The relative value of how physicians are paid needs to change

The Centers for Medicare and Medicaid (CMS) sets the rates all physicians get paid and insurance companies base their rates on the same formula. So who creates the formula? Well, it’s the doctors, silly! Or at least some of the doctors. Here’s how it works.

A 31-member committee formed by the American Medical Association is made up of representatives from the various specialty societies. This Relative Value Update Committee (RUC) meets in private and decides how much value each unit of medical work represents. That unit of work is then assigned a dollar amount and that creates the pay scale.

The catch is that primary care (internal medicine, family medicine and pediatrics) is very poorly represented on the committee. The surgical specialties; anesthesia, radiology and even tiny surgical specialties like urology or ear, nose and throat are equally represented and as a group they get to decide how to value a doctors time and expertise. This is why primary care has been undervalued and underpaid all of these years. Somehow something done with a scope or a tube or a scalpel is considered many times more valuable than thinking and diagnosing and treating.

This RUC has been criticized for years but no other system has been designed to replace it. The value that some specialties like ophthalmology and orthopedics are paid has created situations where doctors are paid the equivalent of 12 hours of procedures in a single day. The panel estimated 75 minutes for each colonoscopy and, according to the Washington Post, one doctor was able to bill for 26 hours of paid work in a single day. A colonoscopy rarely takes more than 20-30 minutes and most of the work is done by the nurse setting up the procedure.

I have been writing about the fact that fewer and fewer of our brightest physicians are choosing primary care specialties. This decline has persisted for years and now we have truly reached a crisis point, especially when Obamacare goes into effect and more people will be seeking care.

It is no wonder that young graduating doctors with $150,000 in school debt would pick a specialty like anesthesia where they could work 8 hours, never be on call, have no practice expense (except a billing and accounting service) and make 4-5 times what an internist makes. Thanks to the RUC for the lopsided value they place on medical care.

Medicare spending is capped. There is no way to raise the rates for needed physicians (like primary care) unless the value of other services is ratcheted down. The current RUC is seriously flawed and the time and relative work estimates some of the specialties have come up with is just wrong. Furthermore, this payment method shows no consideration for quality outcomes or value to society.

The Unites States is the only country where these wide ranges of specialist physician pay is seen. The relative value, as it is done now, needs to change.

Toni Brayer is an internal medicine physician who blogs at EverythingHealth.

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  • Suzi Q 38

    I agree, but what are physicians like you doing to change it?
    You have to make sure that you have proper representation on the board.
    Obviously, physician salaries (with the exception of primary care) are huge. These huge salaries are not sustainable over the long term.

    Yes, there are CEO’s who make a milion a year (not sure about this),
    but there is only one at each hospital. There are many more doctors to pay for in comparison.

    The idea would be to get higher pay for PCP’s and take it from the salaries awarded to each specialist. If they got paid a little less, and your specialty got paid more, everything would balance….in a “perfect world.”

    The deal is that no one wants to “let go” of a little money.
    Not the CEO’s, who I admit make a lot, but are few, to the numerous specialists, who are your colleagues.

    They don’t care that you are getting paid so little. They are getting THEIR money.

    Maybe you should get funding to support more members of your specialty on that board, if it is so important to so many of you.

    Get people who are not only physicians, but good speakers and very persuasive. “Bull dogs” instead of “poodles.” Carefully pick the members.

    Surgery is surgery. Anesthesia is anesthesia. For some reason general practice and pediatrics got to the bottom of the list. I am not a physician, so I am not sure why.

    • guest

      It does not seem like remedies are on the way. There was a recent group of Georgia docs that lost the fight suing i believe Medicare regarding RUC and lost. You probably know about that from here. Then there were several really good articles in the Wasington post and others exposing this which seemed like might have helped in the fight.

      Immediately after the RUC articles broke in the WashPost, WashMonthly and Time, Modern Healthcare reported that the AMA deployed an army of lobbyists to defend their policy position with Congress. So long as Congress is susceptible to being bought off, the specialists, supported by the industry, will win.

      This is, I’m afraid, just the character of the US at this point in history, and we can see it in all kinds of ways.

      I posted a lot of complaints with the last RUC article and the AMA found it and corresponded within an hour with their position. A lot of dissenters replied but there was no further response. Not sure what else can be done.

      • Suzi Q 38

        The Georgia doctors were “trailblazers.”
        They needed all of your support, and NOT just in spirit.
        They needed money and lawyers, plus a political plan.

