The RUC (again): Is there a light at the end of the tunnel? A conversation with Brian Klepper

By David Harlow posted Wed September 04,2013 12:23 PM


Last month, there were a couple of breathless articles about the RUC (Relative Value Scale Update Committee) published in The Washington Post and The Washington Monthly, reporting as news the state of affairs that has prevailed for years in the realm of re-setting the relative values of physician services annually for purposes of the RBRVS -- which is at the heart of the Medicare Physician Fee Schedule (MPFS) and which affects physician reimbursement well beyond Medicare, since the RBRVS is used as a touchstone in determining payment levels under commercial payor agreements as well.

I thought this confluence of publications was a good excuse to call up Brian Klepper, who is an expert critic of the RUC, to discuss the latest stories and talk about the prospects for meaningful reform.

Have a listen to our conversation (about 30 minutes long):

Brian Klepper - RUC - HealthBlawg

A transcript is appended to this post.

As detailed in our conversation, the RUC is a committee of the American Medical Association, and it operates behind a veil of secrecy. When it issues its annual update recommendations, CMS generally accepts the recommendation, and promulgates the update as a rule: the annual MPFS rule. The RUC is dominated by specialists, so the system tends to overvalue procedures and to undervalue "cognitive" services, or primary care.

There is a case to be made that the RUC deliberations are subject to the Federal Advisory Committee Act (FACA) requirements (open meeting rules, opportunity for public comment, etc.); unfortunately, as Brian describes, the Federal court system was not inclined to follow this line of reasoning when a challenge to this process was brought.

The Sustainable Growth Rate rule creates a zero sum game for Medicare physician reimbursement, so as specialty care reimbursement rises, primary care reimbursement necessarily shrinks. Congress has kicked the can down the road for years now, refusing to implement the zero-sum approach to Medicare physician reimbursement changes on an annual basis. Thus, there is a deferred Medicare accumulated physician pay cut approaching 40%.  

There is an argument to be made that none of this matters in the long run, since we are moving away from fee-for-service medicine and in the direction of bundled or global payments. However, bundled payment rates are built on fee-for-service payment rates at some level, so the influence of the RUC on the RBRVS will be felt in a bindled or global payment system as well.

Given the paralysis on Capitol Hill, the court decision and the SGR law mean that moving forward will be difficult, if not impossible.  

There is a faint glimmer of hope in the form of a bill filed by Rep. Jim McDermott (D-WA) that would bring the RUC within FACA and reconstitute its membership to be more fairly representative. It was filed last session and died in committee. In the current legislative session it sits in committee as well, as H.R.2545, Accuracy in Medicare Physician Payment Act of 2013.

It remains to be seen whether any substantive changes will come about in the near future.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting  


Conversation of David Harlow and Brian Klepper on the RUC

July 26, 2013

David Harlow: This is David Harlow at HealthBlawg and I have with me today Brian Klepper, who is the principal and chief development officer of WeCare TLC, a worksite clinic and medical management company. He is also a columnist for Medscape and writes for The Self-Insurer online as well. Welcome Brian.

Brian Klepper: Thanks, glad to be here.

David Harlow: I am interested in speaking with you today about the recent flurry of what I would call breathless articles about the resource-based relative value scale used for Medicare payments of physicians and specifically about the relative value scale update committee, the RUC, that is operated by the American Medical Association and has an advisory role in updating the RBRVS on an annual basis. There were some articles (and I’ll link to them) in the Washington Monthly and the Washington Post about this and my initial reaction, Brian, is that this is old news. I am surprised to see this portrayed in the way that it was, as fresh information. I am wondering if you could react to that a little bit and maybe give us a thumbnail capsule of why we should care about the RUC.

