Supplement: Detailed Critique of Current Payment Methods
Fee-for-Service Payment as Implemented by Medicare Using RBRVS
Since 1992, the Medicare fee schedule has been determined by the Resource-Based Relative Value Scale (RBRVS) (13), updated regularly by the RBRVS Update Committee (RUC) convened by the American Medical Association with representation from multiple specialties in a proprietary process. The RBRVS attempts to rationalize payment by calculating a fee for each procedure, with components based on “Relative Value Units” (RVUs) for work (details below), practice expense, and malpractice liability, plus a geographic adjustment (14) for cost of living. All these components except the malpra ctice RVU have turned out to be problematic.
The RBRVS methods has led to marked overpayment for procedures (5) compared to cognitive services, and the RUC has never effectively corrected (15, 16) this imbalance or accurately updated practices expenses and the Geographic Practice Cost Index (GPCI). Prior to 2015, the RUC was constrained by Congress’s budget neutrality rules and the threat of implementing the Sustainable Growth Rate (SGR) formula, so that increasing primary care pay would have to be taken from specialist pay, while all fees were threatened with drastic reductions by the SGR formula.
Since passage of the Affordable Care Act, correction of fee-for-service has been sidelined by efforts to move away from fee-for-service toward value-based payment and by the replacement of the SGR with the MACRA (17) law and MIPS (18) in 2015. This new law imposes pay-for-performance and pushes doctors to join Alternative Payment Models (19) such as Accountable Care Organizations that can accept insurance risk, along with substantial increases in data reporting required for “value-based” payment. The result has been steady increases in physician time required for documentation, data reporting, and administrative demands.
Work RVU
Criteria for determining the Work RVU include physician time, skill, judgment, stress, and amortization of physician education cost, but many of these are subjective and vulnerable to inter-specialty lobbying on the RUC, which is dominated by specialists. As a result, the Work RVU is skewed toward procedures (5) at the expense of cognitive services that predominate in primary care specialties. Primary care physicians are paid far less than many procedural specialists (20), and often not enough to cover medical school debt, practice startup costs, and leave enough for a reasonable middle-class lifestyle.
The time element in calculating the Work RVU has been based on surveys of a very limited sample of physicians and has not been updated regularly, raising serious questions (15) about its validity.
The Work RVU for cognitive services uses Evaluation/Management coding (21) that has relied on a complex “pay-for-documentation” scheme that rewards over documentation and has only paid for patient visits, leaving time for documentation and care coordination largely uncompensated. In 2021, the Centers for Medicare & Medicaid Services implemented welcome changes to Evaluation/Management coding to allow more use of time-based coding that includes documentation and care coordination time (22), which has started to reduce documentation “bloat.”
Practice Expense RVU
The Practice Expense RVU has also relied on limited physician surveys, an unreliable source of data, and has not been updated nearly often enough (23) to reflect actual practice expenses.
The GPCI (2) uses a very complex mathematical formula, also relies on limited physician
surveys, and has never been updated accurately (24). For example, cost-of-living in Hawaii is among the highest in the country, yet the Hawaii Medicare GPCI is mid-range (25).
The RBRVS is essentially a system for pricing procedures, instead of a system for paying physicians for their time and expertise, as is the case for salaried physicians and for all other highly trained professions. Assigning values to procedures instead of to the expertise of the physician performing the procedure has enabled devaluation of physician training and expertise by insurers and policymakers.
Value-Based Payment
Current health care reforms in the United States, collectively referred to as “value-based” payment, have been founded on the theory that the high cost of U.S. health care is caused by overutilization due to financial incentives inherent in fee-for-service payment. This ignores the fact that U.S. physician visits and hospital days per capita are at the low end of the range of utilization in other advanced countries that cover everyone, often use fee-for-service payment, and spend around half of what the United States spends per capita on health care (26).
Although there are pockets of overutilization driven by fee-for service, most notably in the hospital sector and with some procedural specialists, research finds much more underutilization than overutilization (27, 28) in the United States, due to lack of access and financial and socioeconomic barriers to care, often leading to costly complications and overutilization of emergency rooms and preventable hospitalizations. There has never been any evidence of overutilization of primary care services when paid with fee-for-service (29), yet “value-based” reform efforts have been focused primarily on primary care.
The “value-based” solution to presumed overutilization is to shift insurance risk onto doctors and hospitals in the form of pay-for-performance, capitation, and bundled payments, so that they make more money by providing fewer services and, hopefully, only services that have “value.” Risk adjustment is required when insurance risk is shifted onto either capitated private plans within Medicare and Medicaid or onto doctors and hospitals under “value-based” payment reforms. The data demands of pay-for-quality and risk adjustment in turn require a marked increase in detail and complexity of documentation and diagnosis and procedure coding, adding ever more uncompensated physician time spent on documentation and administrative tasks (30).
