The Most Powerful Health Care Group You’ve Never Heard Of

Excessive health care spending is overwhelming America’s economy, but the subtler truth is that this excess has been largely facilitated by subjugating primary care. A wealth of evidence shows that empowered primary care results in better outcomes at lower cost. Other developed nations have heeded this truth. But US payment policy has undervalued primary care while favoring specialists. The result has been spotty health quality, with costs that are double those in other industrialized countries. How did this happen, and what can we do about it.

American primary care physicians make about half what the average specialist takes home, so only the most idealistic medical students now choose primary care. Over a 30 year career, the average specialist will earn about $3.5 million more. Orthopedic surgeons will make $10 million more. Despite this pay difference, the volume, complexity and risk of primary care work has increased over time. Primary care office visits have, on average, shrunk from 20 minutes to 10 or less, and the next patient could have any disease, presenting in any way.

By contrast, specialists’ work most often has a narrower, repetitive focus, but with richer financial rewards. Ophthalmologists may line up 25 cataract operations at a time, earning 12.5 times a primary care doctor’s hourly rate for what may be less challenging or risky work.

These differences in physician worth and payment didn’t just happen. Instead, they have been driven by a 31 doctor – 26 specialists and 5 primary care physicians – American Medical Association panel, the Relative Value Scale Update Committee (RUC), which for 20 years has been Medicare’s sole advisor on the value of physician services. The Centers for Medicare and Medicaid Services (CMS), the federal agency overseeing the program, has historically accepted nearly 90 percent of the RUC’s recommendations with no further due diligence. So the RUC has huge financial impact throughout health care, not only for Medicare but for many commercial health plans that follow Medicare’s lead on payment.

CMS has never designated the RUC a Federal Advisory Committee (FAC), which has let it avoid the stringent legal requirements of the Federal Advisory Committee Act, ensuring that regulation is formulated in the public rather than the special interest. Even so, CMS’ reliance on this panel is congruent with legal precedents that would render it a “de-facto” FAC, and the rules would apply. The law is clear, for example, that federal advisory bodies’ proceedings must be transparent and available to the public. The panel’s composition must numerically reflect the real world. Scientific methods must be credible, and panelists must disclose and avoid financial conflicts.

CMS has willfully ignored these requirements, and the RUC has freely exploited the opportunities that resulted. Barbara Levy MD, the RUC’s chair, insists that the RUC is an expert panel, not meant to be representative. She has written that “The work of the RUC benefits the entire Medicare system and is done at no cost to taxpayers,” as though it is an altruistic activity. But in an interview last October, she admitted “We assume that everyone is inflating everything when they come in. They are wanting to fight for the best possible values for their specialties.”

Nor does every specialty get to play. Geriatrics was finally welcomed to a seat only in May. For the previous 20 years, Medicare, a program dedicated to seniors’ health care, didn’t feel specialty expertise on the elderly was pertinent.

Over time, the RUC’s over-valuing of specialty services and under-valuing of primary care has had serious real world impacts. It has created lucrative incentives for specialists to over-treat. Lower primary care reimbursements have resulted in shorter visits and a doubling of the specialty referral rate over the past decade. An increasingly rushed schedule has inhibited primary care’s ability to moderate inappropriate specialty care.

But ultimately the RUC’s payment distortions have damaged far more than primary care physicians’ work lives. Patients receiving unnecessary services are needlessly exposed to physical risk.  Purchasers – taxpayers, businesses and individuals – shoulder excessive and rapidly growing health care costs.

It is reasonable to place a sizable part of these excesses at the feet of CMS’ too cozy relationship with the RUC. Like lobbying, the RUC’s capture of regulatory oversight has been a boon to the health industry. It has driven ruinous national deficits, and is the greatest obstacle to turning around our health system and our economy.

Last August, Dr. Fischer and other Augusta, GA primary care physicians sued Medicare, challenging its reliance on the RUC. The case was tossed out in May on a procedural technicality, without considering the merits of the complaint, but is now under appeal.

That case could be made moot if the Obama Administration simply prevailed on the CMS Administrator to require the RUC to adhere to the FACA rules, as most other federal advisory panels do. (Of course, that would require that someone inside the Administration has the drive and the courage to focus on it.) At the same time, CMS could begin an energetic effort to re-evaluate mis-valued codes that represent high volume or high cost services. The simple act of changing the value and incentives associated with incorrectly valued medical services could immediately save tens or even hundreds of billions of dollars.

It is clear that it will be impossible to get American health care under control unless we can recapture regulation and reconfigure it to act in the common rather than the special interest. Until that is accomplished, America’s and our children’s diminishing prospects will be directly tied to our failure to stop the health industry’s rapaciousness.

Brian Klepper, PhD is a health care analyst based in Atlantic Beach, FL. Paul Fischer, MD is a family physician in Augusta, GA and lead plaintiff in the lawsuit against HHS and CMS.

17 replies »

  1. Not everything can be resolved with making more regulations. Doctors and health care system need to remember to place patients first.

  2. Mr. Whelan,

    Then maybe you don’t understand what’s involved in primary care or in a cataract extraction and intra-ocular lens implant, or why ophthalmologists get 12.5 times the hourly rate of a moderately complex primary care office visit.