Brian Klepper: I have been interested in the RUC since about 2007 when Roy Poses, who is a physician at Brown, told me about it when we were both fellows at the Aspen Institute Health Forum in Colorado and I begin to dive into it. At that time I wrote a piece called “Bad Medicine: How the AMA Compromised Primary Care in America,” which dove into it a little bit and then in October of 2010 I believe, the Wall Street Journal ran a wonderful exposé by Anna Mathews and Tim McGinty that was a devastating indictment of the RUC, in which Tom Scully, who had been the CMS administrator under Bush 2, he called the RUC indefensible, which in the context of one of the most important newspapers in the country, was pretty damning. That was followed up the following January by an article by Uwe Reinhardt in the Economix blog of the New York Times, where he sort of explicated the function of the RUC without really drawing the conclusions of how corrosive the process has been. And then I got together shortly after that with David Kibbe, who is my sometimes writing partner. Dr. Kibbe as you know is a genuine thought leader, he is a family physician and he is one of the country's top experts on electronic health records and the transfer and storage of clinical information. David and I talked about it. He was at the time, still is, working part-time for the American Academy of Family Physicians and we said the RUC has been so destructive to primary care that there really ought to be an effort to get the primary care community to abandon participation in the RUC, saying that it is a terrible process and by doing that delegitimize it, paving the way for another process for valuation of medical procedures.

I should stop here and do a sidebar and explain what the RUC is. The RUC is a secretive AMA committee that was established in 1992 right after the introduction of the resource-based relative value scale, which was an effort to rationalize and give weight to different medical procedures and a Harvard scientist by the name of Hsiao came up with the methodology, which seemed like a good idea at that time, but it has turned out to be crazy, and so the AMA stepped forward: well CMS really does not have the resources to do a good job with this, but you really need to get doctor input into the kind of work that they do; so let us do it and CMS at that time under Gail Wilensky and then shortly after that Bruce Vladek said sure, why not, that seems like a good idea and that would be helpful. So what it ended up being was a lobbying group which was utterly opaque, its proceedings were hidden from view. Their scientific methodologies were laughable, they wouldn’t get past any basic statistics class. They often made decisions based on survey samples of their own doctors who knew that they would be paid based on their response to surveys with fewer than 30 responses, and the composition of the 29-member panel was not at all representative of the numerical composition of physicians in the country. So for example, primary care physicians are somewhere between 30 and 35% of all US physicians and they represented only 3 of 29 members on the panel. So they were a federal advisory panel that by the de facto rules should have come under the auspices of the Federal Advisory Committee Act, but never adhered to any of their rules. The Federal Advisory Committee Act is a law that says that groups advising federal agencies must adhere to rules that are in the public rather than the special interest. The proceedings have to be open, the representational composition has to reflect the real world, they have to use credible science, and so on.

The impact of the RUC which has made a lot of its valuations and determinations based on horse trading and lobbying and all kinds of other behind-the-scenes, inappropriate methodologies has been devastating, in terms of its impact on American healthcare. Say for example, one taxonomy that you might point to is saying: Well, it has consistently undervalued primary care relative to specialist care. So, primary care's reimbursement is based on what are called E&M or Evaluation and Management codes, which are based on office visits duration and the complexity of an office visit. The payment for them is very limited relative to speciality care. By contrast specialty care has been amped up very, very high. So it has consistently overvalued specialty care because the composition of the panel has been dominated by specialists and it has undervalued primary care. Those two things had a secondary impact, in the sense that it has inhibited primary care's traditional capacity to moderate and hold accountable specialty care and at the same time it has created tremendously lucrative procedures by giving tremendous weight to certain procedures. So for example after an increase in the valuation of complex spinal surgeries in 2002, there is data showing that between 2002 and 2007 the rate of complex spinal surgeries increased fifteen-fold with no clinical origins to that -- purely driven by the financial incentives.

David Harlow: So let me say here a couple of other things to frame this. Number one, the differential between the primary care reimbursements and specialty care reimbursements are much more pronounced now than they were when the RBRVS was first adopted through Bill Hsiao's work, and the other thing that’s worth mentioning is that there’s a zero sum game going on. Under federal law there is a requirement that the total value of Medicare reimbursement for physician services remain the same -- subject to some minor inflation adjustment -- so that as specialty care reimbursement increases, whether by individual procedure or by overall total, the primary care reimbursement necessarily decreases -- and this is something that we are familiar with. We revisit this on an annual basis as Congress overrules itself and allows a greater expansion of the costs because this zero sum game doesn’t really work and we now have accumulated about a 40% increase in total expenditures that at least theoretically will need to be carved out of physician reimbursement at some future date on the Medicare side. So that’s another aspect of this system that further complicates it and is in need of fixing. So between the increased differentials, between primary and specialty care, and what's been called the “doc fix” that happens on an annual basis when we are looking at the Sustainable Growth Rate for physician expenditures. There is really a need for Congressional action in order to get a handle on these expenditures. I guess the other thing I would say here is that – we are talking about physician expenditures under Medicare, but really this has a much greater impact because of other expenditures that these physician expenditures are related to and I wonder if you could speak to that as well.

