentives that drive up costs without improving care.

The RUCkus Continues: Former Medicare Administrator Calls the "RUC Process" "Incredibly Flawed," and the AMA Chair Says He's "Inaccurate"

We have posted frequently about the role of the RBRVS Update Committee (RUC) in fixing the rates at which Medicare pays physicians. These payment rates have been much more generous for procedures than for "cognitive" services, (that is, services including interviewing and examining patients, making diagnoses, forecasting prognoses, recommending tests or treatments, and counseling patients.) Several authors have suggested that how the RUC fixes payment rates is a major cause of the decline of primary care. (See our previous posts on this here, here, here, here, here, here, and here and important articles by Bodenheimer et al,[1] and Goodson.[2])

An Interview with a former Medicare administrator

Health Affairs just published an interview(3) with Kerry Weems, a recent administrator of the US Center for Medicare and Medicaid Services (CMS) under the Bush administration, who had some remarkable criticism for the RUC.

Iglehart: The last question I wanted to ask you relates to the Specialty Society Relative Value Scale Update Committee [RUC] of the American Medical Association. The AMA formed the RUC to act as an expert panel in developing relative value recommendations to CMS. The twenty-nine-member committee essentially determines, through the relative values it establishes for the codes that form the basis of Medicare payments, how much doctors will earn from providing services to beneficiaries. In recent years the RUC has come under criticism based on the view that its specialty- dominated composition undervalues primary care services and, in some instances, overvalues specialty services. I have two questions, Kerry, regarding the RUC. You have been in government for twenty-six years; have you ever heard of an administration that has seriously questioned the RUC process, and whether CMS ought to somehow internalize it or delegate it to another body?

Weems: I think there is a general consensus that the RUC has contributed to the poor state of primary care in the United States. In many ways the supposition behind the RUC process, behind the whole relative value scale, is incredibly flawed. It's an input measurement system, so it asks, What's the cost of my inputs, and that's how I'm going to price my outputs. It has no relationship to perhaps the market value of what you might buy. So because it's highly procedure based, it's prejudiced against just standard primary care evaluation and management [E&M] visits, because in an E&M visit it's hard to document what happens in the same way that it is when you remove a mole, or perform some other procedure.

So the process itself is flawed. I don't think that we can make a change without a statutory change giving us the ability to do that. But it's something that is drastically needed. You know, it's funny that we talk about better coordination of care and creating the medical home. Well, the place where this can occur is in an E&M visit, which has been highly undervalued by the RUC.

Iglehart: You say that the RUC process is seriously flawed and needs to be overhauled. Was there ever any discussion during the eight years of the George W. Bush administration about doing that?

Weems: There were a number of discussions, but it's a hard nut to crack. Those discussions never ripened to the point where we could say we've got something better.

Iglehart: But you'd anticipate under the Obama administration that those discussions will continue?

Weems: Sure. And, you know, you can even see the early attempts at trying to crack that. Representative [Pete] Stark [D-CA] introduced last year the so-called CHAMP [Children's Health and Medicare Protection Act] bill, in which he proposed to develop a new payment approach that would have provided more money to primary care physicians. He split it up into several different categories. This probably wasn't the right approach, but again, he was trying to work through the problem, trying to provide more money for primary care. His heart was in the right place.

There are a number of important points here.

First, a former CMS administrator charged that the RUC has a substantial role in the decline of primary care in the US. Such charges have been made by well-reputed academics who have analyzed the role of the RUC from the outside. But as we have said before, aspects of what the RUC does are obscure, especially because the proceedings of RUC meetings are not made public. But now someone more directly involved has made the same charges.

Second, a former CMS administrator has called the "RUC process ... incredibly flawed." Even the second Bush administration felt these flaws were sufficient to have "a number of discussions," but found "it's a hard nut to crack." Hence he said that although there is something fundamentally wrong with the "RUC process," the government could not easily fix it.

Yet RUC leadership has repeatedly said that the RUC is merely a private advisory committee which gives recommendations to CMS using its rights to free speech and to petition the government. (Note also that above, Inglehart first said that the RUC was formed as "an expert panel" to make "recommendations." But then he said the committee "determines ... how much doctors will earn.") If the RUC is simply an advisory committee, and CMS did not like the advice the RUC was giving, why couldn't CMS leaders simply ignore the RUC?

Weems' remarks do not make sense if the RUC is merely an outside private group providing advice. But they do make sense if the RUC is acting like a government agency.

So this interview once again raises the question: why does CMS rely exclusively on the RUC to update the RBRVS system, apparently making the RUC de facto a government agency, yet without any accountability to CMS, or the government at large?

A response by the Chair of the Board of the AMA

Within days of this interview, Dr Rebecca Patchin, the Chair of the Board of Trustees of the American Medical Association (AMA), wrote a response to the Weems interview. (Amazingly, the response appeared as a blog post on the Health Affairs Blog.)

First, she implied that a former CMS administrator did not know what he was talking about when it came to the RUC.

In the interview, inaccurate statements were made about the role of the AMA/Specialty Society RVS Update Committee (RUC), which advises CMS regarding the relative levels of reimbursement for different medical procedures performed by physicians.

Now I feel like I am in good company. The leaders of the RUC have charged that I made inaccurate statements about the RUC as well (see post here).

However, Dr Patchin failed to identify any particular statements by Kerry Weems or his interviewer as inaccurate, much less provide any evidence to that effect. Note that while the RUC leaders also charged me with making inaccurate statements, they did not specify any particular statements as inaccurate, much less produce evidence in support of their contentions.

Next, Dr Patchin wrote:

Every time the RUC has been asked to review payments for E&M (evaluation and management) codes, the RUC has sent CMS recommendations that would lead to higher payments.

This may be so, but it ignores an important issue. While the RUC may have made some recommendations to increase payments for cognitive services, it has made many more recommendations to increase payments for procedural services. Furthermore, while payments for individual procedures went up, and the volume of procedures also went up, the global budget for physicians' services, called the Sustainable Growth Rate (SGR), resulted in across the board cuts. Since raises for procedures were larger and more frequent than raises for cognitive services, the net effect was that payments for procedures increased relative to cognitive services.

Even more important, it begs that question: what has the RUC done at times when no one asked it "to review payments for E&M ... codes?" After all, the RUC leadership has argued again and again that it is only a private advisory committee (and see below for another such argument). As such, it should be able to choose how often it deals with payments for cognitive services. It should not have to wait to be asked to review them. So why wasn't the RUC reviewing these payments more frequently?

Then, Dr Patchin reiterated:

To clarify: The RUC makes recommendations to CMS, and then CMS makes its payment decisions.

and again,

Bottom line: the RUC makes recommendations, CMS makes payment decisions.

This, once more, begs the questions. Why didn't the RUC make more recommendations to improve payments for cognitive services? Why doesn't CMS get recommendations about payments to physicians from sources other than the RUC? Why doesn't CMS make the process for setting physicians' payments, and updating and revising the RBRVS system more broad-based and transparent? Why did the administrator of CMS feel unable to change or ignore the "RUC process?"

