More Barbarians at the Gates: Private Equity Puts Primary Care in Play

There are still some idealistic physicians who enter primary care practice as a calling.

The usual informal definition of primary care is care which is continuous, coordinated, comprehensive and compassionate.  The official definition used by the American Academy of Family Physicians (AAFP) is:

Primary care is that care provided by physicians specifically trained for and skilled in comprehensive first contact and continuing care for persons with any undiagnosed sign, symptom, or health concern (the 'undifferentiated' patient) not limited by problem origin (biological, behavioral, or social), organ system, or diagnosis.

Primary care includes health promotion, disease prevention, health maintenance, counseling, patient education, diagnosis and treatment of acute and chronic illnesses in a variety of health care settings (e.g., office, inpatient, critical care, long-term care, home care, day care, etc.). Primary care is performed and managed by a personal physician often collaborating with other health professionals, and utilizing consultation or referral as appropriate.Primary care provides patient advocacy in the health care system to accomplish cost-effective care by coordination of health care services. Primary care promotes effective communication with patients and encourages the role of the patient as a partner in health care.

Private Equity Firms are Buying Out Primary Care Practices

However, an article this week in Modern Healthcare described how primary care in the US is getting a rude surprise.  Apparently, primary care practices are now "in play," (using the terminology for the classic 1987 movie Wall Street, in which Gordon Gekko declared that greed is good).



The argument was that there is

a small but growing number of investments that private-equity firms are making in primary-care physician practices that are ahead of the curve in offering new care delivery and payment models. Investors see an opportunity in being early participants in value-based care, even as the business case is still unclear given mixed results in Medicare's payment and delivery reform demonstrations so far.

But the niche is well-suited for private-equity firms, which feed on uncertainty, said Todd Spaanstra, a partner at Crowe Horwath, an accounting and consulting firm. 

This is not about quality of care, it is about the idea that business people think that "value-based care" and "risk-based contracting" are the current rages, and so there is money to be made investing in entities that seem to fit in with these fashions.

said Slava Girzhel, managing director at KeyBanc Capital Markets. 'There's a lot of discussion about private-equity investing in risk-based models, and I do think we'll see more of that.'

Continuous, coordinated, comprehensive and compassionate care may suffer when the time horizons are not that long, and the owners of the practice are ultimately looking to sell it. 

The long-term opportunity for private-equity firms is the ability to sell these managed-care-savvy medical groups to insurers or health systems, which may pay a premium for the care-coordination expertise and data analytics these practices offer.

Also,

The typical private-equity investment timetable is short—about five years. At that point, the firm would probably look to sell the practice, ideally to an insurance company or a health system, said Dan Hosler, a principal at private-equity firm Sterling Partners.

Furthermore, why private equity may be interested in primary care now, continuing interest will depend on the numbers, not on the benefits to patients

'This is an area where there are winners and losers,' said Dr. Andrei Gonzales, director for value-based reimbursement initiatives at McKesson Health Solutions. 'It's everyone trying to get a slice of the pie that's getting smaller.'

What Happens When the Barbarians are at the Gate

Conspicuously absent from this article was discussion of aspects of the private equity modus operandi which are even more at odds with primary care values than the short time horizon noted above.  We previously warned about the perils of private equity employing physicians (look here.)  The main points were:

-  Private equity is just the new name for leveraged buyout firms (the type of firm described the book, Barbarians at the Gate.)

-  Therefore, when they buy out firms (e.g., the primary care practices discussed above), they use borrowed money.

-  But they leverage in two senses.  Once firms are bought, the private equity owners makes the firms take out further loans, and the money from them may go back to the owners, usually in the form of a special dividend, to pay down the debt originally incurred by the private equity owners.  This leaves the bought out firms heavily in debt, but frees the private equity firm from its original debt.  If the firm is eventually sold, the new buyers take over the debt.  In a worst case scenario, however, the bought out firm goes bankrupt, the private equity's firm stock in it becomes worthless, but the private equity firm need not be responsible for its financial obligations.