Brian Klepper: Yeah, everything which you say is absolutely true. It is important to say for listeners that there are many, many nooks and crannies to this. It is a very complex story. My wife is urging me to write a book that is sort of like All the President’s Men. Starts off with, you know, Hsiao creating this monster and going through all the ramifications. As you say, the payment differentials, the valuation differentials are tremendous. So, three years ago the Graham Center, which is a subsidiary of the American Academy of Family Physicians, did a study that found that on average a primary care physician is going to make $3.5 million less than a specialty physician over a 30-year career. If you compare their pay to orthopedists or neurologists, it is more like $12 million. So, another offshoot of this is that nobody goes into primary care anymore. The percentage of medical students going into primary care has dropped to almost nothing and as a result of that we are facing this tremendous primary care shortage over the next few decades. The power problem associated with this is also very compelling because not only is the AMA the largest single societal health care lobby, but they are supported by not only all of the individual medical speciality societies, which of course are much wealthier than the primary care societies, but they are also supported by the rank and file of all of the corporations that support specialty services and that win from this windfall of lucrative services that in turn drives unnecessary utilization. So it is a genuine cabal that extends not just into Medicare but into every payment stream and the valuation values that are set by the RUC – that are recommended by the RUC and almost 90% of them over the last 20 years – 90% of the recommendations have been accepted by CMS with no further due diligence. Those have then become the basis for payments in virtually all of the other commercial and other public health system reimbursement streams as well. So, it has tremendous impact.

This is, in my opinion, the core of the health care cost crisis. This is not by any means the only problem with healthcare costs. There are many other problems, but this is the deepest one and the most powerful and it will be the hardest to dislodge.

Is it worthwhile here David to talk about the lawsuit and the implications of the finding?

David Harlow: Yes, that would be great.

Brian Klepper: Well, so what happened was that Dr. Kibbe and I in January of 2011 published an article in Kaiser Health News called Quit the RUC, which made this argument that it was this corrosive thing that was harming primary care. At that time, we had I think a more immature, an earlier stage understanding of what the RUC was about and how corrosive it was, but we published this article and it set off a minor firestorm and got some play and then I approached a physician, who has become a longtime friend, by the name of Paul Fischer. Paul had been controversial and impactful years ago when he was the first physician expert witness in the tobacco trial and had played an important role in that and so I asked him if he would become involved and he and 5 of his primary care colleagues also from Augusta, Georgia, we found and retained a constitutional attorney right outside of DC and they filed a lawsuit against the US Department of Health and Human Services and the Centers for Medicare and Medicaid Services over their longstanding relationship with the AMA's RBRVS Update Committee for their refusal to require the RUC to adhere to the common interest requirements of the Federal Advisory Committee Act. The core assumption was that the RUC is a de facto federal advisory committee and therefore should be required to do that.

The case went on for a year – well a year and a half and was resolved finally by an appeals court in January. Both the district court and the appeals court ruled that the relationship between CMS and the RUC were beyond the jurisdiction of the court and could only be resolved by Congress and so therefore the courts could not assess the merits of the contents of the suit. We thought that this was a pretty surprising result because it meant that as a practical matter the RUC is utterly unaccountable and almost impossible to dislodge and that the only real way to get at it was to have an appeal in Congress, which was made all the more difficult by Congress' open-arms policy to lobbying contributions from the health care industry.

It is worth mentioning here as aside that in 2009 when the health care reform law was being formulated that data from Open Secrets from the Center for Governmental Responsibility shows that the health care industry gave Congress $1.2 billion in campaign contributions, it was an unprecedented amount, in exchange for influence over the shape of the law. So that’s an illustration of the level of their influence and their power and so it makes it difficult to believe that a structure like the RUC that is so advantageous to the industry could be dislodged.

David Harlow: So both in terms of that, combined with the general logjam in Congress these days and, I think, the extreme unlikelihood of CMS acting on its own to revisit the relationship with the RUC and create a new structure, makes it extremely unlikely that something will change in that respect any time soon. I guess another approach to change has been the increasing emphasis on moving away from fee for service for reimbursement purposes, although the bottom line is there needs to be some way of valuing services as they go into bundled payments and this ends up being the de facto model for valuing these services.