I don't have the capacity to find out the answers to these questions. Answering them might take some investigative reporting, or even a Congressional investigation. Given that physicians' payments are key incentives driving the health care system, and that payments favoring procedures are likely to be a major cause for rising volume and costs of procedures, which, in turn, is likely to be a major reason our health care system is so expensive, why do we know so little about how these payment rates are set?

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.
3. Iglehart JK. Doing more with less: a conversation with Kerry Weems. Health Aff 2009; http://content.healthaffairs.org/cgi/content/full/hlthaff.28.4.w688/DC1

A Letter from the RUC, and My Reply

The vast amounts spent in the US on health care have not translated into access for many patients, consistently excellent quality of care, and signiticantly improved outcomes. While we spend all this money, the primary care and generalist practitioners on the front lines are increasingly embattled and disgruntled, and their numbers are rapidly thinning. One problem may be the pattern of fees paid to physicians. Fees paid to physicians not only influence costs directly, but provide incentives for physician decision making about what tests and treatments patients receive. We have posted several times, most recently in February, 2009, here, about how the US Medicare system sets fees paid to physicians.

Since health care reform is now a hot topic in the US, there has been increasing discussion of the plight of primary care and generalist practitioners, but little consideration of how it arose. What we wrote in February was (with updated links):

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for "cognitive" medicine, i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.

For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(1) and Goodson.(2) By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.

The next month, Dr William L Rich III, and Dr Barbary Levy, the Chair and Chair-Elect of the RUC, wrote me a letter to "point out several blatant inaccuracies within your blog entry that severely misrepresent the nature and work of the AMA / Specialty Society RVS Update Committee (RUC)." They then asked me to "retract or correct the inaccurate statements within the aforementioned blog immediately." However, the letter did not specify the supposedly inaccurate statements within the blog post. So, my email response noted that "the letter contains no detail about the alleged 'inaccurate statements.' If you define them, we will certainly consider your views." I never got a reply to this message, therefore thinking the matter to be closed, and I saw at that time no reason to make the exchange public.

Apparently, the matter was not closed. A few days ago, two anonymous comments were appended to the post. They stated that my letter had appeared on the AMA web-site, here. So it is now public. The comments did not say, and I have so far not been able to find out when the letter was posted, and what its context is within the AMA web-site, including any indication that I had already replied to it in private.

Despite these irregularities, however, given that the AMA apparently has chosen to make the letter public, I believe I ought to respond publicly.

"Blatant Inaccuracies?"

Dr Rich and Dr Levy wrote:

We would like to take this opportunity to point out several blatant inaccuracies within your blog entry that severely misrepresent the nature and work of the AMA / Specialty Society RBRVS Update Committee (RUC). We request you retract or correct the inaccurate statements within the aforementioned blog immediately.

First, as I noted above, the letter never specified which of my statements the letter writers considered "blatant inaccuracies." If there are any specific statements of fact in the post above (or any other post I write) that can be shown to be inaccurate, I will correct or retract them. However, I do not believe the letter by Dr Rich and Dr Levy demonstrated any particular statements of mine to be blatantly inaccurate.

The Obscurity of the RUC Membership

The letter stated:

The RUC does not operate in the shadows.

One of my major criticisms of the RUC was that it is opaque. Before I wrote my first post on the RUC, I tried to determine its membership by searching the AMA web-site, easily available AMA publications, and the web. I could find lists of past members, but no current list. In addition, I asked RUC staff by email whether they could provide me the list, or an easy way to access it. They would or could not do so, and the highest ranking staffer I contacted wrote, "we do not give out the RUC members' contact information. We attempt to shield the RUC from lobbying by industry or others." Only after these inquiries did I dub the RUC membership "secret."

Dr Rich and Dr Levy suggested that it is not quite secret. It stated that "a list of the individual members of the RUC is published in the AMA publication, Medicare RBRVS 2009: The Physicians Guide." This publication is available from the AMA here for a mere $71.95. However, the book is not on the web, or in my local or university library, and I have no other way to easily access it.

Additionally, although the letter stated, "any individual may solicit AMA staff directly or a specialty society to learn the names of the members of the RUC," the letter was not accompanied by any communication from AMA staff containing this information.

Thus, to date, I still do not know who the members of the RUC are. If the letter authors had wanted to show that the membership of the RUC was not meant to be obscure, they could easily have sent me the list with their letter, appended a copy of the pages of the book which contained the list, or asked their staff to provide this information. They chose not to do so. So, while the RUC membership may not be exactly secret, it remains obscure, only barely public, and relatively inaccessible.

The Secrecy of RUC Proceedings

Furthermore, to support its contention that "the RUC does not operate in the shadows," the letter stated that

any individual may attend a RUC meeting upon: (1) the invitation of and notification by a relevant specialty society; (2) an express invitation by the chair of the RUC; or (3) the approval of a written request to attend; and a review of conflicts and potential conflicts of interest.

This does not mean that RUC meetings are open, or that their proceedings are public. Instead, as Goodson(2) noted, RUC "meetings are closed to outside observers except by invitation of the chair." Furthermore, he stated, "proceedings are proprietary and therefore not publicly available for review."

The letter also personally invited me to attend "the next meeting of the RUC, which will take place April 23-26, 2009 in Chicago." In retrospect, this invitation did not appear serious, since it was never repeated or expanded after my email reply to the March letter.

Nor did the invitation include any assurance that I could make anything about this meeting public. I had learned from a previous RUC attendee who will remain anonymous that attendees are obligated to sign non-disclosure agreements. Signing such an agreement might jeopardize my further ability to write anything of substance about the RUC. Furthermore, making all meeting attendees sign non-disclosure agreements effectively makes the meeting secret.

The RUC and Primary Care

Dr Rich and Dr Levy asserted that:

Your publication irrationally and unreasonably paints the RUC as the perpetrator of all physician payment policies that have negatively affected primary care.

Furthermore, they argued that the RUC has been good for primary care and cognitive practice:

The RUC has made several recommendations that positively benefit cognitive and non-procedural physician specialties.

My opinions about the RUC's influence on payments to physicians, and the decline of primary care and generalist and cognitive practice are hardly original. My previous posts were clearly based on evidence and discussion from references 1-4. Let me summarize these arguments, using direct quotes from these references, which perusal of the original articles would reveal are not taken out of context.

Primary and generalist practice is threatened by the current payment system.

From Bodenheimer et al(1):

Incomes of primary care physicians are well below those of many specialists, and the primary care–specialty income gap is widening.

... the lower income of primary care physicians is a major factor leading U.S. medical students to reject primary care careers.

Primary care practice is not viable without a substantial increase in the resources available to primary care physicians.

From Goodson(2):

Medicine's generalist base is disappearing as a consequence of the reimbursement system crafted to save it—the resource-based relative value scale.

Current reimbursement incentives substantially favor procedures and technical interventions and offer financial advantages for expensive care, thereby encouraging specialty services.

The continued and sustained incentives for medical graduates to choose higher-paying specialty careers and for those physicians in specialty careers to increase income through highly compensated professional activities have been associated with the dwindling of the generalist workforce. The lack of incentives for medical graduates to choose generalist careers in internal medicine, family medicine, and pediatrics has had a profound effect on the workforce mix and, ultimately, US health care expenditures.

The RUC has been the major influence on the physician payment system leading to these problems.