-  If the private equity firm desires more money while it still owns the acquired firm, it may sell parts of it off.

-  To make the finances of the acquired firm look more attractive to the next buyer, the private equity firms often undertakes short term cost cutting measures that may involve layoffs, increased workload on remaining workers, etc.

Other dark aspects of private equity are discussed on the Naked Capitalism blog here.

Summary

Primary care physicians thinking about selling their practices to private equity ought to think at least twice before doing so, assuming the physicians are serious about upholding the values of primary care.  Private equity firms are in it for the money, and in the relatively short term.  Private equity firms are unlikely to care about the mission of primary distinct from the ability of primary care practices to make the firms richer.  Therefore, practices owned by private equity may well not provide the best possible care for their patients.  In any case, the physicians working for such practices may be answering to owners who are very explicitly only in it for the money.  They will have become corporate physicians, possibly in the most pessimistic sense of the term.

In general, Dr Arnold Relman reminded us that physicians used to shun the commercial practice of medicine (look here).  Physicians and other health professionals who sign on as full-time employees of large corporate entities have to realize that they are now beholden to managers and executives who may be hostile to their professional values, and who are subject to perverse incentives that support such hostility, including the potential for huge executive compensation.  It is not clear why physicians seem to be willing to sign contracts that underline their new subservience to their corporate overlords, and likely trap them within confidentiality clauses that make blowing the whistle likely to lead to extreme unpleasantness.

Things are likely to be even worse for corporate physicians who are employed by firms owned by private equity. Because of the way private equity operates, primary care practices owned by such firms are liable to be very unstable.  At best, they are liable to be sold to totally new owners in a relatively short time frame, and those owners are likely to be those who will pay the highest price, not necessarily those who will provide the best stewardship for the practices.

Furthermore, primary care practices owned by private equity are likely to end up heavily indebted and subject to strict cost cutting measures that may decrease care quality, decrease access, increase patients' out of pocket costs, and demoralize providers.  Practices acquired by private equity may be broken up and sold as separate pieces.  Should the debt be too high, and the cost cutting not be sufficient, such practices could end up bankrupt and possible completely defunct. 

Do not say I did not warn you.

Physicians need to realize that to fulfill their oaths to put patients first, they have to reduce the influence of rich and powerful organizations with other agendas, like health care corporations, and especially corporations owned by private equity.  The metastasis of private equity into primary care should make us all rethink the notion that direct health care should ever be provided, or that medicine ought to be practiced by for-profit corporations. I submit that we will not be able to have good quality, accessible health care at an affordable price until we restore physicians as independent, ethical health care professionals, and until we restore small, independent, community responsible, non-profit hospitals as the locus for inpatient care.

ADDENDUM (28 April, 2015) - This post was re-published on the Naked Capitalism blog.  

7:24 AM

"We decided in 2005 that no hospital executive could apply to work in this (ambulatory) company. We wanted entrepreneurs who were more open to a different way of providing healthcare services. That has been very, very successful."

--Dan Wolterman, president and CEO of Houston-based Memorial Hermann Healthcare System, Texas' largest not-for-profit health system, from an interview in Modern Healthcare.

6:35 PM

The Answer For Lower Healthcare Costs Is...

...Customer Service.

From the New York Times: Seattle's Iora Primary Care is a new model of primary care, seeking national scale and venture capital funding.  Though the ambition may be outsize, the concepts are not new. Daily team huddles. Health coaches. Taking satisfaction surveys seriously and mining results for actionable insights. Employer and payer partnerships. Pay-for-performance not volumes. Loose-tight operations (wellness options are "loose" - i.e. varying from site to

site, while EHR alignment is "tight" and non-negotiable.)

According to the article:

"...small change(s) can make a big difference in a patient’s health — what good is the perfect drug if the patient can’t swallow it? — but the extra-mile work it took to get there can be a challenge for the typical primary care practice in the United States. Harried by busy schedules and paid on a piecework model, many doctors rush from visit to visit, avoid phone calls and emails that don’t generate payments, and often fail to address the complex social issues that hamper people’s health.