Do you see any hope for a move away from the RBRVS in developing bundled payment amounts?

Brian Klepper: No, I think you put your finger on it. If I am a hospital and I am given a bundled payment for a patient with say, a whole range of problems including orthopedic problems for example, and I do an internal valuation of the contribution to care of the patient, the orthopedist who has been making 10 to 12 times what the primary care physician has for very capricious reasons that has to do more with lobbying than actual value of his service, is going to come back and say wait a minute, I am worth 12 times what the primary care doctor is, just look at the RUC values -- and that makes it very, very difficult for a bundled payment system to work in the real world. I think that that is a real serious problem.

David Harlow: Well, I guess it is at least theoretically possible for a strong-willed private payor to take a step in the right direction and move away or make some adjustments to these fee schedules. I know in the past some private payors used the RBRVS as a starting point and would adjust certain ranges of codes by a percentage up or down depending on where they feel they need to be and hopefully that can continue in the future in an effort to rationalize this system.

Brian Klepper: You know a couple of years ago my wife had cataract surgery and so I got a chance to look at the bill from Medicare and it struck me that it made sense to do an analysis and compare what an ophthalmologist receives under Medicare for cataract surgery -- it is referred to as a cataract extraction and intraocular lens implant -- and compare that to a primary care office visit that is moderately complex. This kind of artificial situation really sheds a lot of light on how egregious the problem is.

First of all there is this sort of myth that what primary care doctors do is easy and therefore they are the dumb ones. What a primary care doctor is actually faced with day after day is often seeing patients that they know very little about, the patient presents with a set of symptoms and they could be anything, a set of symptoms could be neurologic or hormonal or an infection or anything else, and they have to figure out in very short order what it can’t be, and then what it must be, and then figure out from there whether they are capable of managing it or whether they need to send it to a specialist. That’s an extremely cognitively complex requirement.

By contrast, most specialists have a very narrow set of things that they see over and over again. In the case of a cataract, this is a 50-year-old procedure, all of the risk pretty much has been filtered out, it’s almost completely automated and it takes about 10 or 11 minutes to do this procedure. A moderately complex office visit takes 20 to 25 minutes and the physician is required to see at least three different problems that they deal with and when you look at the reimbursement on an hourly basis, the ophthalmologist is receiving 12-1/2 times what the primary care doctor is -- for something that is arguably less complex. That kind of real-world result is the direct outgrowth of the RUC's activities that have happened behind closed doors, out of sight, and have resulted in these tremendous, not only cost burdens on the American people, but also differentials and distortions of the American healthcare system. It is really worth understanding in those terms.

David Harlow: Yes and so we hope that moving forward in order to try to rationalize the system, to get a handle on costs and growth, that we will be able to move forward and incorporate a more rational approach to reimbursement.

Brian Klepper: Representative Jim McDermott, a Democrat from Washington, he has set up a bill, I think it’s called the Accuracy in Medicare Payment Act or something along those lines, which would require the RUC to be treated as a federal advisory committee and therefore come under the common interest rule. In addition to that it would also open up the panel beyond physicians to include other important constituencies who play a role in the system. So it would include patients and purchasers and health care economists, all of whom could bring perspective and expertise to the process. It is a very important bill and it would be an important first step.

It makes a lot of sense. Representative McDermott is a physician and he has crusaded on this issue, on the fact that he understands how serious it is. I don’t know whether it will get any support, but it certainly deserves the support of both sides of Congress.

The final point is that health care is the most important single issue in creating economic instability in the United States. There is a RAND study from 2010 that shows that 80% of all of the growth in household income over the last decade is now being absorbed by health care and this out-of-control issue threatens to capsize the rest of the US economy. So getting this under control is very important for the national economic interest and this is the most important first step. So I really appreciate the chance to talk about this with you. So thank you very much.

David Harlow: This has been great. I couldn’t agree more. McDermott's bill has been filed before and as often happens with important legislation, it didn’t get passed the first time through; it went to a couple of committees and sort of died on the vine there, but I am hopeful as you are that in this session or maybe in a future session of Congress, this bill can be enacted into law so that we can bring this process within FACA, within the open meeting law and have appropriate representation and broader process involved in dealing with these issues.

Again, thank you very much, Brian, for speaking with us today. This is David Harlow on HealthBlawg.