From Bodenheimer et al(1):

In summary, the RUC process favors increases in procedural and imaging reimbursement for 3 reasons: specialty society influence in proposing RVU increases, the specialist-heavy RUC membership, and the desire of RUC specialists to avoid increases in evaluation and management RVUs. With their ability to create new codes and influence RVU updates, many procedural specialists can influence fees in a way that observers find to substantially overvalue procedural and imaging services. Moreover, high fees may encourage physicians to increase the volume of profitable services, leading to even higher income gains and greater spending growth.

From Goodson(2):

The RUC has powerfully influenced CMS decision making and, as a result, is a powerful force in the US medical economy. Furthermore, by creating and maintaining incentives for more and more specialty care and by failing to accurately and continuously assess the practice expense RVUs, the decisions of CMS have fueled health care inflation. Doing so has affected the competitiveness of US corporations in the global market by contributing to years of double-digit health care inflation that have consistently increased the costs of manufacturing and business in the United States over the last decades.

The current mechanism fails to provide sufficient checks and balances and is skewed and dysfunctional.

The resource-based relative value scale system originally developed to achieve full value for cognitive services currently threatens the sustainability of the generalist base. As a result, a large portion of the population will lose access to the continuous and personalized care provided by generalist physicians whose repertoire of clinical skills and interventions coupled with access to specialty and diagnostic services are essential for ensuring efficient and effective health care delivery.

Dr Rich and Dr Levy are entitled to their opinions, but I would argue that there is considerable evidence and opinion suggesting that the current dysfunctional physician payment system is a major cause of the decline of primary care and cognitive practice, and simultaneous rise in health care costs and decline in health care access in the US. Furthermore, there is also considerable evidence and opinion suggesting that the RUC has singular responsbility for the dysfunctionality of the payment system and how it is skewed in favor of procedures as opposed to cognitive services and primary care.

Summarizing: the Opacity of the RUC, and its Negative Effects on Primary Care and Cognitive Services

So, I stand by my statement that the RUC process is opaque. Instead of saying "the identities of RUC members are secret, as are the proceedings of the group," I would be willing to now say, "the identities of the RUC members are obscure and difficult to ascertain, and the proceedings of the group are secret." That is not much of an improvement.

If the RUC leadership wants to make its membership transparent, all it needs to do is post it on the web. If it wishes to make its proceedings transparent, all it needs to do is publish them as well. If it makes such changes, I would happily and publicly applaud them.

If the RUC leadership wants to show that their members are not influenced by individual conflicts of interest, transparency about the committee's membership would inspire more trust than making the information as obscure as possible.

Furthermore, there may be more reason to be concerned about the effects of institutional rather than individual conflicts of interest on the RUC. Most RUC members appear to represent specialty societies. Rothman et al claimed that industry funding of professional medical societies is "pervasive."(5) If the RUC leadership wants to show that their committee as a whole is not affected by institutional conflicts of interest of its specialty societies, it ought at least to disclose the relationships of those societies and their leaders with companies that stand to profit from increasing utilization of the specific services whose use is influenced by the incentives which the RUC largely determines.

Finally, if there is a "wedge between cognitive and procedural specialties" it was driven a long time ago, particularly by a payment system that progressively favored the latter over the former, and by a bureaucratic burden that fell disproportionately on the former. But blaming the messenger is a time-honored, if not necessarily honorable tactic.

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.
3. Ginsburg PB, Berenson RA. Revising Medicare's physician fee schedule - much activity, little change. N Engl J Med 2007; 356: 1201-1203.
4. Newhouse JP. Medicare spending on physicians - no easy fix in sight. N Engl J Med 2007; 356: 1883-1884.
5. Rothman DJ, McDonald WJ, Berkowitz CD et al. Professional medical associations and their relationships with industry: a proposal for controlling conflict of interest. JAMA 2009; 301: 1367-1372. Link here.

What, The RUC, Again? - One of the World's Most Prominent Medical Journals Also Leaves Some Important Things Out

With health care reform continuing as a hot topic in the US, more discussions of issues of interest to Health Care Renewal are appearing. We previously posted about a prominent expert's discussion of how the US Medicare system pays physicians. We noted that he seemed to avoid critical issues, and thus may have failed to suggest changes that would address the real problems. Finally, we noted that his undisclosed financial relationships with several companies which have profited from the status quo may have affected his arguments, and failure to disclose these apparent conflicts of interest muddied the discussion.

In a similar vein, we will discuss an article just published entitled "Reforming Medicare's Physician Payment System," by Gail R Wilensky, PhD(1). [Note that the discussion will be formatted in the same manner as the previous post, and we will unashamedly borrow some language from that post.]

Ms Wilensky's summary of the main problems afflicting the payment system was:

Medicare originally based its reimbursement to physicians, like all its reimbursements, on the amounts that had historically been charged for particular health care services. In 1984, when the program moved away from a charge-based per-diem rate for hospitals, it introduced the use of the Medicare Economic Index — a measure of the annual change that physicians face in the costs of practice — for updating physicians' reimbursement. This change marked the start of an increasing divergence between Medicare's reimbursement of physicians and its reimbursement of other providers.

In general, however, physicians are paid for providing discrete services, according to a disaggregated fee schedule that uses more than 7000 billing codes. In 1989, a major change was made in physician payments: the disaggregated fee schedule based on historical charges was replaced with the Resource-Based Relative Value Scale, which is based on relative values for physicians' work effort, physicians' practice expenses, and malpractice liability insurance expenses. Although the scale was intended to correct for a historical undervaluing of primary care and overvaluing of procedures (which it does not appear to have done very successfully) and for larger differences between urban and rural reimbursements than could be justified by differences in the costs of practice, it retained the use of a largely disaggregated fee schedule.

Because the risk of inappropriate volume increases is much greater with a disaggregated billing system, as the experiences of the 1980s showed, updates to the fee schedule have followed a top-down strategy. Since the early 1990s, overall Medicare spending has been tied to a preset target — initially to the volume performance standard (an amount that was set into law each year) and now, through the sustainable growth rate (SGR), to the rate of growth in the economy. Fees are adjusted whenever overall spending is greater (or less) than the target level....

Most recent discussion of reforming physician payment has focused on the SGR, which has caused the pressure to lower physicians' fees.

Her main solution to these problems:

I believe the key to reforming physician payment is to develop a more aggregative payment strategy. In the near term, payments need to be developed that cover all the services that a single physician provides to a patient for the treatment of one or more chronic diseases. This approach is consistent with, and could be related to, the work that CMS and others are doing on medical homes. In addition, bundled payments should be developed for high-cost, high-volume DRGs, to include, at a minimum, the reimbursement for all physician services associated with the DRG and perhaps the hospital payment as well.

Ms Wilensky suggested the main problem with Medicare's current system for paying physicians is that the sustainable growth rate (SGR) forces reductions in physicians' fees whenever total payments to physicians grow faster than the optimal rate. However, she avoids discussing why those payments grow so fast.

Increases in Fees Paid for and Volume of Procedures

As we have discussed, the current system pays physicians much more to do procedures than provide "cognitive" services, and these discrepancies are increasing over time. The amounts it pays for particular procedures are frequently raised. Meanwhile, physicians increase the number of procedures they do, partially because they find ways to do procedures faster. Thus, the amount being paid for procedures increases rapidly over time. But then the SGR mechanism is used to cut fees across the board, including those for cognitive services, which did not contribute to the overall increase in costs.