        I don’t think enough of the PCP’s in this country gave them a second thought.

        People and physicians like them are so few.

        The majority, sit home and bemoan the whole situation, yet when a group like that gets brave, few stand behind them.

        Hopefully they will be encouraged to fight again, or a new group will take their place until the powers that be take notice and listen.

        • guest

          I think it would require as many or more lobbyists than the AMA has.

          • Suzi Q 38

            Yes, but are you saying that getting more lobbyists is impossible?

          • guest

            Well i think your answer is here Miss Suzi Q. Right below your comment or my comment is–who else but the AMA. Can you imagine? Every thread that is about the RUC and RVU or whatever those 3 initials are, the AMA has workers that pop in and write, usually within an hour. So I guess the help is slower this go around waiting a whopping 5 hours to respond with it’s usual party line responses.

            So you ask a good question whether we can have lobbyists. The problem is the organizations that “support”( I use this term loosely) doctors, are working against PCP’s and I would vouch to say medicine as a whole. YOu have probably read extensively here about the complaints physicians have about the AMA and AAFP. But of course they have loads and loads of money and power to hire lobbyists to go to Congress. Not to mention workers that insert comments on KevinMD.
            It is not so easy when you are a working doc to have the energy and time to form such an organization that can compete against the AMA that has the best bullshit artists around lobbying against you. But maybe it is not impossible. I don’t know. Does not seem very probable. Would I join if it existed? probably.

  • guest

    yes in a sane world is so true. I am not sure i understand that piece of the political puzzle here. What benefit is there for them to whore themselves out? Are they paid off? what is going on there? The last time there was a discussion I believe they inserted their BS into the post along with the AMA.

  • morebuzzkills

    GREAT point raised in this article about why medical students choose lucrative specialties. $150,000 is actually on the low for medical student debt in this day in age. Let me admonish the readers that lowering physician pay is not the solution to anything. Depending on who you believe, physician pay represents between 8-20% of total health care spending. Let’s be liberal with this estimate and just assume it represents 20%. Of this total, close to half is absorbed by the physicians’ practice
    expenses, including malpractice premiums, but excluding the amortization
    of college and medical-school debt. This makes the physicians’ collective take-home pay only about 10
    percent of total national health spending. Imagine cutting physician pay by 20 percent! Doesn’t that sound great? Well, not so fast…let’s think about that mathematically for a moment. A 20% reduction in physician pay would reduce total national
    health spending by a very underwhelming 2%. What’s the return? A wholly demoralized workforce. With that said, there are certain specialties that do have inflated salaries, but they are the exceptions rather than the rule. Folks enjoy attacking physicians because they are easy and visible targets…but let’s go after the real bad guys. Insurance filing/advertising/inefficiencies consume a much larger slice of the pie. Redundancy also eats up unnecessary dollars due to lack of a cohesive and functional way to share medical data. The talking heads champion “meaningful use” but it is all fluff. Meaningful use just means that we pay compliance people unnecessary money to make sure that the right boxes are checked and the right verbiage is used in clinic notes. The notes that your doctor works so hard to write when you leave contain about 90% of filler crap and are likely not ever read by the next physician you see. Please America, go after the real problems. I urge the readers of this blog to not lose sight of the fact that medical training is a gargantuan liability on the personal balance sheet. In addition to an enormous upfront cost, medical school/residency/fellowship means sacrificing the most important income earning years in terms of realizing the benefits of compound interest. The latter point is perhaps the most important and is often only realized after it is too late to do anything to try to regain lost ground. Don’t get me wrong, it is absolutely an honor to have the opportunity to serve and care for patients. However, physicians sacrifice an incredible amount to do this…and many times these sacrifices are not immediately evident (especially to medical students and the general public).

    • Michael Rack

      good point. Payments to physicians represents approximately 20% of healthcare spending, with approximately half of that 20% going towards overhead (including paying office staff, electricity, phone, etc). Therefore physician income/salary represents approximately 10% of healthcare spending. Since much of overhead is fixed, a 20% reduction in payment for physician services would lead to almost a 40% reduction in physician salary/income

  • Anthony D

    “we have truly reached a crisis point, especially when Obamacare goes into effect and more people will be seeking care.”

    You know things are going to be a disaster when congress passes a bill, knowing it is rife with problems, but says we’ll fix it later. Having NO Obamacare is better than this mess. What a disaster.

  • Suzi Q 38

    I agree about your medical school loans, but not all medical students have loans.
    Some survive and are lucky with family assistance.