"This misalignment of financial incentives is a huge problem for patients, who often can’t get the care they need. But it’s also a big economic problem. The United States has the costliest health care system in the world, even as many patients suffer from preventable illnesses and die younger than their peers in other countries. The system is so full of inefficiencies that Americans are often sicker even as everyone — patients, insurers, the government — ends up spending more money on care.

"Iora thinks it may be able to solve both problems and make money doing so. Its business model is meant to keep patients...out of the hospital by improving service while earning a dividend on the expensive care it was able to avoid."

Still, despite the intuitive appeal and some preliminary research, hard data on results are scant:

"Iora has little published research on the cost savings it has achieved for its partners. The company’s small size makes it hard to produce data with statistical significance. Asked about current evidence of the model’s success, the company provided numbers about one of its sites, where researchers have compared Iora patients with similar patients elsewhere: Total spending was down 12 percent, with hospitalizations down 37 percent, compared with the control group. That may have been a practice with healthy patients, like Dartmouth, or one of the higher-risk patient groups; an Iora spokeswoman said she could not say which practice it was because of a confidentiality agreement with the sponsor.

"Many of the basic elements of the Iora primary care approach — longer hours, more support staff and additional per patient funding — have been tried in other settings, especially in so-called patient-centered medical homes. So far, the results for those types of practices have not been promising. Few have shown real reductions in spending or in the frequency of patients entering hospitals.

Many healthcare organizations are chasing the same vision, betting that all the "We Love Customers" talk will finally start to put some results on the bottom line.  As a healthcare strategist AND an occasional patient, let's hope they're right and the data begin to show it.

1:55 PM

Wal-Mart Wants To Be Your Doctor

And your manager of chronic diseases. And your pharmacist. And maybe your health coach. They could even play in your ACO sandbox.

In response to the article, Wal-Mart says they’re NOT, repeat NOT “… building a national, integrated low-cost primary health care platform..." OK, got it.  Not.

Unless, of course, they are.

It’s hard to deny their interest when a few scant weeks ago the retailer sent out a request for partners to help it "dramatically ... lower the cost of healthcare ... by becoming the largest provider of primary healthcare services in the nation."

It's no surprise that hospitals and physicians face stiff competition from unexpected directions.  These deep-pocketed newcomers care not a fig for our outdated business models, our glacial decision-making and our ability to pervert most innovations that might disrupt the status quo.

[Read more from NPR blogs...]

4:34 PM

Harvard Cut Money for Primary Care "Step-Child"

This story, about cuts in the funding for Harvard Medical School's minimal program in primary care, has received little attention in the US. I was alerted to an article about it in the Harvard Crimson by a news article in the British Medical Journal that was picked up by Medscape.

Here are the main points, from the Crimson article,

Harvard Medical School has suspended funding for its Primary Care Division as part of a broader departmental restructuring effort, prompting students and faculty to circulate a petition calling on HMS Dean Jeffrey S. Flier to reaffirm the School's commitment to primary care education.

According to Nancy J. Tarbell, dean for academic and clinical affairs at HMS, the School had provided roughly $200,000 in funding each year to the Division. She said that the Division, which has not been disbanded but whose structure and administration is being reviewed, will remain affiliated with HMS. The Division has always been funded exclusively by the Medical School, according to HMS spokesman David J. Cameron.

'The reorganization of this division is really a narrow administrative issue,' said HMS Dean of Medical Education Jules L. Dienstag. 'It has nothing to do with the commitment of HMS to primary care, which is unchanged, undiluted, and undiminished.'

Nevertheless, as of Thursday afternoon, over 450 individuals had signed the online petition, including students, residents, faculty, and physicians from HMS and its affiliated hospitals. The petition calls for the School's administration to present a detailed plan of action for expanding institutional support despite the budget cut, expand loan forgiveness initiatives that financially enable students to pursue primary care specialties, support efforts to strengthen primary care in a reformed national health care system, and solicit and implement proposals from the HMS community to improve primary care education.

