How the RUC Escaped a Challenge to Our Deeply-Flawed Reimbursement System

On January 7, a federal appeals court rejected six Georgia primary care physicians’ (PCPs) challenge to the Centers for Medicare and Medicaid Services’ (CMS) 20-year, sole-source relationship with the secretive, specialist-dominated federal advisory committee that determines the relative value of medical services. The American Medical Association’s (AMA) Relative Value Scale Update Committee (RUC) is, in the court’s view, not subject to the public interest rules that govern other federal advisory groups. Like the district court ruling before it, the decision dismissed the plaintiffs’ claims out of hand and on procedural grounds, with almost no discussion of content or merit.

Thus ends the latest attempt to dislodge what is perhaps the most blatantly corrosive mechanism of US health care finance, a star-chamber of powerful interests that, complicit with federal regulators, spins Medicare reimbursement to the industry’s advantage and facilitates payment levels that are followed by much of health care’s commercial sector. Most important, this new legal opinion affirms that the health industry’s grip on US health care policy and practice is all but unshakable and unaccountable, and it appears to have co-opted the reach of law.

The RUC exerts its influence by rolling up the collective interests of the nation’s most powerful medical specialty societies and, indirectly, the drug and device firms that support and benefit from their activity. The RUC uses questionable “methodologies,” closed to public scrutiny, to value medical services. CMS has historically accepted nearly 90 percent of the RUC’s recommendations without further due diligence. In a damning October 2010 Wall Street Journal expose, former CMS Administrator Tom Scully described the RUC’s processes as “indefensible.”

The RUC’s distortion of America’s health care market, ramping up both care and cost, cannot be overstated. It has consistently over-valued specialty services and undervalued primary care services. Ophthalmologists performing cataract procedures are now paid 12.5 times the hourly rate of PCPs involved in a moderately complex office visit, arguably a more complicated activity.

At the same time, the erosion in primary care reimbursement has reduced office visit durations and undermined primary care’s moderating influence over specialty care. These dynamics are almost certainly responsible for the doubling of specialty referrals over the past decade.

The RUC’s excessive valuations of certain procedures — e.g., cardiac stenting, colonoscopies, back surgeries — have created lucrative incentives for over-utilization. 2008 OECD health data showed that, for every inpatient percutaneous transluminal coronary angioplasty (PTCA) performed on patients in the United Kingdom, New Zealand or Switzerland, we do more than four in the US. Then there are data showing a clinically inexplicable 15-fold increase in complex spinal fusions between 2002 and 2007, with adjusted mean hospital charges of $81,000.

All health care interests except primary care win under this arrangement. Everyone else loses. Unnecessary care puts patients at physical risk. Purchasers — taxpayers, employers and individuals — pay twice the cost of care in other developed countries, an economic burden that now threatens to pull the US economy off a cliff. And the role of PCPs gets short shrift.

The Legal Objection To The RUC

The core of the Augusta physicians’ legal challenge was that the RUC is a “de facto Federal Advisory Committee,” and therefore subject to the stringent accountability requirements of the Federal Advisory Committee Act (FACA). This law ensures that federal bodies have panel compositions that are numerically representative of their constituencies, that their proceedings are open, and that methodologies are scientifically credible. In other words, FACA ensures that advisory practices are aligned with the public interest.

The RUC adheres to none of these and is an object lesson in how special interests can be insinuated into and capture regulatory processes, displacing the public interest. For example, when the legal challenge was first filed, only 3 of 29 RUC panelists (10 percent) represented primary care, even though some 30 percent of US physicians practice primary care. RUC meetings are closed to the public, unless an invitation is extended by the Chair, and admission is tied to the guest signing a nondisclosure agreement. Determination of a procedure’s value has been based on as few as 30 survey responses by physicians who know that their reimbursement will be linked to how they have answered the questions.

The Effects Of The RUC’s Influence

There are also several cascade effects. One is our crisis-level shortage of PCPs. All but the most idealistic medical students are steered away from primary care and into the specialties by relative low reimbursement. A PCP can expect to earn $3.5 million less over a 30-year career than a typical specialist. When the comparison is against high-earning physicians, like orthopedic surgeons, the difference is $10 million. Just as our boomer population reaches its years of highest health care use and cost, we’ll have a devastating primary care shortage, which in turn will propel traditional primary care cases into far more expensive and often unnecessary specialty care.