    Also, you are not the only group of college students facing a “mountain” of student loans.
    At least you have a career/job that can pay the loan off.
    If you pay $50K a year and live as frugally as you did before you got your first physician job, you can have these loans paid off in 4-5 years. Just pay as much as you can, rather than just the minimum.

    There are lawyers, professors, teachers, engineers, psychologists, nurses, business MBA’s and another professionals who may owe $150K to $200K for undergrad and a master’s program.

    It is rare that most would make the salary a specialist does.
    I know two lawyers who are unemployed right now, and still have to pay off their loans.

    I don’t disagree that your loan situation is daunting, but other people may have worse situations.

    “……Who would pay $150,000-200,000 for medical school if they weren’t going to be paid handsomely afterward?……”

    Many of us who AREN’T specialists (including the PCP’s) did.
    The fact remains is that the disparity is salaries is so unfair.
    Specialists should be paid a little less, and the PCP’s should be paid more.

    Be sanguine with your decision to be a physician, and realize that others have it just as bad as you do with the SL situation…with far fewer resources to pay the loans off.

  • Tiredoc

    It seems odd to even come up with a “relative value” based on the amount of time that it takes to do a procedure. The only model I can think of is the labor charging guide at an auto shop. People aren’t cars.

    It’s about the most simple exercise in economics possible. You pay more for what you want more of. You tax what you want less of. The value shouldn’t be based on how much labor is put in, but on how much value the service provides to the system.

    Some systems are just too inane to fix. This is one of them. The old system worked better. Just dump RVUs.

  • American_Medical_Association

    Medicare’s payment formula was not created by doctors or an AMA committee. It was created by Harvard University and required by federal law to capture the value of work and resources that go into medical services.

    Gauging the hard work and resources that go along with being a skilled healer should not be the sole jurisdiction of well-intentioned academics and bureaucrats. The AMA-convened relative value update committee ensures that the expert perspectives of physicians are heard by Medicare’s decision-makers.

    The update committee applies an evidence-based approach that produces fair and objective recommendations. As Medicare’s ultimate decision maker, the Centers for Medicare and Medicaid Services has a seat at the table during all committee’s discussions, but it is not obligated to accept the committee’s recommendations.

    There are many factors beyond the control of the update committee that contribute to the current income differentials between primary care and specialty medicine. Despite this, there has been strong support for primary care within the update committee. Medicare payments for services often performed by primary care physicians had increased 25% in the past five years due in part to the committee’s recommendations. In the end, more than $6 billion has been redistributed to these primary care services.

    Turning the update committee into an undeserving kicking post for all the ills of the Medicare payment system is “simplistic and misses the mark,” according to Dr. Yul Ejnes, former chair of the ACP’s Board of Regents and a current member of the update committee. His insider’s view posted on KevinMD – http://www.kevinmd.com/blog/2013/08/unfair-ruc-view.html – shows that the work of the update committee is much more nuanced than reported.

    • LeoHolmMD

      “The AMA-convened relative value update committee ensures that the expert perspectives of physicians are heard by Medicare’s decision-makers. ”

      Correct. This is being done in a way that is biased towards specialists and leaves Primary Care poorly represented. That is the authors point.

      And what evidence based approach are you talking about? The same evidence that produces over-diagnosis, over-treatment and loads of unnecessary procedures? It should leave patients wondering “valuable to who?” Is this evidence peer reviewed or even available to anyone to scrutinize?

      Referencing Dr. Ejnes: “Therefore, the RUC’s output is more an assessment of the raw material cost than it is a determination of retail price. It makes no distinctions based on supply and demand, cost-effectiveness, or characteristics of the physician who performs the service.”
      If the raw materials (aka overhead) comparison were true, income would be nearly equalized across specialties. The only consideration would be the cost of education. And again, if this mechanism does not address supply/demand, cost effectiveness or quality: valuable to who?

      I am sure the work of the update committee is more nuanced, but it’s effects are not. The reason it has become a “kicking post” is because it fails to represent those who have to deal with it’s decisions…similar to the AMA, who struggles to keep membership in the double digits.

    • kjindal

      “Medicare payments for services often performed by primary care physicians had increased 25% in the past five years …”
      What kind of nonsense is that? Payments rates for myself & local colleagues have been flat for many years. This is for the E&M codes, which are 99.9% of codes billed by primary care physicians. So what services are YOU talking about???