The Division was previously part of the HMS-HPHC jointly administered Department of Ambulatory Care and Prevention (DACP), which Tarbell said was recently restructured and renamed as the Department of Population Medicine and placed solely under HPHC's administrative purview in order to better reflect its core research and teaching activities.

Tarbell, who seemed unclear about what actual services were provided by the Division, said that the HMS administration is conducting a 'comprehensive review' of the its programs and that the Division has historically been 'relatively small.'

'When you look at [HMS's primary care initiatives] as a whole, at the big picture, you can't make the argument that funding has decreased for primary care training at HMS,' Tarbell said, adding that the school is expanding its funding this year for a required third-year medical clerkship from $600,000 to $800,000.

But despite administrators' reassurances that primary care education remains a top priority at the Medical School, some students and faculty maintain that the cut sends a negative message about the School's priorities, which they say have traditionally centered on specialty medicine and research. And the petition expressed concern about the future of outreach activities previously coordinated by the Division, including a Primary Care Mentorship Program, if funding or a Divisional home were to be eliminated.

'Primary care, from the perspective of the Medical School, was sort of a stepchild [in the past], and not much was done to provide students with information about primary care careers or to connect them with role models in primary care,' said Susan Edgman-Levitan, executive director at The John D. Stoeckle Center for Primary Care Innovation.

'Harvard's goal has always been to create leaders in medicine, with regards to basic science and new developing fields. Primary care has never really been a major emphasis, although I think on a global basis, Harvard has put a major emphasis on reaching out to the rest of the world,' said Martin P. Solomon, an assistant clinical professor of medicine at the Brigham. 'People like Jim Kim and Paul Farmer are all very important and have had an enormous impact on primary care worldwide, but in our own backyard, Harvard has had very little impact. [Primary care] is not ... glamorous....'

Indicating where the medical school's priorities lie, during the month in which the cuts were announced, Dean Flier took the time to open, and thereby endorse the meeting of ACRE (the Association of Clinical Researchers and Educators). The grandiosely named group promotes unrestricted financial relationships among medical academics and health care corporations, and dismisses those concerned with the effects of these relationships (see our posts here and here).

It is true that the cuts in primary care occurred at a time of general belt-tightening, due to the sudden decline in the value of Harvard University's endowment. However, as reported in a muck-raking article in Vanity Fair by Nina Munk, even the reduced endowment is still the largest of any university in the US.

Furthermore, primary care generated relatively small costs to the university. However, as reported by Vanity Fair, the current financial crisis was generated on the University's tremendous building binge during the years the endowment seemed like it would grow forever:

... the university is facing the onerous financial consequences of over-building. Consider this: Over the 20-year period from 1980 to 2000, Harvard University added nearly 3.2 million square feet of new space to its campus. But that’s nothing compared with the extravagance that followed. So far this decade, from 2000 through 2008, Harvard has added another 6.2 million square feet of new space, roughly equal to the total number of square feet occupied by the Pentagon. All across campus, one after another, new academic buildings have shot up. The price of these optimistic new projects: a breathtaking $4.3 billion.

The University also rewarded the managers of the endowment with pay sufficient to make them very rich.

By the early 2000s, Harvard’s top moneymen were making as much as $30 million to $40 million a year. Finally, in 2003, seven members of Harvard’s class of 1969 wrote a strong letter of protest to the university’s president, Larry Summers. They spoke out loudly, publicly, informing any member of the media who would listen that compensation at Harvard Management Company was 'obscene.'

At other American universities, where investing money for the institution is regarded as a kind of public service, Harvard’s swagger raised deep suspicion. 'Harvard became a bunch of mercenaries,' the chief investment officer of another big private university told me.

Most of these managers decamped, taking the money with them, before the endowment value crashed.