And, as lead plaintiff Paul Fischer,MD has noted, the policies promoted by the RUC have degraded many areas of specialty medicine, narrowing care patterns as specialists “practice to the codes” that are most lucrative, and straining the collegiality that, until recent years, characterized most medical care.

One difficulty in challenging the RUC is that, to lay observers, it can appear to be a technical issue, accessible only to people who get down in the weeds. But it is foundational, defining the relative value of care services, which in turn drives pricing, profitability and care patterns.

That said, there are true experts who grasp the gravity of the problem. Among the most compelling are four former Administrators of CMS — Gail Wilensky, Bruce Vladeck, Tom Scully and Mark McClellen — who came together in a remarkable round table discussion last March in front of the Senate Finance Committee, co-chaired by Orrin Hatch and Max Baucus, unanimously agreeing that the RUC has been a colossal error and must be replaced (See the video here.) As Dr. Vladeck commented:

I’m hopeful that some combination of the need to address overall deficit reduction strategies more generally and a different kind of political climate in the relatively near future will create the opportunity for people to say, “We made a mistake in 1997. We created a formula that produces irrational and counterintuitive results, and we’re just going to abolish it and start all over again in terms of some kind of cap on Part B payments. It’s the only way we’re going to get out of this morass.

The six Augusta, GA PCPs left to right: Robert Clark, Becca Tally, Paul Fischer, Edwin Scott, Rob Suykerbuyk and Les Pollard

A Laudable Effort By Six Primary Care Physicians

America’s health care community should also acknowledge the tremendous effort mounted by the six Augusta, GA PCPs: Robert Clark, Becca Tally, Paul Fischer, Edwin Scott, Rob Suykerbuyk and Les Pollard. These physicians financed the legal challenge out of their own pockets and did so for no other reason than they were convinced of the huge wrong CMS’ relationship with the RUC perpetrates on the American people and on primary care. They are great American citizens who, unlike their primary care societies, took a stand on behalf of the public interest, literally putting their money where their mouths are and paying the price of admission to the legal system.

American health care has many problems that contribute to uneven quality and egregious cost, but CMS’ longstanding relationship with the highly conflicted and unaccountable RUC is among the most outrageous and damaging. Now, with legal remedies exhausted, the avenues of redress are limited.

As Dr. Vladeck noted, perhaps America’s looming fiscal crisis, driven primarily by its health care costs, can compel Executive or Congressional action on the RUC. Only if the CMS Administrator changes her agency’s reliance on the RUC in its current form, presumably with pressure from the White House, Congress and the HHS Secretary, can this problem be resolved. Doing so would be a huge step toward regaining our fiscal balance, not just in health care but for the nation as a whole.

Brian Klepper, PhD is an independent health care analyst and Chief Development Officer for WeCare TLC Onsite Clinics. His website, Replace the RUC, provides extensive background on the role that the AMA’s RVS Update Committee has had on America’s health care cost crisis. This essay originally was published on the Health Affairs Blog.

26 replies »

  1. Hey! I know tis is kinda off topic but I was wondering iif you knew whwre I could find a captcha plugin
    for my comment form? I’m using the same blog platform as yours
    and I’m having problems finding one? Thaanks a lot!

  2. Brian,
    that is scary that you say it’s too technical! So were DERIVATIVES!! and look what happened there!!! If the public is so bored with it or too complicated for their brains–they will continue to watch their own demise! sorry to be so blunt and thank you for the articles.

  3. Gregory Warner at Marketplace did a fine radio article on the probleml (http://www.marketplace.org/topics/life/health-care/world-health-care-pricing). Joe Eaton from the Center for Public Integrity did a great piece in 2010 (http://www.kaiserhealthnews.org/stories/2010/october/27/ama-center-public-integrity.aspx). And you saw the excellent pieces by Anna Mathews and Tom McGinty at the WSJ.

    But in the main, reporters have viewed the RUC as too technical and “inside baseball” to focus on for the mainstream. That’s been part of the problem.