Why does Medicare continue to behave seemingly so irrationally? As we have discussed before, it seems to do with the machinations of the shadowy RUC (RBRVS Update Committee).

The Shadowy RUC

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for "cognitive"medicine, i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.

For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(2) and Goodson.(3)

By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.


What Wilensky Left Out, and Why?

Ms Wilensky, a distinguished health care policy expert, barely touched on the biggest problems with how the US fee-for-service payment system works, and why these problems occurred. Thus, it is not surprising that the few solutions she recommended seem irrelevant to these problems.

As an aside, her discussion is not atypical of what is seen in most writings about health care policy that have to do with costs. It appears that it is politically incorrect to say that incentives are skewed, that this skewing appears to have resulted from the acts of a few individuals, and that these acts occurred with little outside attention or accountability. Why do health care policy experts follow these dictates of political correctness?

I don't know, but one possible explanation is that they are themselves biased by their own incentives. So let us further consider the case of Ms Wilensky.

Ms Wilensky's Conflicts of Interest

The New England Journal of Medicine article identified Ms Wilensky as "a senior fellow at Project HOPE, Bethesda, MD, a former administrator of the Health Care Financing Administration (now the CMS), and a former chair of MedPAC." It also noted, "no potential conflict of interest relevant to this article was reported."

So it did not acknowledge the following relationships:

- Ms Wilensky is a member of the board of directors of Cephalon, which claims to be "one of the world’s top ten biopharmaceutical companies." According to the 2008 company proxy statement, her total compensation for this position was $347,395 in 2007, and she owned 65,000 shares of Cephalon stock or equivalent.
- Ms Wilensky is a member of the board of directors of Gentiva, which claims to be "the nation's leading provider of comprehensive home healthcare and related services." According to the 2008 company proxy statement, her total compensation for this position was $125,031 in 2007, and she owned 33,205 shares of Gentiva stock or equivalent.
- Ms Wilensky is a member of the board of directors of Quest Diagnostics Company, which claims to be "the world’s leader in diagnostic testing, information, and services." According to the 2008 company proxy statement, here total compensation for this position was $291,112 in 2007, and she owned 122, 224 shares of Quest stock or equivalent.
- Ms Wilensky is a member of the board of directors of SRA International, a multi-purpose consulting company which "provides health consulting services for global clients, both public and private." SRA International also has a subsidiary, SRA "Global Clinical Development [which] is a full-service, global CRO [contract research organization]" providing services to pharmaceutical, biotechnology and device companies. According to the 2008 company proxy statement, her total compensation for this position was $179,659 in 2007, and she owned 20,000 shares of SRA stock or equivalent.
- Ms Wiilensky is a member of the board of directors of the UnitedHealth Group, one of the largest US health care insurers/ managed care organizations. According to the 2008 company proxy statement, her total compensation for this postion was $322,591 in 2007, and she owned 312,560 shares of UnitedHealth stock or equivalent.

All these corporations benefit from how the health care system currently runs. In particular, our current procedure-heavy style of medicine, driven by the incentives dictated by the RUC, favors the extensive use of expensive pharmaceuticals, laboratory tests and devices. The companies Cephalon, Quest Diagnostics, and SRA International thus especially benefit from this style. As a member of the boards of these companies, Ms Wilensky has a duty to advance their financial performance. Thus, it seems that Ms Wilensky's legal responsibilities to these companies might tend to bias her against actively questioning how physicians are currently paid, or proposing solutions that might upset the status quo.

Ms Wilensky's leadership roles in US publicly traded corporations are public, but not easily found unless one knows where to look. (A previous post on Health Care Renewal did document Ms Wilensky's board relationships at the time, 2006, as they related to a report she helped author on pay-for-performance [P4P]). However, the New England Journal of Medicine did not choose to make these apparent conflicts of interest public.

Without the knowledge of these financial relationships, one might suppose Ms Wilensky's opinions are only based on her disinterested expertise as a well-known health care policy scholar. Without knowledge of these financial relationships, one might think that a secretive, opaque process skewing physicians' payments toward procedures is not an important problem for our health care system.

We have come to a critical time in the history of attempts to reform the US health care system. Whether reform occurs, and whether it does any good will depend on the quality of the debate that precedes it. Such a debate should be robust, but those involved ought to make clear where their biases and interests may lie.

Unfortunately, it may be that some of the most prominent voices in the debate are those of people with strong personal financial interests in having health care reform go in certain directions, not others. Furthermore, people with particular interests may not want certain issues to be even brought up. If these interests are not revealed, the debate becomes deceptive.

In a previous post, I said "I fear that much of the debate up to now has been deceptive, and will not lead to good outcomes." Since the current post is also about a prominent health care expert published in a leading international forum whose arguments seem to obfuscate a major cause of our health system dysfunction, possibly due to conflicts of interest which were not disclosed, my fear has become stronger.




References

1. Wilensky GR. Reforming Medicare's physician payment system. New Engl J Med 2009; 360: 653-655. Link here.

2.Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.

3. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.

Aetna Settles

As reported by the Hartford Courant:

Aetna will reimburse more than $5.1 million on 73,000 health claims for college students it underpaid between 1998 and April 1, 2008, under a nationwide agreement announced Monday by New York Attorney General Andrew M. Cuomo.

The claims involved out-of-network care in which Aetna Student Health — formerly called Chickering Student Health — paid physicians what it considered reasonable and customary. Doctors whose charges were higher could bill students for the balance.

Aetna will reimburse students if they paid such a balance. If a student wasn't balance-billed, Aetna will reimburse the doctor. The company says its under-payments averaged $25 each nationwide.

The inadequate claim payments stem from outdated information that Aetna and other insurers used from the databases of Ingenix, a UnitedHealth Group unit.

The $5.1 million agreement is in addition to the $20 million Aetna agreed to pay in a settlement last month of Cuomo's investigation of the out-of-network payment system.

We had posted earlier here about a settlement UnitedHealth made related to its use of the database run by its Ingenix subsidiary.

Note first that Aetna and UnitedHealth are supposed to be fierce competitors. Yet they used the same database, a database constructed by a UnitedHealth subsidiary. This is a reminder that although many have promised that a competitive, market-based health care system would decrease costs, improve access and improve quality, the system that was supposed to be competitive mostly was not. In this example, multiple, supposedly competing managed care organizations/ health insurance companies all appeared to use one company's database. (We have also noted how nearly all managed care organizations/ health insurance companies all basically use a payment schedule for physicians provided by the US government.) Various such anti-competitive practices by managed care organizations / health care insurance companies have to date mostly elicited yawns from health care and policy researchers, the press, government regulators, and the legislature.

Second, note that Aetna's use of the UnitedHealth Ingenix database allowed it to underpay physicians, sometimes resulting in excess out of pocket expenses for students. That does not seem to square with Aetna's high-minded mission statement:

Aetna is dedicated to helping people achieve health and financial security by providing easy access to safe, cost-effective, high-quality health care and protecting their finances against health-related risks.

Aetna surely was not protecting these students' "finances from health-related risks."