Unfortunately, capitation and risk-shifting reward skimping on care and avoidance of sicker, more complex, and poorer patients and populations (31) who are likely to need costly care. Proponents of “value-based” payment offer pay-for-quality or outcomes and risk adjustment to counter these perverse incentives, but both quality and risk are far too complex to measure accurately, and the crude measures in place divert physician time and effort to meeting metrics that often do not coincide with patient priorities. Capitation also invites profiteering and gaming of documentation to increase payment.
Crude risk adjustment fails to deter avoidance of difficult patients and gaming of documentation. Capitated doctors soon find the keys to financial success are to maintain a large practice of relatively easy patients who don’t require too much of the doctor’s time, code their patients as intensively as possible to beat risk adjustment formulas, and try to avoid taking on more challenging patients who are likely to need a lot of the doctor’s time or require expensive care.
Administrative simplification is crucial to achieving a more cost-effective health care system, but risk shifting adds administrative complexity and cost. Due to their high administrative cost and incentives to exacerbate disparities in care, we do not find “value-based” payment, pay-for-performance, shifting insurance risk onto doctors, or competition among risk- bearing entities such as Accountable Care Organizations (32) and Medicare Advantage plans to be equitable or cost-effective strategies. We recommend eliminating all such provisions from payment for health care services under a single-payer system. Quality improvement efforts should be continued but founded on the intrinsic motivation (7) of health professionals to improve patient care, not financial incentives and disincentives.
What happens when primary care physician pay is inadequate for the training, expertise, and practice costs required?
Third-party payers generally control physician fees unilaterally.
With fee-for-service based on the RBRVS, when fee increases fail to keep up with education debt, rising cost of living, and rising practice expenses, including uncompensated administrative burdens imposed by payers, then the only way primary care physicians can maintain their incomes is by increasing volume of patients seen. Since their time is limited, this means reducing time spent with each patient and limiting the number of problems addressed in a visit. Both primary care physicians and patients complain about this. Primary care physicians we know refer to this as the “fee-for-service treadmill,” and it accounts for the willingness of many of them to consider capitation, in which payment is not directly tied to the number of visits.
With capitation, physicians get a set amount of money per attributed patient per month. If the capitation rate is inadequate and does not keep up with rising practice costs, administrative burdens, and cost-of living, the only way physicians can maintain their incomes is to increase their panel size, thereby limiting how much time they can spend with each patient. The Hawaii experience with primary care capitation (33) found substantial reduction in primary care visits (which saves no money under capitation), small increases in referrals to urgent care or the emergency room and to specialists, and no cost savings overall. Physicians may have more freedom to prioritize, spending more time with patients who really need it and less time with stable patients, but overall the effect is to push primary care physicians to take on more patients than they can handle and still provide high-quality care. Now they are stuck in the “capitated payment treadmill” and the incentive to avoid caring for sicker, poorer, and more complex patients is amplified.
In both cases, primary care physicians are stripped of professional autonomy and control over their time, contributing to widespread demoralization and “burnout.”
ADDITIONAL REFERENCES FOR SUPPLEMENT
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17. MACRA. CMS.gov.
18. MIPS Participation Options Overview. CMS.gov.
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21. Evaluation and Management Services Guide. CMS Medical Learning Network booklet MLN006764 February 2021.
22. Proposed Policy, Payment, and Quality Provisions Changes to the Medicare Physician Fee Schedule for Calendar Year 2021. CMS.gov. August 3, 2020.
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24. Medicare: Geographic Areas Used to Adjust Physician Payments for Variation in Practice Costs Should Be Revised. GAO Report GAO-07-466: Jun 29, 2007.
25. 2022 GPCI Value Table - Understanding the 2022 Value Table. eMDs. 2022.
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29. Sullivan K. Underuse is Rampant, But Overuse is All We Talk About. The Health Care Blog. Oct. 6, 2016.
30. Gaffney A, Woolhandler S, Cai C, et al. Medical Documentation Burden Among US Office- Based Physicians in 2019: A National Study. JAMA Intern Med. 2022;182(5):564–566. doi:10.1001/jamainternmed.2022.0372
31. Rubin R. How Value-Based Medicare Payments Exacerbate Health Care Disparities. JAMA.2018;319(10):968–970. doi:10.1001/jama.2018.0240
32. Kahn, J.G., Sullivan, K.R. Promise vs. Practice: The Actual Financial Performance of Accountable Care Organizations. J Gen Intern Med 37, 680–681 (2022). doi.10.1007/s11606-021-07089-6
33. Navathe AS, Emanuel EJ, Bond A, et al. Association Between the Implementation of a Population-Based Primary Care Payment System and Achievement on Quality Measures in Hawaii. JAMA. 2019;322(1):57–68. doi:10.1001/jama.2019.8113