  4. Addendum: Are there enough comprehensive writings on how PCP’s will be nonexistent soon BECAUSE of this–and other factors

  5. Dear Brian,
    Well I believe you, You would know. And it sounds hopeless. I guess after reading the WSJ article what impressed me is they don’t give the big picture. Meaning they make it look like it’s the PCP’s financial problems. There is no correlation to how it actually affects the public and is destroying PCP offices.

    In addition to the hospital take over of private practices and facility feels that are driving up costs as well. I get the impression that the general public is unaware of the severity of the scope of the problem.

    But I think you are right. I am not in the billionaires club so it will be futile to write and that will frustrate me more. Have you seen any comprehensive articles written in the press that help the public see the big picture?

  6. Well, it’s in our upcoming book, which is specifically for employers, and hopefully will get them incensed. The problem is that the lobbying groups for employers, like NBGH, are all so hyperfocused on wellness that they don’t have time for real issues. Once the wellness bubble bursts, I’d like to see NBGH go after both this and hospital quality issues.

  7. drg,

    Thanks for your concern. It pains me to say it, but it almost certainly would be of zero value for you to bother. A lawsuit has been brought and rebuffed. The WSJ wrote an expose on the problem. 4 former CMS Administrator told the Senate Finance Committee that they unanimously agree this is a terrible problem that needs to be changed.

    What’s needed now is the attention of non-health care business, focused on Congress and the White House, making the argument that, unless we fix this core problem, there is no way to reduce health care costs, and therefore not way to meaningfully impact our national budget crisis.

    At this point, I see little movement in that direction.

    So the answer is that, while I appreciate the gesture, unless you’re a billionaire with lots billionaire pals, the forces at play here are simply way too powerful.


  8. would it be effective to have PCP’s and patients write letters? and if so where? how can any of us help?

  9. Dr. Jaeger,

    Re: your comment that “we are never hearing the whole story from blog posts or the lay press,” there is a big difference between personal and expert blogging. A thoroughly documented literature, covering articles from the mainstream press (e.g., WSJ & NYTs), an array of academic journals, senate committee meetings and more has been archived at http://www.replacetheruc.org. Our team, consisting of primary care physicians and non-physicians health care experts, realized early on that if we were going to challenge the RUC’s relationship with CMS/HHS, then we needed to have our facts nailed down.

    We are comfortable that the whole truth has been presented in the various articles and briefs developed over the past couple years. The issue is not their veracity or completeness, but the political mechanisms that have been structured to avoid scrutiny and challenge.

    Please note that Dr. Blankenship, an exposed partisan, has been unwilling to return to this site to justify his accusations.

    Casual readers may assure themselves that the RUC surely is a justifiable enterprise. My colleagues and I, who have labored hard on this for a couple years without any agenda or interest except to correct a terrible wrong that has been perpetrated on the American people, do not labor under any such illusions.

  10. Dr. Blankenship would do an even larger service to the readers by explaining his accusations. There are majore issues at stake here, and it would be fruitful for all of us to hear what an insider’s objections are.

    It does grow increasingly hard to defend the actions and influence of the RUC. I know we are never hearing the whole story from blog posts or the lay press. Let’s hear your rebuttals and then let the “facts” speak for themselves.

    Ful disclosure: Academic PCP. No link to the RUC or AMA.

  11. Hey Remember when the book 1984 was JUST a sci fi novel???
    Are there any actions being done to correct this? This –meaning corporate America taking over the world.

    I wonder why this is not making the news? All you read about is there is a shortage of PCP’s and rising healthcare costs.
    Well NO WONDER!! There is no mystery in that! But to the newspapers and public it is a well kept secret with no solutions. The obvious solution of paying PCP’s !! is not addressed!!!!
    I was discouraged by reading only a few PCP’s fighting and the AAFP is not backing them?? I enjoyed life better when 1984 was just a novel…..

  12. Mr. Klepper, since you’ve stated that you’re a reader of Health Affairs then you should state that according to a 2009 article in Health Affairs by Laugesen and Glied, “Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services
    Compared To Other Countries”

    The article compared incomes of US PCPs and Orthopedic Surgeons to those of their counterparts in France, Australia, Canada, the UK, and Germany.

    From the article: “US primary care physicians earned the highest incomes ($186,582), while French ($95,585) and Australian ($92,844) primary care physicians had the lowest.