This is, of course, just one of many examples we have discussed of cynical marketing techniques by health care corporations. Every big health care organization seems to boast about how it enhances high-quality, accessible, reasonably priced care. But few really seem to do so.

Paul Trossel defined organizational integrity as "how top management of an organisation lives by its own standards." Here again is an example of a failure of organizational integrity in health care, and its (in this case) financial adverse effects on patients.

For a company the size of Aetna, a $25 million settlement is practically petty cash. And like many previous settlements we have discussed, it enacts no penalties on the leaders who actually made the decisions in question. Thus it is unlikely that further settlements like this will promote better organizational integrity, more competition in the health care "market," lower costs, better access, or better quality.

At One Academic Medical Center: "Profitability" Trumps "Doing the Right Thing"

A post on the Health Care Blog opened a window into the thinking of top leaders of health care organizations. The post was written by Gary S Kaplan MD, the CEO of Virginia Mason Medical Center, a well reputed US academic medical center. It seemed generally well-intentioned, and was focused on the creation of an organization of US health care CEOs "dedicated to transforming health care and creating a more sustainable health system."

But my interest today is not this organization or its future plans.

Dr Kaplan's post included,

We, unfortunately, in the current payment system, reduce our profitability by doing the right thing. Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing. We need to change our payment system if we truly want to ensure universal coverage, improve quality and reduce cost.

I completely agree with Dr Kaplan about the need to change how we pay doctors and hospitals. But note his second sentence.

It implies that the leadership of Virginia Mason sees "profitability" as a goal of the organization that supersedes "doing the right thing." Furthermore, Dr Kaplan implies that his medical center's board of directors has prevented him from "doing the right thing," in order to avoid "bankruptcy."

Perhaps this was just a horribly written paragraph. But it does seem to say that at Virginia Mason Medical Center, the leadership thinks it is less important to uphold the organization's mission, that is, to do "the right thing," and more important to promote "profitability."

However, Virginia Mason Medical Center is a not-for-profit organization. (See this link.) A not-for-profit organization should not have "profitability," by definition.

Furthermore, the leadership of a not-for-profit organization is supposed to uphold the organization's mission, and to put this mission ahead of other concerns. This is called the duty of obedience, and is a fundamental duty of leaders of not-for-profit organizations (see this link). Failure to uphold the mission threatens the fundamental integrity of the organization.

Naturally, to fulfill the mission, the leadership of a not-for-profit should not let the organization go bankrupt. It should be concerned about raising and having sufficient funds to make an honest attempt to fulfill the mission. But bringing in money should be secondary to the mission, and "profitability" should not be a goal.

By the way, the current stated mission of Virginia Mason Medical Center is:

Our vision is to be the Quality Leader - Our aspiration is not to be the biggest, but to be the best. We will differentiate ourselves on the basis of quality.

Our mission is to improve the health and well being of the patients we serve - Healing illness is our first priority and is what gives our people the energy for our vision. We are also committed to providing a broad range of services that improve one's sense of well-being and which prevent illness.

We have previously discussed how a leader of another not-for-profit academic medical center revealed that his major criterion for evaluating faculty members was how much money they brought in, not how well they fulfilled their academic and clinical responsibilities. His goal was to make sure enough faculty were "taxpayers," people who brought in more money than they consumed (not that enough faculty were good clinicians, teachers, or researchers.) Again, it seemed that his organization put making money ahead of fulfilling its mission, ignoring their duty of obedience.

Now apparently another leader of a not-for-profit academic medical center has let slip that the leadership of his organization is thinking the same way, but on a more macro level.

By the way, I doubt that the thinking disclosed by these two leaders is anomalous. What is anomalous is that they made it public. Many academic medical institutions could be lead by people who put profits ahead of mission, thus shirking the duty of obedience, and hollowing out the integrity of their institutions.

Academic medical institutions, like most health care institutions, are now lead by business people who grew up in what now appears to have been the second gilded age. The global economic meltdown has made it clear that we just lived through an era in which business leadership was too often marked by arrogance, greed and corruption. Business leaders took ridiculous risks, deceptively marketed products, and manipulated financial instruments to generate short-term profits, and thus to generate fabulous payments to those same leaders. And we have seen how these practices nearly destroyed the global financial system and have lead the world to the brink of a new great depression.

At least the global financial meltdown has discredited the notion that markets not subject to any external regulation or policing will somehow police themselves. So maybe it is time to add a little regulation and policing to health care. One place to start would be the duties of the leaders of not-for-profit health care organizations.

These include

• the duty of obedience: they need to put their organizations' missions ahead of other concerns.
• the duty of loyalty: they need to give their organizations their undivided allegiance when making decisions.
• the duty of care: they need to exercise reasonable care when making decisions.
  

But as long as the leaders of not-for-profit health care organizations continue to put profitability ahead of mission, things will continue to get worse.

BLOGSCAN - How US Medicare Will Pay for Cancer Drugs

On the GoozNews blog, Merrill Goozner dissects the recent decision by the US Center for Medicare and Medicaid Services (CMS) to make more lenient the criteria it uses to decide which off-label anti-cancer drugs it will pay for. Now any drug rated favorably in at least one of several drug compendia will be approved. Yet it turns out that intricate, but important conflicts of interest may affect how drugs get positive reviews in some of the compendia. It does seem that nearly every piece of our fiendishly complex health care system is affected by conflicts of interest. To put the most positive interpretation on it, most US government agencies that deal with health care seem to have operated up to now in ignorant bliss when it comes to these conflicts.

NB: see also the post by Dr Howard Brody on the Hooked: Ethics, Medicine and Pharma blog, and the links he provides.

Out of the RUC - the American College of Physicians Initiates an Open Discussion

We and the other bloggers have been trying to provoke an open discussion of the secretive, unrepresentative, unaccountable process which the US Center for Medicare and Medicaid Services (CMS) uses to fix payments to physicians. That process may largely be responsible for the implosion of primary care in this country, and substantially responsible for how we manage to pay so much for health care, yet have worsening problems with access and quality.

See our previous discussions of the process, and the central role of the RBRVS Update Committee (RUC), most recently here, and in earlier posts (here, here, here, here, and here) and important articles by Bodenheimer et al,(1) and Goodson.(2)

The ACP Advocate blog, the apparently official voice of the American College of Physician on its advocacy efforts, took up the issue in this post authored by Robert B Doherty, ACP Senior Vice President for Governmental Affairs and Policy.

Doherty summarized some of the points made on Health Care Renewal and on DB's Medical Rants. He appeared not unsympathetic to some of the criticisms of the RUC and the process that Medicare uses to fix physician payments.

I will summarize some of the points he made in his responses below, and interpolate my replies. I have also submitted the same material as a comment to his post.

- The RUC just provides advice.

The RUC provides [just] recommendations to the Centers for Medicare and Medicaid Services (CMS) on the physician work relative value units (RVUs) under the resource-based relative value scale.