By 2005, Jack Meyer had had enough. After 15 years at Harvard Management Company, frustrated by the circular fights about compensation, and sick of justifying himself to Summers and Rubin, he walked out and started his own giant hedge fund. Shamelessly, he took many of Harvard Management Company’s best people with him, about 30 portfolio managers and traders, along with the chief risk officer, chief operating officer, and chief technology officer. Harvard’s trading floor was decimated.

No one in the current or past Harvard leadership has yet been held accountable for the overspending that seemed predicated on the absurd (at least in retrospect) assumption that the endowment would continue to grow indefinitely.

At some point in the last five years, the men and women who run Harvard convinced themselves that the endowment would grow at double-digit rates forever. If Harvard were a publicly traded company, those people would have been fired by now.

Because of the case of the Harvard endowment, the US Internal Revenue service is reportedly investigating how university endowments were run (e.g., see Reuters).

But meanwhile, primary care, already a step-child, was cut.

The case of primary care at Harvard shows how the leadership of academia, and academic medicine in particular, has become entranced by the glamorous, the glitzy, the high-tech, and the prospects of wealth to be made by their pursuit, while neglecting the core academic and health care missions that are the reasons for the existence of universities and medical schools.

No wonder US health care is in a crisis. Those who want meaningful health care reform should find a way to push academic medicine to uphold its mission rather than enrich and glamorize its leaders, and to allow health care professionals to reaffirm their professionalism (regardless of past interpretations of US anti-trust law to the contrary).

ADDENDUM (5 August, 2009) - see more comments on Harvard's failed governance here on the ACTA Blog.

8:27 AM

A Window on the Unworkable Settings in Which Physicians Practice

The Annals of Internal Medicine just published an important problem that helps explain why our health care crisis is so intractable. (Linzer M, Manwell LB, Williams ES, Bobula JA, Brown RL, Varkey AB et al. Working conditions in primary care: physician reactions and care quality. Ann Intern Med 2009; 151: 28-36. Link here.)

The article arose from the MEMO (Minimizing Error, Maximizing Outcome) study. The study included an initial cross-sectional survey and then longitudinal follow-up of 422 physicians, roughly equal numbers of family practitioners and general internists, in 119 different ambulatory settings in New York City, NY, Chicago, IL, Milwaukee, WI, Madison WI, and smaller towns in WI. The surveys asked physicians about their work-flow and time pressure, the pace of their practice (from calm to chaotic), their ability to control their own work activities, and five aspects of organizational culture (emphasis on quality, emphasis on information and communication, trust, cohesiveness, and alignment of values between physicians and leaders.)

The results showed how bad the practice environment in primary care/ generalist practice has become. Some important points were:

- More than half of the physicians (53.1%) said they needed more time to do physical examinations, and nearly half (47.6%) for follow-up visits.
- Almost half (48.1%) described the pace of their offices as chaotic.
- Substantial majorities of physicians thought their workplaces' organizational cultures were deficient, if not hostile.
- Only 23.7% thought there was a high emphasis on quality.
- Only 28.2% thought there was a high emphasis on communication and information.
- Only 30.6% thought there was a great amount of trust.
- Only 33.9% thought there was high work place cohesiveness
- Only 14.2% thought there was great alignment between the values of leadership and physicians.

So, to summarize, many physicians thought they did not have enough time to take care of each individual patient. Most thought their workplaces were nowhere near calm, and nearly half thought they were chaotic. Few thought that their workplaces emphasized quality or communication and information, or inspired trust or cohesiveness. Very few thought that their leaders' values were aligned with their professional values.

This blog has focused on problems with the leadership and governance of health care organizations. We have discussed leadership that is:
–Autocratic, or “imperial”
–Insulated
–Uninformed about health care context, indifferent to health care values
–Incompetent
–Self-interested
–Conflicted
–Corrupt
We have shown that the governance of health care organizations may be:
- Unrepresentative
- Unaccountable
- Opaque
- Not Subject to Ethical Standards
and that such governance facilitates and enables bad leadership.