      • American_Medical_Association

        A close look at the Medicare physician payment schedule shows that payment rates for E/M services have increased every year, while most other medical services have remained stagnant or decreased.

        Here’s one example from the Medicare physician payment schedule:
        2008 RVU for 99213 1.68; National Medicare Payment $59.80
        2013 RVU for 99213 2.14; National Medicare Payment $72.81

        Five consecutive years of annual increases are due in part to the update committee’s recommendations to Medicare’s decision-makers.

        The valuation of the most commonly billed E/M code by primary care physicians, a 99213, has increased by 27%. The national payment amount, factoring in the conversion factor, for 99213 has increased by 22%.

        The gains for primary care are evident in Medicare’s increased spending on office visits:

        2008 $15 billion
        2012 $21 billion

        • LeoHolmMD

          An even closer look will reveal that the work RVU (wRVU) has changed very little for the FM PCP. 0.97 for many years now for a follow up level 3. Since many FM docs are employed, the increases in RVU payments have gone to employers, rather than the physicians, even though the work done continues to increase. Private practice, especial in rural communities continues to tank despite these “increases” that do little to sustain providing basic care to people in small towns across our country. The reality is: primary care continues to get hammered while specialists get their rear ends licked like lollypops by hospitals who profit from high end procedures. The increase in Medicare payments is meaningless when you consider population expansion and the number of people being cared for. Whoever is posting for you continues to demonstrate where the disparities are coming from.

        • guest

          Interesting way to defend yourself. “99213 now pays $72.81.” My hairdresser makes more than that. So does the guy that cleans my carpets.

          • Give me a break

            @guest: 99213 is a office visit that includes 15 minutes spent with a patient. If your hairdresser and carpet guy are gouging you for more than $291 an hour, you may want to do some shopping around.

          • guest

            If you want to work with that kind of volume. My hairdresser doesn’t but I guess could make more that way as well. Many PCP’s don’t. Or else work for a big hospital chain and don’t get nearly that amount of money. If PCP’s were making $291 an hour why would they be on here complaining?

        • kjindal

          firstly, did you downvote my comment? so silly & childish from the AMA (if that was you – I dunno since that is hidden by the site host).
          secondly, medicare reimbursement rates vary considerably by region, right? I work primarily in a nursing home, so use the 99307-309 codes (medicare essentially eliminated the 99310 code by applying a universal audit to those a while back). Those have NOT gone up as far as I can tell.
          And there is no practical way for a small-office PMD to see 4 99213 visits in an hour. The 15 mins face-to-face doesn’t include all the other stuff that goes w/seeing a patient that happens “behind the scenes”.

  • guest

    yes and no crystal ball required.

  • petromccrum

    I am not a medical provider but have been complaining for years about this. Doctors don’t get paid enough-my hairdresser makes more per hour than my primary care doctor and hospitals are gouging patients and NOT providing services.

  • Nick Weiss

    Let me start off by stating that I am an orthopedic
    surgeon. That being said, I agree with you
    completely…PCP pay should be higher. The
    gap should be less. None of us should at
    all be ashamed of what we are making as physicians. We all deserve the pay we are getting and
    then some. We are highly trained, have sacrificed
    much and very few people can do what we have done to get to this point. I do need to say that the continued PCP vs
    specialist battle troubles me. As
    specialists, we too are “working like dogs” and have onerous call schedules. We are not just “cutting and placing tubes”
    but are taking time with our patients and treating them appropriately both
    operatively and non-operatively. Believe it or not, we “think” too. There are many arguments to be made as to why
    specialists make more than a primary care physician (further training in
    years/procedures, competitiveness of gaining further training, etc.) but for
    another time. Right now we have to be
    united. Government, insurance companies
    and hospital systems are running our show….we’ve been asleep at the wheel. Not only are they telling us how the system
    will work, they are dictating our pay and even how we practice medicine
    directly. We must do everything in our
    power to take back medicine.

    • guest

      i am a psychiatrist and am so delighted to hear that from you. The problem seems to be, in part that the organizations “supporting us”(and I use that term loosely) are not. Each thread on this topic, the AMA inserts it’s rhetoric. If you have the inclination, the AMA has written multiple posts below that seem very defensive to me. But decide for yourself.

      A lot has been exposed recently about the RUC that actually were reported in multiple major newspapers. However, immediately after the RUC articles broke in the WashPost, WashMonthly and Time, Modern Healthcare reported that the AMA deployed an army of lobbyists to defend their policy position with Congress. So long as Congress is susceptible to being bought off, it seems to be a losing battle. This is, I’m afraid, just the character of the US at this point in history, and my personal belief is that it can be see it in all kinds of ways.

