Bad Medicine: How The AMA Undermined Primary Care in America

Brian Klepper

Originally published 12/13/07 on The Health Care Blog

On Tuesday’s Wall Street Journal website, Dr. Benjamin Brewer describes physicians’ reactions to the 10.1% cut in Medicare physician payments that will take effect January 1. He argues that the onus will fall, once again, disproportionately on primary care physicians, who are already losing the struggle to keep their heads above water.

He is right, of course. There is no question that Medicare must rein in cost. But the cuts are approximately the same across specialties and therefore regressive. Insensitive to its distinct role, its lower revenues and its high operational costs, they hit primary care harder than they do specialties. Given its already battered status, the cuts’ impact on primary care could translate to real consequences this time.

American primary care is a shambles, and it is now clear that it will not be viable in the future unless significant changes occur in our national attitude about its value and in the way we pay for it. While, in other developed nations, 70-80 percent of all physicians are generalists and 20-30 percent are specialists, in America the ratio is reversed, the result of a payment system, the Resource-based Relative Value Scale (RBRVS), that was originally intended to account for and financially lessen the differences between specialties. Instead, RBRVS has evolved to reward expensive care and penalize proactive management, even though the data are unequivocal that higher percentages of primary care within a community results in healthier, lower cost populations.

Specialists typically take home at least double the income of the generalist. While the knowledge base and options have exploded in all areas of medicine, the demands on generalists, who must maintain reasonable expertise across all areas, have been intense. Medicare’s payment system, which is the basis for most commercial payment as well, favors specialists in two ways. It pays them a higher rate for their time (implying that what they do is more difficult and more valuable), and it allows them to earn money through procedures that are unavailable in primary care.

In a June 2007 Annals of Internal Medicine article explicating the primary care crisis, Bodenheimer et al, provide this example:

Under the RBRVS system, the 2005 Medicare fee for a typical 25- to 30-minute office visit to a primary care physician in Chicago was $89.64 for a patient with a complex medical condition (Current Procedural Terminology [CPT] code 99214). The fee is calculated by multiplying the relative value unit (RVU) for the 99214 CPT code (2.18) by the 2005 Medicare conversion factor (37.8975) and adding a geographic adjustment. The 2005 Medicare fee was $226.63 for a gastroenterologist in the outpatient department of a Chicago hospital performing a colonoscopy (CPT code 45378), which is of similar duration to the office visit. Colonoscopy performed in a private office in Chicago, which differs from the hospital setting because the gastroenterologist pays for equipment and nursing time, would cost $422.90. Office visits are considered evaluation and management services (history, physical examination, and medical decision making), whereas colonoscopies are an example of a procedural service.

The career-choice implications of these financial dynamics are not lost on medical students, who have been diverted in droves away from what many apparently see as an unrewarding primary care office existence. Between 2000 and 20005, the percentage of medical school graduates choosing Family Medicine dropped from a low 14% to an abysmal 8%. Among Internal Medicine residents, an astonishing 75% now end up as hospitalists or sub-specialists rather than office-based general internists.

Of course these numbers beg several questions. Who will oversee care as the boomers enter their most medically intensive years? Who will keep up with the knowledge explosion and manage our individual patients and the nation’s health? There is no question that rapid progress in expert systems and more effective use of medical extenders will help us develop better approaches to evaluation and management, but do we honestly think the nation won’t need more primary care physicians?

How did we get here and who bears responsibility for it? The short answers:

  • The American Medical Association, which has sponsored a proprietary, secretive advisory committee, the RVS Update Committee (or RUC) that is heavily dominated by specialists and that has been the main source of Relative Value Unit recommendations regarding Medicare physician reimbursement.
  • CMS (the Centers for Medicare and Medicaid Services), which has, to a disturbing degree, taken the RUC’s advice and implemented their recommendations, apparently without much other outside counsel. In its reports to Congress, MedPAC (the Medicare Payment Advisory Commission) has pointedly expressed its concern over the imbalance in physician reimbursement, as well as over its likely impact on the future of the physician labor force.