  3. You lost me when you said that cataract surgery is easier than a primary care office visit.

  4. Get real. This pseudo-debate has been going on for decades. The fact is that primary care doctors cannot possibly know all of what they need to know to recommend many sophisticated procedures for their patients. They must rely on the expertise of specialists. The key, per Drs. Relman and Gawande, and Clay Christensen, PhD, is re-organization and accountable care. Paying primary care more and specialty care less does nothing to reduce the size of the pie; it just changes the size of the pieces. You’re waaaaaaay behind the times. Move forward!

  5. Get real. This pseudo-debate has been going on for decades. The fact is that primary care specialists cannot possibly know what they need to know to recommend many sophisticated surgical procedures for their patients. They must rely on the expertise of specialists. The key, per Drs. Relman and Gawande, and Clay Christensen, PhD, is re-organization and accountable care. Paying primary care more and specialty care less does nothing to reduce the size of the pie; it just changes the size of the pieces. You’re waaaaaaay behind the times. Move forward!

  6. There have been many posts about improving primary care and how it works well in other systems. Yet I don’t think there is enough study comparing the work pattern of PCPs across the world.

    If PCPs are delivering results then the consumer should reward that by fully trusting the PCP and not go to specialist. Yet they go, why?

    Though it may be happening that value is being delivered proportional to compensation provided.

    Compensation may be addressed. But the problem will be addressing consumer behavior. If consumer still value specialist more, then desired health results may not be obtained.

    Further if the paradigm, value delivered is proportional to compensation, is true then results of cost cutting on specialist delivery would lead to more catastrophic scenarios.

    Agree with some suggestion of Dr Motew above and would also like to note that healthcare has great parallels with education in terms of cost inflation, quality and reimbursement. There is same debate there about compensation for elementary school techers compared to that of those in higher education.

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  8. All you bloggers here like Don Berwick. Did he change anything? Nope.

  9. I have posted (as a specialist) time and again my response to the “over” versus “under” paid specialists versus primary care….No doubt, that compared to specialists, primary care earn less, also no argument that the RUC process is flawed.

    I ask again, rather than argue the ‘value’ or ‘difficulty’ of any one physician, why not pay based on hard factors such as: days/hours worked, on call hours, weekends, malpractice risk, length of training?? These are concrete determinants of time-based costs, risk and investment not related to procedures.

    Either way you slice it, some primary care physicians do not take call, rarely work weekends, turn off phones at 5pm and have very little comparative malpractice risk. How does this compare to a specialist for example with 80-90 working weeks, every 4th weekend and night call, 80-100k/year malpractice cost and training delayed reimbursement costs in the $100k’s range?

    I will certainly contend that there are many specialists who work minimal hours, no call, low risk (dermatology, radiation onc, eye..), who as well should be compensated on the same hard factors.

    We will get nowhere arguing “my job is harder” or “my specialty is more important” etc..

  10. Sorry, I may have misunderstood this paragraph as suggesting that shifting reimbursement would be a solution to expensive over-utilization created by over-valuing of specialty services:

    “Over time, the RUC’s over-valuing of specialty services and under-valuing of primary care has had serious real world impacts. It has created lucrative incentives for specialists to over-treat.”

    I couldn’t agree more with your conclusion that we must change payment incentives and improve primary care access. The new incentives must avoid the system we saw in managed care in the past that rewarded primary care providers for minimizing referrals rather than rewarding them for good outcomes associated with appropriate use of specialists.

  11. RichATL, Not sure what article you read, but to my knowledge we never assert that the solution for lower costs is to limit access to care. Your comment is a hammer in search of a nail.

    While we do need to fix our very broken, capricious med mal system, study after study has shown that defensive medicine produces a comparatively small part of excess cost. The far greater culprit is lucrative procedures, delivered independent of appropriateness.

    We need to substantially change payment incentives, to make quality/safety/cost data far more transparent, and we need to re-empower primary care through greater access, more equitable pay, and a more foundational role in care.

    Clearly, medicine and the health care sector isn’t up to this task, since they see it as against their self-interests. The real movers, then, must be non-health care purchasers.

  12. Drs. Klepper and Fischer are correct that the only way to “bend” the growth curve of healthcare costs is to significantly limit access to care. Unnecessary specialist care certainly is one of the areas where access could be limited with tolerable effect on outcomes. However, the likelihood is very small that more equitable pay for primary care physicians will make a significant short- or medium-term impact in the absence of major overhaul of our malpractice system. It is human nature to try to protect oneself before considering the system and the risk of litigation will motivate continued referral to specialists if the legal system continues to punish for not referring patients for specialty care, particularly when they request/demand it.

  13. janrey,

    I think this article just answered it for you. So long as there are tremendous financial incentives in Medicare to provide services unnecessarily and at high cost, there is literally no limit the amount of money we can spend. No amount will ever be enough.

  14. What I wish someone would address is since every working person pays into medicare funds through payroll deductions and everyone receiving medicare pays around $100 a month (on top of paying into medicare most of their working life) why is medicare in financial difficulties?