      I am truly at a loss as to how to solve a problem where the organizations “supporting” physicians do not seem to have their best interest at heart. Most physicians here,I think believe the AMA are working closely with industry and government but are not protecting doctors and medicine itself.

      • LeoHolmMD

        The only way to correct this is to discredit the AMA entirely: either through lack of membership (already happening), or addressing it directly by exposure. It is beyond time to develop an organization that actually represents patient and physician interests. The AMA is exquisitely sensitive to criticism of the RUC. You can appreciate why.

        • guest

          So well put Leo, in both of your posts. One of the problems though, is the AMA really can run on its own. Seriously I don’t think they need our dues or membership. They make money from Medicare, medical device industry, Big pharma etc. They have tons of money they generate and great lobbyists.

          As far as exposing them, I guess it is starting to happen. But with great lobbyists, they just deploy an army of them to Congress to defend their policy position. Look at this blog even with tons of AMA propaganda.

          I fully agree we need to develop an organization that actually represents physicians and pt interest. But how?

          Of course ironically what they LACK is offering health insurance for physicians.

      • Nick Weiss

        Great points. Perhaps we should have a “sunshine act” enforced for our politicians as well. Funny (and sad) that they think we are a crooked as they are and that somehow a sandwich is going to sway me to jeopardize my reputation and patient’s well being. I too am scratching my head as to what we can do. Too much shenanigans going on. My hope is we can ferret that out and make some headway eventually.

        • guest

          Physicians in general are very diligent hard working types that have had it drilled into us to be good and ethical. So here’s the recent irony of it. It is drilled into us to follow HIPAA guidelines lest a pt should overhear any clinical data of anothers in ones office.

          But HIPAA allows data mining of pt medical records much like Facebook. It is de-identified whatever that really means. But HIPAA allows for pt’s medical information to be sold to marketers for tons of money. The oxymoron is pt’s are not the consumers of this technology. They are the ones being sold for a price.

          While we physicians are “protecting” pt information, and can get in all kinds of trouble if we don’t, Big Pharma and other industries are exploiting and marketing the EHR pt medical data. And quite legally ALL under the auspices of HIPAA.

          The AMA represent a tiny percentage of the physician population but are full of brilliant politicians. It’s hard to imagine a more unpatriotic group It’s ALL about them, and the rest of us physicians be damned.

          I so agree with you. But I’m afraid I was never trained in dirty politics.

    • LeoHolmMD

      It’s not about pay. It’s about respect and sustainability. You should make more: You do stuff I can’t do and went to school longer. No argument. It is the disparity in treatment by the exact entities you named that is producing the issue. Medicare runs everything. It is government, and it may as well be hospital systems. And since government took over health insurance…they are government too. And who does government turn to when they decide what value something has: the RUC. I have no quarrel with specialists. The small town doctor who has to take out a loan to sustain his practice likely does not either. But where would you like that person to turn? Specialists are not dangled out in front of large medical systems at bottom feeder rates to enchant populations for more lucrative primary care procedures. See what I am saying?

      • Nick Weiss

        Agree with what you are saying Leo. I think your point can be applied to all physicians in general….these entities do not value any of our contributions to society. PCPs are particularly undervalued. But you know who does value us? Our patients. We should not underestimate the collective power of our patients. Perhaps if we get our message out to our patients via the media we might have a chance. Unfortunately, NYT and others seem to be on more of a physician bashing spree than supportive.

  • guest

    When it comes to the multitude of posts from the AMA here, I think Shakespeare said it best. The lady doth protest too much.

  • Suzi Q 38

    Some of you need to clear your calendars for a day or two and show up in San Diego or wherever to protest and complain. Demand the right representation, or resign.
    IT is hard to do, but may be necessary.

  • guest

    Great article. I’m a specialist by practice but I’m also a patient and a parent. When we devalue the gatekeepers as we have done we end up with the mess of a healthcare system that we have now: fragmented overly interventional care that improves the health of no one. I can do OK without a PCP, but I worry about my kids. Finding a good pediatrician who is competent in my extremely high cost of living area will be challenging. I don’t see that improving.

  • Michael Wasserman

    I couldn’t agree more, and have been blogging about this and sharing my thoughts with my legislators for years! The foxes are guarding the hen house!

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