++ My comments: The RUC may say that all it provides is advice, but that advice is almost always uncritically accepted by CMS. Per the also excellent article by Goodson(2), the AMA itself claims that CMS follows more than 90% of the RUC's "recommendations." ++

- The RUC did propose some increases to payments to primary care physicians. (Regarding this point, he quoted from a letter written by the Chair of the RUC:

The RUC recommended significant increases to E&M (evaluation and management) services, which were implemented by the CMS on 1 January 2007. These permanent increases result in an additional $4.5 billion in E&M services payments each year! To imply that they are small and insignificant is preposterous. Family physicians may see their overall Medicare payment increase by 5% or more.

++ My comments: The RUC did very belatedly recommend some increases in evaluation and management codes, but these hardly made up for its years of neglect of primary care (to use polite terms), and this increase, as Dr Larson pointed out, benefited all physicians, not just primary care, or cognitive specialties, to the extent it was not nullified by across the board cuts necessitated by the SGR. ++

- The RUC is helping promote the concept of the medical home.

The RUC deserves credit for the evaluation and management increases, and more recently, for estimating the physician work involved in care coordination for the Medicare medical home demonstration project.

++ My comments: How well the RUC did in the case of the proposed medical home is unclear. See this post and its links to a serious critique of this work. ++

- The RUC ought to be reformed, but not abolished.

But the RUC does need to look at its own composition and processes. It needs to be more representative of primary care and more transparent in its deliberations. The new Obama administration and Congress would be well-advised to insist that the processes Medicare uses to determine the values of physician services be as transparent as possible, and include sufficient and appropriate representation and expertise from primary care. They should also require a better process for identifying overvalued services.

But making the RUC the main villain in a system created and run by the government misses the mark. We have to remember that it is Congress and CMS, not the RUC, who makes the rules. As long as the Medicare payment system pays based on volume instead of rewarding prevention and care coordination, primary care physicians' incomes will lag behind specialties that can generate more volume, because primary care doctors can only increase volume by cramming more patients into an already over-scheduled day. This would be true even if the RUC were reconstituted to include more primary care doctors.

And, we need to ask if the RUC were to disappear, who should recommend the work involved in physician services? Economists and physicians hired by the federal government?

++ My comments: I surely agree that the RUC ought to be more representative of primary care and more transparent. As noted in Dr Goodson's article, primary care has had a very small representation on the RUC. There is not a single designated seat for general internal medicine, but orthopedics effectively has two (one for orthopedics, one for spine surgery, which has a separate society).

Note further that many of the specialty societies that support RUC members are supported heavily by industry, that is, by pharmaceutical, biotechnology, and device companies. Such corporations benefit from irrational exuberance about procedures, since they sell the drugs, devices and supplies that are used in procedures. See posts here and here, for example, on some of the industry sponsorship of the AAOS, which sponsors an "orthopedic" seat on the RUC.
Such institutional conflicts of interest affecting the RUC have never been publicly
discussed.

The transparency issue is not trivial. The identities of the people who sit on the RUC have been SECRET. A few members have admitted publicly that they are, but the AMA - I'll say it again - keeps the membership roster of the the RUC secret. One wonders what they have to hide. Not only is the membership secret, of course, but the group's deliberations are also secret.

It is the privilege of the AMA, a private group, to keep the membership of the RUC secret. But I would note, that secret is also kept from the general AMA membership, who are presumably paying their dues to support this secret committee.

On the other hand, since the RUC functions as a de facto government agency (note again that CMS seemingly gets input from no other source for its revisions of RBRVS), having such important government decisions, which have nothing to do with national security, made in secret is offensive.

It is true that Congress and CMS made the rules that allowed all this to happen. There are very big questions about why CMS pursued this course. Maybe some investigative reporter, some congressional agency, or in a new administration, CMS itself will investigate how this happened.

But the AMA did not have to go along with it. They could have insisted on an open,
transparent, representative, accountable process, and refused to participate were that not allowed. Instead, they at least went along with a fee setting process that is opaque, unrepresentative, unaccountable, and not obviously subject to any ethical standards.

The RUC should disappear. Medicare should develop an open, transparent, representative, accountable process to negotiate what it pays physicians. The names of the people involved should be public. The people involved should be free of obvious personal conflicts of interest, and should not be sponsored by organizations with obvious institutional conflicts of interest.++

At any event, I salute Mr Doherty for getting this important policy issue more into the light. The RUC seems to be one of those things that it was not considered polite, or politically correct, to talk about, much less criticize. Maybe an open dialog will lead to some measurable reform of a physician payment system that badly needs it.

References
1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.

UnitedHealth (and Ingenix) Settles

UnitedHealth just settled yet another lawsuit. As reported by the New York Times,

In a settlement with one of the nation’s biggest insurers, New York’s attorney general, Andrew M. Cuomo, has ordered an overhaul of the databases the industry uses to determine how much of a medical bill is paid when a patient uses an out-of-network doctor.

A statement from Mr. Cuomo’s office said the industry had engaged in 'a scheme to defraud consumers' by systematically underpaying the nation’s patients by hundreds of millions of dollars over the last decade.

The move, to be announced Tuesday, is part of a settlement with the insurance giant UnitedHealth Group, which operates the industry databases. It results from a yearlong investigation by Mr. Cuomo’s office that concluded the data had understated the true market rates of medical care by up to 28 percent.

The settlement will have a nationwide impact because UnitedHealth, the biggest health insurer in New York, operates the databases used by the entire industry, through its Ingenix business unit. The deal calls for creation of a new independent database, to be run by a university that is still to be selected.

Because insurers typically reimburse patients for only 70 to 80 percent of the 'reasonable and customary' cost of medical services when they visit doctors outside the insurer’s designated network of physicians, the patient can get shortchanged if the insurer understates the prevailing local fees.

According to Mr. Cuomo, the databases consistently understated the local 'reasonable and customary' rates, which Ingenix collects from insurers. The report of the investigation’s findings described the industry calculations as 'created in a well of conflicts' that produced information that was 'unreliable, inadequate and wrong.'

In an interview Monday, Mr. Cuomo said: 'For years this database was treated as credible and authoritative, and consumers were left to accept its rates without question. This is like pulling back the curtain on the wizard of Oz. We have now shown that for years consumers were consistently low-balled to the tune of hundreds of millions of dollars.'

It is amazing how often the antics of UnitedHealth leadership have been grist for the Health Care Renewal mill. As we noted in September...

We have posted quite a bit about leadership problems at one of the US biggest for-profit managed care organizations/ health care insurers, the UnitedHealth Group (UHG), most recently here.

UHG has not always been known for being particularly patient-, employer-, or physician-friendly. For example, as reported by the Hartford Courant, "UnitedHealth Group Inc., the largest U.S. health insurer, will refund $50 million to small businesses that New York state officials said were overcharged in 2006." We have previously discussed how UHG promised its investors it would continue to raise premiums, even if that priced increasing numbers of people out of its policies (see post here); allegations that the UHG acquisition of Pacificare in California lead to a "meltdown" of its claims paying mechanisms (see post here); charges that the UHG acquisition of Sierra Health Services would give it a monopoly in Utah, and that UHG was transferring much of its revenue out of the state of Rhode Island, rather than using it to pay claims (see post here); and numerous violations of Nebraska insurance laws by UHG (see post here).

Such anecdotes conflict with the UHG mission statement, as recently revised. The company pledged to:
* Enhance the performance of the health care system, and improve the overall health and well-being of the people we serve and their communities.
* Work with health care professionals to expand access to high-quality health care so people get the care they need at an affordable price.
* Support the physician/patient relationship and empower people with the information, guidance and tools they need to make personal health choices and decisions.