Writing (amazingly) in the Journal of the American Medical Association last month, Harvard’s John Goodson MD, describes the RUC and its relationship with CMS this way:

The American Medical Association (AMA) sponsors the resource-based relative value scale update committee (RUC) both as an exercise of “its First Amendment rights to petition the Federal Government” and for “monitoring economic trends . . . related to the CPT [Current Procedures and Terminology] development process. Functionally, the RUC is the primary advisor to CMS for all work RVU decisions.

The RUC has 30 members (the chair only votes in case of a tie) with 23 of its members appointed by “national medical specialty societies.” Meetings are closed to outside observation except by invitation of the chair. Only 3 of the seats rotate on a 2-year basis. Other members have no term limits.

Seventeen of the permanent seats on the RUC are assigned to a variety of AMA-recognized specialty societies including those that account for a very small portion of all professional Medicare billing, such as neurosurgery, plastic surgery, pathology, and otolaryngology. Proceedings are proprietary and therefore are not publicly available for review.

Traditionally, more than 90% of the RUC’s recommendations are accepted and enacted by CMS.

In other words – and it is important to be clear about this – the premeditated actions of the specialist-dominated RUC, operating under the auspices of the AMA and in alliance with CMS, appear to have played a direct role in the current primary care crisis by driving policy that financially favored specialty care at the expense of primary care. Equally important, this relationship has been key in establishing drivers of our health systems relentlessly explosive cost growth with its attendant impacts on the larger US economy.

Dr. Goodson describes the cascade of links between the AMA, CMS and the economy this way:

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.

Certainly, these revelations should give pause to primary care physicians, and constitute grounds for reconsidering the relationships they and their specialty societies’ have with the AMA. Not that the AMA would care. Their members represent only a small minority of American physicians, and only a relatively small percentage of those are generalists.

But our Congressional representatives and the American people almost certainly don’t know these details. Most Americans and, for that matter, most health care professionals, are utterly unaware of the roles of the AMA and CMS in shaping the primary care crisis and our larger health system problems. Most believe the AMA speaks for all physicians.

So what should we do?

The consequences are upon us. There is little value now in recriminations or in arguing with the AMA about their role. That would only waste precious time and resources, and distract us from the real task, which is to re-stabilize primary care.

Ideally, if Congress were responsive to the common interest, the special problems associated with primary care would be heard and immediately addressed through a revised payment system. But in our special interest-driven system, that will be difficult. The most influential lobbyists – the AMA is one of Congress’ largest contributors, as are the drug and device organizations who sell to specialist physicians – appear to have the ear of Congress. (On the other hand, this year it does not appear that that influence will be sufficient to avert the cuts.)

The discussions about primary care’s dilemma and how we got here have been led by highly respected and credible thought leaders, and taken place in and on prominent health care publications and websites. But realistically, the conversation has taken place primarily within the health care community. To effect change, the American public and, more importantly, influential non-health care decision-makers, must be made aware of the problem, and what its dynamics mean for their and the nation’s short and long term prospects. Only then can the hope exist of replacing the old paradigm.

Some of that is already afoot. The National Committee for Quality Assurance recently proposed a new model for primary care reimbursement that would reward physicians for their time spent managing chronic conditions and communicating with patients. What is promising about this effort is that it appears to have the buy-in of the major primary care specialty societies, and the involvement of major insurers and employers. The question now is whether it can gain the traction required to rapidly change what we ask of primary care physicians and how we pay them.

Another interesting, and perhaps more far-reaching proposal (Download finalpcppaper.doc) has been made by Norbert Goldfield MD and his colleagues. Dr. Goldfield is a highly respected health care innovator, who has been a central force behind the development of 3M’s health care analytical tools.

His group has argued that primary care physicians should be paid for the services they provide, multiplied by a coefficient that appreciates the patient’s burden of illness (or severity) and then multiplied again by a coefficient that appreciates that physician’s willingness to engage downstream providers as the patient’s fiduciary. This is an entirely different role than “gatekeeper,” and would require the PCP to be directly involved in specialty care as the patient’s advocate and guide. Physician performance would be gauged against quality and cost values expected under a traditional, non-PCP-involved system.

