Lawsuit Targets Medicare Pay 'Bias' Toward Specialists

August 10, 2011

August 10, 2011 — Six family physicians in Georgia have accused the Medicare program in a federal lawsuit of illegally relying on a committee of the American Medical Association (AMA), which they hold responsible for paltry reimbursement rates for primary care physicians and inflated ones for proceduralists.

The lawsuit, filed this week in a US district court in Maryland, is the latest sign of a long-standing rift between primary care clinicians and specialists over Medicare compensation. The professional feud has been obscured recently by organized medicine's united efforts to replace the sustainable growth rate formula that Medicare uses to set physician pay.

However, the division along specialty lines over Medicare rates has resurfaced in the form of not only a the new lawsuit but also legislation from Rep. Jim McDermott, MD (D-WA). His bill would require the Centers for Medicare and Medicaid Services (CMS) to hire independent analysts to identify overpaid and underpaid services in addition to listening to the AMA committee's advice.

The AMA body in question is the AMA/Specialty Society Relative Value Scale Update Committee (RUC). It came into existence in 1991 at the same time that the US Congress approved the resource-based relative value system for determining Medicare rates for medical services. Each service, from an office visit to a liver transplantation, is assigned a relative value unit (RVU), which reflects the level of physician work (time, effort, skill, and stress), the physician's practice expenses, and a malpractice-premium element. A complicated formula converts the RVU into a dollar amount.

RUC's job is to recommend annual updates to RVUs — increasing or decreasing their value — based on changes in medical practice and coding. A particular procedure might become less demanding due to technological advances or more demanding, for example. New services emerge, older services disappear.

Designed to cover all specialties, including the primary care specialties, RUC has 29 members, 23 of whom are appointed by national medical societies. Twenty-six of the 29 have voting rights.

Illegal Advisory Committee?

Medicare has long been criticized for underpaying primary care physicians and overpaying specialists, and RUC is being blamed for contributing to the inequity. The case against RUC is laid out in the federal lawsuit, filed by 6 family physicians practicing at the Center for Primary Care in Evans, Georgia.

The suit alleges that:

  • RUC membership is "highly biased" toward procedural specialties and only 2 seats of the 29 total truly represent primary care. The internal medicine seat does not — an oncologist occupies it.

  • RUC recommendations are based on practice data collected by medical societies using a survey method that experts describe as "inherently biased and arbitrary and capricious."

  • The RUC functions for all intents and purposes as a federal advisory committee, yet it does not obey laws requiring such committees to field a balanced membership and conduct public meetings. (For its part, the AMA states on its Web site that RUC is not an advisory committee to CMS but an independent group "exercising its First Amendment right to petition the federal government," with final payment decisions resting with CMS. RUC meetings are not closed, it adds. Government officials can attend them.)

All of these circumstances combine, the suit alleges, to tilt Medicare rates in favor of specialty care and devastate primary care in the process. Medical students choose more lucrative specialty careers, leaving primary care shorthanded. Those who do toil in that field are hard pressed to meet the needs of their current patients, much less millions of new patients in the future as a result of healthcare reform, according to the suit.

The Georgia physicians are asking the federal court, among other things, to force RUC to operate as an official and transparent federal advisory committee and prohibit CMS from implementing its physician fee schedule until that happens.

In an interview with Medscape Medical News, plaintiff Paul Fischer, MD, founder of The Center for Primary Care, described RUC as "bizarre."

Dr. Paul Fischer

"We have doctors who do certain procedures determining what they should be paid for those procedures...but nobody is determining whether those procedures have any value," said Dr. Fischer, who helps operate a Web site called Replace the RUC! A saner approach would give Medicare more value for the money it spends, he said. "Why should the government pay $50,000 for a stent when I can treat you with pills from Walmart that cost $4?"

When asked to comment on the suit, the AMA provided Medscape Medical News with a statement from Barbara Levy, MD, RUC's chairperson:

"The RUC is an independent panel of physicians from all medical specialties, including primary care, who make recommendations to CMS as all citizens have a right to do. These volunteers provide physicians’ voice and expertise to Medicare decision-makers through their recommendations."

Forty-Seven Medical Societies Oppose McDermott Bill

Representative McDermott justifies his RUC bill, called The Medicare Physician Payment Transparency and Assessment Act, with much the same arguments that appear in the federal lawsuit, which he supports.

"For two decades now, this panel has been dominated by specialists who undervalue the essential and complex work of primary care providers and cognitive specialists, while often favoring unnecessarily complex, costly, and excessive specialty medical services," he stated in a press release this spring. "The result of this is clear — there is a shortage of family doctors, patients don’t necessarily get the services they need, and medical costs are increasingly driven higher."

His legislation does not eliminate the RUC but rather requires CMS to gather additional recommendations from independent analysts about adjusting Medicare rates up or down, based on their own survey data, which would be public.

Two medical societies representing primary care physicians — the American Academy of Family Physicians and the Society of General Internal Medicine — have endorsed the legislation, whereas a consortium of 47 societies, mostly in the specialty realm, have lined up against it. This opposition group includes the American College of Surgeons, the American College of Cardiology, the American College of Obstetricians and Gynecologists, the American College of Radiology, and the American Osteopathic Association.

Missing from the list is the giant American College of Physicians (ACP), representing internists. An ACP spokesperson told Medscape Medical News that the group has urged the US Department of Health and Human Services to consider creating an expert panel to supplement RUC.

In a letter to House Speaker John Boehner (R-OH) earlier this year, the 47 medical societies against the McDermott bill said a second panel of payment experts would duplicate RUC's work and "add yet another bureaucratic layer to an already complicated process." Previous CMS attempts to bring outside contractors into the update process, the groups said, proved unsuccessful.

In addition, the medical societies wrote, RUC has consistently supported "our esteemed primary care colleagues" by recommending significant rate increases for the kind of services they perform, particularly evaluation and management. The societies credit RUC with the lion's share of a 22.5% increase in Medicare payments to primary care between 2006 and 2011, a time when other physicians were seeing many of their rates cut.

The AMA also cites RUC recommendations to boost primary care pay. Committee members, it asserts, understand the work of these physicians.

Rep. McDermott cites another statistic, however — since RUC's debut, the income gap between primary care physicians and their specialist colleagues has widened from 61% to 89%.

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