One hypothesis is that UHG has trouble adhering to its idealistic mission because of the shortcomings of its leadership.The story of the fall of its recent CEO, Dr William McGuire, was strikingly instructive. As we have previously discussed, (see these posts here, here, and here from 2006 with links backward) Dr McGuire received outrageously lavish remuneration, which stood in stark contrast to the previous UHG mission's pledge to "make health care more affordable."Controversy has swirled over the timing of huge stock option grants given to Dr McGuire (see post here), leading to his resignation in October, 2006 (see post here). More recently, McGuire agreed to pay back some of those options, although that would reportedly leave him with more than $800 million worth of options (see post here).

Note that the latest settlement seems to make a mockery of the last point in the UnitedHealth mission statement as listed above. It would appear that information as it appeared in UnitedHealth subsidiary's Ingenix's data-base disempowered people, that is, people other than UnitedHealth leadership.

Nonetheless, despite all this bad behavior, UnitedHealth is still one of the US' largest managed care organizations/ health insurers. That suggests how fundamental problems in leadership of health care organizations are to the ongoing health care crisis.

By the way, note that this recent settlement is about dodgy practices at UnitedHealth's Ingenix subsidiary. Just yesterday, we discussed a report that made the rather bizarre assertion that the US would soon face a shortage of gastroenterologists, members of a quite well recompensed procedurally oriented sub-specialty. But we noted that not only was the report sponsored by a company that manufactures the endoscopes and related equipment used by gastroenterologists, but that it was authored by the Lewin Group, often portrayed as independent and authoritative, but in fact another part of Ingenix. The just announced settlement should suggest even more skepticism about the independence and authoritativeness of this report.

Just as the prevalence of conflicts of interest affecting medical researchers and academic medicine should make patients and physicians skeptical of the clinical research they do, the prevalence of conflicts of interest affecting health services and policy researchers and pundits should make people, physicians, and policy makers skeptical of the policy research they do, and the policy recommendations they make.

Who Is Warning Us About a Shortage of Gastroenterologists?

We have frequently discussed the worsening shortage of primary care physicians and the current crisis in primary care. Now, in the NY Times is a story of a different kind of physician shortage:

The United States will face a severe shortage of gastroenterologists as the population ages and the demand for colorectal cancer screening increases, a health care consulting firm has projected.

At current rates of cancer screening, the United States will need an additional 1,050 gastroenterologists by 2020, according to the study by The Lewin Group.

Note that this isn't the proclamation of a current shortage, but the forecast of one to come. The Times did not provide a link to the report, nor explain the rationale for its prediction. Given that gastroenterologists are remunerated much better for their time spent doing colonscopies than primary care physicians are spend for their time spent taking care of patients sans procedures (see: Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here. ) , it is a little hard to believe that we will not be able to recruit sufficient gastroenterologists in the future, barring any radical change in how physicians are paid.

However, the NY Times article did note:

The projections were reviewed by outside experts and commissioned by Olympus Corporation of the Americas, which manufactures cameras used to screen for colorectal cancer.

Actually, Olympus manufactures not just the cameras, but the colonoscopes themselves (see their web-site, which states the company manufactures "a full line of diagnostic, therapeutic, slim and adult colonoscopes with the highest resolution available.")

Moreover the study was done by the Lewin Group, which was not further characterized in the NY Times article, but does often seem to be a source of authoritative pronouncements on health care policy. So what is the Lewin Group?

It's web-site says it is "a premier national health care and human services consulting firm." It also claims:

The Lewin Group is committed to independence and integrity in our work. We combine professional expertise with extensive knowledge and a rigorous approach to analyzing and solving problems to deliver value to each of our clients and to the larger community as well.

That's a somewhat self-contradictory assertion. It seems that delivering "value" to specific clients might be hard to do while maintaining "independence."

Who are Lewin's clients? We already know that Olympus, a company that makes more money if it sells more colonoscopes, sponsored this study of demand for colonoscopy. The Lewin Group says its clients include "hospitals, health systems and providers;" "payers / insurers;" and "pharma/bio/device." Furthermore, its explanation of its services to the latter group includes:

We provide analysis and results-focused strategies demonstrating the value of medical products to public and private sectors payers, clinicians, health care facilities, patients, and policymakers. We also provide policy insight and guidance to industry clients on evolving trends and their impacts.

"Results-focused strategies demonstrating the value of medical products" somehow seems more akin to marketing than objective policy analysis.

Finally, who owns the Lewin Group? It is not a not-for-profit, and it is not even an independent for-profit corporation. In fact, per the web-site,

The Lewin Group is an Ingenix company. Ingenix, a wholly-owned subsidiary of UnitedHealth Group, was founded in 1996 to develop, acquire and integrate the world's best-in-class health care information technology capabilities.

So, the Lewin Group is in fact part of UnitedHealth, a corporation that was until recently run by a CEO who became known for the more than a million of apparently back-dated stock options he received (see our post here).

For balance, I must note that the same web-page asserts:

The Lewin Group operates with editorial independence and provides its clients with the very best expert and impartial health care and human services policy research and consulting services.

But again, note that the focus is on making clients happy, not providing the public with unbiased knowledge.

One might further argue that it is not in the interests of UnitedHealth, as a commercial managed care organization, to pay for more and more colonoscopies. However, in the current US health care system, in which there have been more and more procedures, UnitedHealth has prospered, perhaps because it has been easy for it to simply past the costs of these procedures along.

At any rate, once again it's hard to tell who the players are in health care policy without a scorecard. As the health reform debate heats up, expect to see more authoritative proclamations coming from groups with vested interests other than simply providing unbiased expertise. Such groups, of course, have the right to make their views known. But it would be a more honest discussion if everyone were willing to put their vested interests on the table.

Thanks to one of our scouts for a tip on the ownership of the Lewin Group, and hat tip to KevinMD.

What, The RUC? - A Prominent Health Care Policy Blog Leaves Some Important Things Out

A new US President, health care costs that continue to rise despite declining access and questionable quality, even during an unprecedented global economic crisis all have made health care reform a hot topic once again in the US. This has even lead to discussion of some topics that formerly rarely merited polite discussion, sort of.

Last week, writing in the New York Times Economix blog, Professor Uwe Reinhardt, a noted health care economist at Princeton University, took on the topic of payments to physicians. His main point was:

America’s health care spending issues might have something to do with our fee-for-service payment system.

Studies have shown that physicians are not impervious to the financial incentives inherent in fee-for-service payments. For example, on average, physicians who have a direct financial interest in the use of imaging services, like CAT scans or M.R.I. scans, recommend far more such services for their patients than do physicians without such financial interest....

He noted some possible solutions:

In recognition of the conflict of interest inherent in fee-for-service payment, there is now a worldwide movement to replace the system with so-called 'evidence-based case reimbursement'. Under this approach, one single payment would cover all of the supplies and services that are needed, under best, evidence-based clinical practices, to respond adequately to well-defined medical conditions.

