Physician payment -Congressional SGR (Sustainable Growth Rate) Formula and AMA's RUC (Relative Value Update Committee) Stack Deck Against Primary Care

A large, widening gap exists between the incomes of primary care physicians and many specialists. This disparity is important because noncompetitive primary incomes discourage medical school graduates from choosing primary care careers.

The Resource-Based Relative Value Scale, designed to reduce inequality between fees for office visits and payment for procedures, failed to prevent the widening primary care-specialty income gap for 4 reasons: 1) the volume of diagnostic and imaging procedures has increased far more rapidly than the volume of office visits, which benefits specialist who perform these procedures; 2) the process of updating fees every 5 years is heavily influenced the Relative Value Update Committee, which is composed mainly of specialists; 3) Medicare’s SGR formula for controlling physician payments penalizes primary care physicians; and 4) private insurers tend to pay for procedures, but not for office visits, at higher levels than those paid by Medicare. Payment reform is essential to guarantee a healthy primary care base to the U.S. health system.

Thomas Bodenheimer, MD, Robert Berenson MD, and Paul Rudolf, MD, “The Primary Care –Specialty Income Gap: Why It Matters, Annals of Internal Medicine, 2007; 146, 301-306

This year it’s the same old story. Medicare pay cuts for doctors are imminent. Congress will step in at the last minute to block the cuts.

But this year differa because the Obama administration knows health reform is not possible without more primary care doctors and other specialists (general surgeons, ER doctors, and other specialists). Surveys indicate doctors are unhappy and are refusing to accept new Medicare and Medicaid patients in record numbers because of low reimbursement and bureaucratic regulations taking time away from patient care.

The threatened pay cuts are due to the SGR (Sustainable Growth Rate) formula, adopted by Congress in 1997, which has called for physician pay cuts every year for the last ten years, and coding actions of the AMA/Specialty RVS Update Committee, formed in 1991, which favors specialists over primary care doctors.

This year’s SGR says doctors will receive a 21% Medicare pay cut on January 1, 2010. That will not happen, and the Obama administration knows it. The Obama team and Congress, on the other hand, seem reluctant to change the historically unworkable and inflexible SGR, which, if implemented would cause more doctors not to accept new Medicare and Medicaid patients. Congress, on its part, seems reluctant to enlarge the payment pie for doctors by saying it is “budget neutral,“ a euphemistic phrase which means if we enlarge the slice of the pie for primary care, we will have to reduce the slice for specialists.

This thinking has set up a potential food fight between primary care doctors, 300,000strong, and the Alliance for Specialty Medicine, comprised of 11 national medical societies representing 200,000 specialists. The AMA, the American College of Physicians, and the American College of Surgeons say the solution is simply enlarging the pie, but Obama and the Democratic Congress has suddenly become sensitive about the $6.5 trillion it has proposed to save the economy and the staggeringly large and mounting national debt.

Medicare is considering drastic alternatives, such as ending fee-for-service and replacing it with capped payments for bundled hospital-physician procedures, not paying for doctors and hospitals for individual visits and procedures but for episodes of care, rewarding doctors for joining into “accountable” multispecialty groups, refusing to pay for “avoidable” complications, standardizing payment through the country to stamp out “unwarranted practice variations,” and setting up pay for performance and comparative effectiveness programs requiring doctors to install and use “certified” EHRS for “meaningful purposes.” What that means nobody seems to know.

As you consider ramifications of SGR and RUC, remember they’re designed to save a buck. Yes, SGR and RUC may lack flexibility, but they’re fundamentally escapes from hard reality. It takes doctors to give care. That SRG and RUC can’t duck.