    While it is true that American physicians go into debt paying for their education, the article states that the average debt in 2009 was about $150,000 which would cost about $21,300 per year for a PCP to service.

    The reason that medical students are not choosing to go into primary care is not because of underpayment. The reason is that the RUC ensures that specialists are getting far more money than PCPs so naturally medical students choose to go into specialty care.

    It would make more sense to compensate US physicians based on a formula that based on the compensation of physicians in France, Australia, Canada, the UK, and Germany.

    The idea of paying American PCPs twice that of Australian and French PCPs, and specialists even more than that is a sort of hidden tax on all Americans.

    It is hard for American firms to compete with firms from these other countries when their health care costs are higher than competing countries because our Physicians are paid twice that of other countries.

    Moreover, increases in productivity have been going to pay for increases in health care costs instead of wages for employees to spend for their own needs.


    “The study—by Miriam Laugesen of the Mailman School of Public Health at Columbia University and Sherry A. Glied, also of the Mailman School and currently serving as assistant secretary for planning and evaluation at the US Department of Health and Human Services—compared fees paid by public and private payers for primary care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom, and the United States.

    It found that US primary care physicians were paid on average 27 percent more by public payers for an office visit, and 70 percent more by private payers for an office visit, compared to the average amount paid in other countries. However, the largest difference in fees paid to US physicians versus fees paid to doctors in other countries was for hip replacements. US physicians were paid 70 percent more for these procedures by public payers, and 120 percent more by private payers, than the average fees paid to physicians in the other countries studied.”

  13. That wouldn’t be me suggesting that. I know Geisinger and all doctors’ motives are pure and beyond any interest in pecuniary reward. Instead, that implication is evidenced directly by the behavior of Dr. Blankenship and the ACC. I just had the bad taste to point your attention to it.

  14. I’m confused.

    I’ve been reading for years how the docs at Geisinger work for minimum wage to provide high quality, low cost health care in a transformational, patient-centered, integrated environment representing the new paradigm for the future of medicine.

    Are you daring to imply that they like to make money?

  15. Yes, Margalit. There are at least three different efforts still ongoing. First, I and other folks will continue to write about this, but with a focus on the popular (e.g., newspaper op-eds, online magazines like Slate and Salon) rather than the health care press. One core issue at this point is that having a Congressional mandate that puts the CMS-RUC relationship beyond the law is unprecedented, especially for a private entity that has such immense power. Another is that a revaluation effort that brings reimbursement back into balance is an important element of a larger strategy to cut the health care costs that are driving the larger US fiscal crisis.

    Next, we’ll soon put together a petition aimed at the health care wonkosphere, seeking to get affirmation from the health care community that presumably thinks about these issues every day. This may be like chicken soup for the dead – probably won’t help, but couldn’t hurt – but it would also be solid evidence that a lot of people very knowledgeable about health care, also believe that this issue constitutes a genuine threat to the national economic security.

    Third, several of us will approach members of Congress and people in the White House on the topic. We believe that there will be some reception.

    It’s also worth mentioning that folks from the Urban Institute (Bob Berenson MD) and from RAND are conducting a hugely important study, authorized through the ACA, to validate RVUs. Anyone wishing to know more about this can contact me at bklepper@gmail.com

    What matters most now is visibility and knowledgeable comment in ways that elevates this issue and gives it the public attention it deserves and needs for change to occur.

  16. Southern Doc and PCB,

    I agree. The primary care societies’ continued participation in the RUC has not only contributed to their own members’ demise, but rendered them complicit in the physical risk to patients that derives from unnecessary care precipitated by overly lucrative services, and the excessive cost burdens that have accrued to purchasers.

    See my 3/30/12 column on this, Should Family Physicians Leave the RUC? (http://careandcost.com/2012/03/30/should-family-physicians-leave-the-ruc/).

  17. The author of one comment above, James Blankenship, MD is almost certainly the RUC representative from the American College of Cardiology and Director of Cardiology at Geisinger Medical Center in Pennsylvania.

    Dr. Blankenship was quoted in the October, 2011 Wall Street Journal expose on the RUC. Here’s the larger passage that talks out-of-date codes and valuation.