Not all health care, of course, can be categorized into neat, episodic bundles for this purpose. For chronic conditions, for example, payment may shift from fee-for-service to annual or monthly fees per patient, and care for such patients might be organized by clinically integrated health systems or by managed care companies procuring health care from different systems on an integrated basis. And for some patients with very complicated conditions, fee-for-service would still persist. One would think, however, that a move toward these alternative payment systems would not only reduce the geographic variations in per-capita health spending, but help control the annual growth of health spending over all.

What is missing from this picture?

Positive Incentives for Procedures, Negative Incentives for "Cognitive" Services, Especially Primary Care

First, Reinhardt suggested that the major problem with the current way the US pays for physicians is that it gives excess incentives for physicians to order diagnostic tests provided by facilities in which they have financial interests. This is, in my humble opinion, a real problem. But it is hardly the biggest problem with our current system of physician payments.

I submit that the biggest problem with our current system is that it provides big and increasing incentives to do procedures. This may lead to the over-use of some procedures in some instances. Moreover, it promotes high prices for the devices, drugs and support services required by the physicians to do these services. Thus, the current system pays many people well, and makes some people very rich. However, its enormous costs come out of other peoples' wallets, decreasing access and quality. Furthermore, the current system has provided disincentives to provide "cognitive care," especially primary care. Payments to physicians who do primary care do not cover all that they do on behalf of patients. Payments have not even kept up with inflation, nor with the increasing overhead costs of providing primary care, most of which are produced by the demands of government and insurance company bureaucracies. Thus, primary care in the US is dying. It is increasingly difficult for patients to find physicians who will take care them as whole patients, not as a set of different organs.

The Shadowy RUC

These biased incentives that lead to so much mischief are not the product of divine intervention or the laws of physics. They are the result of the actions of people, a few people operating in the shadows.

As we have discussed, the US Medicare system determines what it pays physicians using the Resource Based Relative Value System (RBRVS). This system determines the pay for every kind of medical encounter according to a complex formula that is supposed to account for physicians' time and effort, physicians' practice expense, and the cost of malpractice insurance. The components of physicians' effort assessed are, in turn, technical skill and physical effort; the required mental effort and judgment; and stress due to the potential risk to the patient.

To keep the system, which was started in 1990, current, requires addition of new kinds of encounters, which means encounters involving new kinds of procedures, and updating of the estimates of various components, including physicians' time and effort. To do so, the Center for Medicare and Medicaid Services (CMS) relies almost exclusively on the advice of the RBRVS Update Committee (RUC). The RUC is a private committee of the AMA, touted as an "expert panel" that takes advantage of the organization's First Amendment rights to petition the government. Membership on the RUC is allotted to represent specialty societies, so that the vast majority of the members represent specialties that do procedures and focus on expensive, high-technology tests and treatments. However, the identities of RUC members are secret, as are the proceedings of the group.

This opaque and unaccountable process has resulted in increases outstripping inflation in fees paid for procedures, while fees paid for "cognitive"medicine, i.e., for primary care, and for services that involve diagnosis, management of acute and chronic disease, counseling, coordination of care, etc, but not procedures, have lagged inflation. The effects of the RUC have been amplified by the unexplained tendency of commercial managed care and health insurance to track the RBRVS system when making their own payments to physicians.For further details about the RUC, see these posts on Health Care Renewal (here, here, here, here, and here) and important articles by Bodenheimer et al,(1) and Goodson.(2)

By the way, why the US Center for Medicare and Medicaid Services (CMS) relies de facto exclusively on the RUC to control the RBRVS system, and why the AMA made the RUC into a secret organization apparently beholden only to the organization's proceduralist members are unanswered questions.

What Reinhardt Left Out, and Why?

Professor Reinhardt, one of our most distinguished health care economists, barely touched on the biggest problems with how the US fee-for-service payment system works, and why these problems occurred. Thus, it is not surprising that the few solutions he recommended seem irrelevant to these problems.

As an aside, his discussion is not atypical of what is seen in most writings about health care policy that have to do with costs. It appears that it is politically incorrect to say that incentives are skewed, that this skewing appears to have resulted from the acts of a few individuals, and that these acts occurred with little outside attention or accountability. Why do health care policy experts follow these dictates of political correctness?

I don't know, but one possible explanation is that they are themselves biased by their own incentives. So let us further consider the case of Professor Reinhardt.

Professor Reinhardt's Conflicts of Interest

Not listed in the NY Times official bio of Professor Reinhardt are the following relationships:

- Professor Reinhardt is a member of the board of directors of Amerigroup, a health insurance company specializing in providing Medicaid and Medicare managed care. The company's 2008 proxy statement said that Professor Reinhardt owns the equivalent of 134,482 shares of stock, current value, $3,859,633 (at its current price, $28.70 per Google Financial), and got $221,422 total compensation in 2007.

- Professor Reinhardt is a member of the board of directors of Boston Scientific, a medical device company. The company's 2008 proxy statement said that Professor Reinhardt owns the equivalent of 51, 533 shares of stock, current value, $396,288 (at its current price, $7.69 per Google Financial) and got $118,885 total compensation in 2007.

In addition, per the above proxy statements, Professor Reinhardt is on the board of two funds from H&Q Healthcare Investors, and is a Trustee of Duke University and the Duke University Health System.

Boston Scientific, a device manufacturer, benefits from increased demand for its products due to physicians' pay incentives that favor the procedures for which they are used. As a director of the company, Professor Reinhardt has a duty to advance the financial interests of the company and its shareholders. Amerigroup may benefit from the current status quo in how physicians are paid. As a director the company, again Professor Reinhardt has a duty to advance the financial interests of the company and its shareholders. Thus, it seems that Professor Reinhardt's legal responsibilities to these companies might tend to bias him against actively questioning how physicians are currently paid, or proposing solutions that might upset the status quo.

Professor Reinhardt's leadership roles in US publicly traded corporations are public, but not easily found unless one knows where to look. (A previous post on Health Care Renewal did discuss Professor Reinhardt's previous failure to review relationships relevant at the time to a riposte Reinhardt wrote in response to an op-ed in the New York Times by a physician who decried the increasing commercialization of health care.)

However, the New York Times did not choose to make public these conflicts of interest. I should note that biographies of Professor Reinhardt on the Princeton web-site, and furnished by the Princeton Bioethics Forum, the Commonwealth Fund, and the Henry J Kaiser Foundation did not note these relationships. A transcript of an interview on the Public Broadcasting System Frontline show also did not reveal these relationships.

Without the knowledge of these financial relationships, one might suppose Professor Reinhardt's opinions are only based on his disinterested expertise as a well-known economic scholar. Without knowledge of these financial relationships, one might think that a secretive, opaque process skewing physicians' payments toward procedures is not an important problem for our health care system.

We have come to a critical time in the history of attempts to reform the US health care system. Whether reform occurs, and whether it does any good will depend on the quality of the debate that precedes it. Such a debate should be robust, but those involved ought to make clear where their biases and interests may lie.

Unfortunately, it may be that some of the most prominent voices in the debate are those of people with strong personal financial interests in having health care reform go in certain directions, not others. Furthermore, people with particular interests may not want certain issues to be even brought up. If these interests are not revealed, the debate becomes deceptive.

I fear that much of the debate up to now has been deceptive, and will not lead to good outcomes.

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.