Medicare pricing gets new look; RUC process revisited

Washington -- Continued debate about the accuracy of Medicare rates for physician services compelled the Medicare Payment Advisory Commission to discuss how the relative value unit system might be improved. MedPAC met Oct. 8-9 in Washington, D.C.

In November, the Centers for Medicare & Medicaid Services again will begin a key process, known as the five-year review, with a request for public comment on services in the physician fee schedule that might be misvalued.

The AMA/Specialty Society Relative Value Scale Update Committee, or RUC, is convened by the American Medical Association to recommend how to adjust relative value units for Medicare services. It consists of practicing physicians representing a broad range of medical specialties.

MedPAC recommended in 2006 that the Health and Human Services secretary establish a separate panel with expertise in clinical and health care economics that could give additional advice on services that may be overvalued or undervalued. The commission also recommended that the secretary use Medicare claims data to identify services that might pay too much and potentially contribute to unnecessary growth in the volume of services.

"With the next five-year review about to start, perhaps these recommendations bear revisiting," said Kevin Hayes, a principal policy analyst with the commission.

Inconsistencies noted

CMS typically accepts most of the relative value unit revisions recommended by the RUC, but the process is not without controversy. Hayes noted some inconsistencies in how the physician work portion of relative value units are determined. For example, the physician fee schedule estimates that a physician will spend 30 minutes on a typical colonoscopy, but some published research has determined that the average time is actually 13.5 minutes.

"The overall policy question is whether the [relative value units] are accurate and equitable," Hayes said. "The question is particularly relevant to physician services because of the critical role physicians play in the health care system. More broadly, research from CMS suggests that overestimates of physician time may be a problem that applies to a number of services, and not just limited to an isolated procedure such as a colonoscopy."

The practice expense portion of relative value units include direct and indirect costs. CMS uses specialty-specific cost data to update the indirect costs, but the data are not current for most specialties, Hayes said.

Some MedPAC members wondered if an easier method could be used to handle the services for which payment rates are determined to be outside of a reasonable range.

"If it's a question of outliers, then that's something CMS could handle with a reasonable addition of resources," said Bruce Stuart, PhD, a commission member and a professor and executive director of the Peter Lamy Center for Drug Therapy and Aging at the University of Maryland. "Is there some mechanism by which we could prioritize payment issues, focus on those, then pass it off to CMS?"

After MedPAC made its recommendation for a second layer of review in 2006, the AMA said any such panel should represent practicing physicians. The American College of Physicians said it would support such a move as long as any savings from adjusting rates for overvalued Medicare physician services were used to boost pay for undervalued services. MedPAC has cited complaints from some physicians that the budget-neutral relative value scale favors procedures and specialty care over more traditional primary care services such as evaluation and management.

CMS has not acted on the advice. But the RUC established a five-year review identification work group in 2006 to identify potentially misvalued services. The work group and CMS so far have identified more than 600 services for further review by the RUC.

MedPAC concluded the October meeting without adopting any new formal recommendations to CMS. But it reiterated that improving the pricing update process is an interim step.

Alternatives to the current system

The commission has stated that Medicare must move toward reforming the payment system as a whole, including the pursuit of such innovations as medical homes, bundled payments and accountable care organizations.

For example, ACOs were detailed by MedPAC in a chapter of its June report to Congress. A typical Medicare ACO would include a hospital, primary care physicians and specialists. Services still would be billed under fee for service, but care would be coordinated for shared Medicare patients with the goal of meeting and improving on quality benchmarks.

But Robert A. Berenson, MD, a commission member and senior fellow at the Urban Institute, warned that fixing the fee-for-service system should not be ignored as such new options are examined.

"You've got to keep working on fee for service, because those other things will take a long time to develop," Dr. Berenson said. "What I heard was a general agreement that while you're working on more fundamental reforms, you also need to get prices right, and there was concern expressed about what happens when you get prices wrong."

The print version of this content appeared in the Oct 26, 2009 issue of American Medical News.

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