    “Many recommendations on which services to examine came from doctor societies. The upshot may be that payments don’t keep up with medical realities when procedures become easier or faster, MedPAC said.

    “The Medicare payment for placing cardiac stents in a single blood vessel stems from a 1994 RUC analysis. Medicare paid doctors for 326,000 of those procedures in 2008, at a cost of around $205 million. Compared to the mid-1990s, cardiologists say, stenting today is more routine and may often be less stressful.

    “The example used to set the code’s value is “way out of date,” says David L. Brown, a cardiologist at SUNY-Stony Brook School of Medicine. “In those days, stents were used when you were having a catastrophic event or thought you might have a catastrophic event.” Stents and the catheters used to thread them into arteries are now smaller and easier to use, he says. The time varies by patient, but Dr. Brown says he required around 45 minutes on average to perform a single-vessel stenting. The RUC’s valuation suggests a two-hour procedure.

    “The American College of Cardiology feels the service is “fairly valued,” says James Blankenship, who represents the society on the RUC and is director of cardiology at Geisinger Medical Center. He concedes that two hours is “probably a little bit too long,” but argues that the procedure may be harder because cardiologists now take on challenging patients who might once have gotten bypass surgeries.”

    If you have any doubt that RUC’s representatives like Dr. Blankenship are dedicated to optimizing their societies’ reimbursement, independent of relative value, see this announcement of a talk by Dr. Blankenship by the Society for Cardiovascular Angiography and Interventions (SCIA)(http://webinars.scai.org/session.php?id=9695)

    “Dr. Blankenship will describe and take your questions about the impact of the RUC on you and your practice, why your participation in the process is essential, and how SCAI, ACC, and HRS band together and engage other in our efforts to protect the values for the services and procedures you provide to your patients.”

  18. Brian, I know exactly how you feel. The system is completely set up totally to benefit the few at the expense of the many. Unforunately, as is often the case in government, the few have the resources and the clout. And in this case, it’s a negative sum game. It would be zero-sum except for the fact that overtreatment harms patients. I know — I’ve dodged quite a number of overzealous proceduralists through the years.

    I say “I know exactly how you feel” because I am as obsessive about the North Carolina Medicaid debacle as you are about this. It’s the same albeit on a smaller statewide scale — institutionaized ripoffs facilitated by phony numbers. TCHB should have my posting out tomorrow.


  19. Mr. Blankenship:

    Please cite the “incorrect innuendos or inferences” and I’ll do my best to further substantiate them. (Everything I summarize here has been credibly documented in past articles on Kaiser Health News and The Health Affairs Blog.) I have made my living and developed national credibility over 30 years by adhering to the facts, so I’m not sure what you’re implying.

    The RUC does, in fact, determine the relative value of medical services. Since its recommendations have been historically accepted by CMS almost 90% of the time, its relative values have translated into real cost.

    I stand by everything I’ve said.

  20. The erosion of professional satisfaction in primary care is directly related to the ongoing decline of operating margins for our front line docs. Today Primary Care docs need to work harder, faster, and longer just to make ends meet (or simply survive). Many are failing altogether. Even more see their local health system as their ‘way out’. The patient gets the short end of the stick.
    I find it ironic that the federal government is spending billions on new accountable care and medical home initiatives while the predominant workforce needed to make these models effective, the primary care physician, is waning so badly. Renewed economic income equality between specialists and primary care is an essential component to repopulate the primary care ranks and improve costs and clinical outcomes. The RUC bears much responsibility for the widening income gap, overconsumption of procedures and resources, and increased health care expenses. When nearly half of the medical bills are paid by Uncle Sam, to the tune of trillions of tax payer dollars, it is astonishing to me that the very body that determines how value is assigned to physician services remains confidential and secret. Really?

  21. There were 3 incorrect innuendos or inferences in the first paragraph and I stopped counting after that. For example, the RUC does not “determine the value of medical services.” You would do a greater service to your readers by reporting the facts.

  22. Primary care professional organizations should be ashamed for their lack of concrete action on this issue. It’s unclear to me who they are representing sometimes.

  23. Thank you to the Augusta docs.

    The most telling aspect of this case was the AAFP telling them to go jump in a lake. The well-paid whores who run that organization have no interest in rocking the boat.