To me, Dr. Goldfield’s proposal has tremendous merit. Recognizing the primary care physician’s value by imbuing him/her with the authority to serve as the patient’s advocate throughout the continuum of care, and then paying him/her to do that would accomplish several important objectives. It would:

  1. Reduce unnecessary specialty care services.
  2. Reduce the income disparity between primary and specialty care.
  3. Re-incentivize young physicians to enter primary care.

One last observation. The background reading for this post reminded me of Jared Diamond’s great, cautionary book, Collapse. Diamond describes society after society in which leaders knowingly made decisions that undermined their survival. But they couldn’t course correct because the decision-makers were benefiting from the current circumstances. I wonder whether we’ll be able to avoid that fate.

Finally, deep thanks to my friend and colleague Roy Poses MD at Health Care Renewal, who has written about these issues as well, and who brought them to my attention.

Recommended Resources

Bodenheimer, T. et al., “The Primary Care-Specialty Income Gap – Why It Matters,” Annals of Internal Medicine, June 2007; 146: 896.

Goodson, J., Unintended Consequences of Resource-based Relative Value Scale Reimbursement, JAMA, November 21, 2007; 298: 2308 – 2310.

Maxwell S, Zuckerman S, Berenson RA. Use of physicians’ services under Medicare’s resource-based payment system. N Engl J Med 2007; 356: 1853-1861.

Newhouse JP. Medicare spending on physicians – no easy fix in sight. N Engl J Med 2007; 356: 1883-1884.

Poses, R. A (Well Deserved) Rant about the RUC, Health Care Renewal, 11/27/07.

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About Brian Klepper

Brian Klepper is a health care analyst, commentator and a Principal in Worksite Health Advisors.
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5 Responses to Bad Medicine: How The AMA Undermined Primary Care in America

  1. Cordelia says:

    To take this line of thought a step further, is it a direct implication of legislation by Congress that CMS accepts ~90% of the recommendations of the RUC, or are there offices or individuals with the discretion to alter relative payment rates based on these recommendations?

  2. It’s a great question, Cordelia. Because CMS leadership come and go with Administrations, I assume that its the CMS career folks who have the discretion, although they’re undoubtedly the object of pressure from Congress. There are people in DC who can undoubtedly shed some light on this.

    But one thing is certain. The current system has brought American health care to its knees, and we clearly need a new structure. Prying the specialists and the drug/device firms that support them away from the dominant position won’t be easy, though.

  3. Cordelia says:

    Since I became aware of the importance of the RUC recommended rates ( a couple of years) I have heard that private insurers generally follow the structure of the RBRVS in setting relative payment rates for physician services (usually with some multiple?). With the increasingly acute shortage of primary care physicians, I would think there would be a compelling case for private insurers to increase the relative rates of payment for primary care – but my understanding is that they mostly do not. Is this roughly correct? If so, why don’t private insurers respond to shortages?

  4. I agree, and have asked that question myself. (See http://www.thehealthcareblog.com/the_health_care_blog/2008/10/the-elephant-in.html).

    By not going outside the Medicare rules on this, the health plans can be seen as complicit. Of course, beginning around 1998, the health plans WANTED health care to cost more, because they made a percentage of total expenditures. But they’re not there now, and it would stand to reason that they’d be more assertive in changing the reimbursement methodology to incent greater empowerment of primary care.

  5. American Medical Association says:

    The AMA is proud to convene the RUC, an expert panel of volunteer physicians who make recommendations on how to value the work and resources involved in patient care. The RUC makes recommendations, and CMS makes payment decisions. Because the RUC applies its considerable clinical expertise to the issues and follows Medicare payment policy and guidelines, the vast majority of its recommendations are accepted by CMS. The reality is that no other group exists to undertake this difficult work, and when the government was unable to review overvalued services the RUC added this to its workload – at no cost to taxpayers.

    The RUC often recommends increases for primary care services. The fact is that RUC recommendations have resulted in $4 billion in annual increased payments for office and hospital visits – the most common services performed by a primary care physician. In fact, the American Association of Family Physicians recently shared with their members information on improvements stemming from the work of the RUC to increase values for primary care services: http://www.aafp.org/online/en/home/publications/news/news-now/practice-management/20101201cptcodesrise.html.

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