I submit that the study by Linzer et al suggests how bad leadership can make the settings in which physicians practice unworkable. It may be that some of the time pressure that physicians face is due to the perverse incentives built into their pay schedules (e.g., see this post), and bureaucratic demands of insurers and government agencies. A fast paced and demanding environment is one thing, however, and a chaotic envirnoment is another. What else would explain chaotic work environments other than bad organizational leadership? Futhermore, how could well lead organizations ignore quality, and fail to inspire trust and cohesiveness? How could good leaders inspire four-fifths of the physicians to say the leaders of their organizations did not value what they value?

This article strongly suggests that we cannot fix the health care crisis simply by changing financing mechanisms or money flows. We can only improve health care by improving the leadership and governance of health care organizations, and by rethinking the size and scope of health care organizations. The most crucial part of health care is what goes on between individual health care professionals and individual patients. Yet our system is composed of endlessly enlarging bureaucracies run by self-interested, often clueless, and sometimes dishonest, if not criminal leaders. This must change, unless we want this crisis to get much, much worse.

8:00 AM

The RUCkus Continues: Former Medicare Administrator Calls the "RUC Process" "Incredibly Flawed," and the AMA Chair Says He's "Inaccurate"

We have posted frequently about the role of the RBRVS Update Committee (RUC) in fixing the rates at which Medicare pays physicians. These payment rates have been much more generous for procedures than for "cognitive" services, (that is, services including interviewing and examining patients, making diagnoses, forecasting prognoses, recommending tests or treatments, and counseling patients.) Several authors have suggested that how the RUC fixes payment rates is a major cause of the decline of primary care. (See our previous posts on this here, here, here, here, here, here, and here and important articles by Bodenheimer et al,[1] and Goodson.[2])

An Interview with a former Medicare administrator

Health Affairs just published an interview(3) with Kerry Weems, a recent administrator of the US Center for Medicare and Medicaid Services (CMS) under the Bush administration, who had some remarkable criticism for the RUC.

Iglehart: The last question I wanted to ask you relates to the Specialty Society Relative Value Scale Update Committee [RUC] of the American Medical Association. The AMA formed the RUC to act as an expert panel in developing relative value recommendations to CMS. The twenty-nine-member committee essentially determines, through the relative values it establishes for the codes that form the basis of Medicare payments, how much doctors will earn from providing services to beneficiaries. In recent years the RUC has come under criticism based on the view that its specialty- dominated composition undervalues primary care services and, in some instances, overvalues specialty services. I have two questions, Kerry, regarding the RUC. You have been in government for twenty-six years; have you ever heard of an administration that has seriously questioned the RUC process, and whether CMS ought to somehow internalize it or delegate it to another body?

Weems: I think there is a general consensus that the RUC has contributed to the poor state of primary care in the United States. In many ways the supposition behind the RUC process, behind the whole relative value scale, is incredibly flawed. It's an input measurement system, so it asks, What's the cost of my inputs, and that's how I'm going to price my outputs. It has no relationship to perhaps the market value of what you might buy. So because it's highly procedure based, it's prejudiced against just standard primary care evaluation and management [E&M] visits, because in an E&M visit it's hard to document what happens in the same way that it is when you remove a mole, or perform some other procedure.

So the process itself is flawed. I don't think that we can make a change without a statutory change giving us the ability to do that. But it's something that is drastically needed. You know, it's funny that we talk about better coordination of care and creating the medical home. Well, the place where this can occur is in an E&M visit, which has been highly undervalued by the RUC.

Iglehart: You say that the RUC process is seriously flawed and needs to be overhauled. Was there ever any discussion during the eight years of the George W. Bush administration about doing that?

Weems: There were a number of discussions, but it's a hard nut to crack. Those discussions never ripened to the point where we could say we've got something better.

Iglehart: But you'd anticipate under the Obama administration that those discussions will continue?

Weems: Sure. And, you know, you can even see the early attempts at trying to crack that. Representative [Pete] Stark [D-CA] introduced last year the so-called CHAMP [Children's Health and Medicare Protection Act] bill, in which he proposed to develop a new payment approach that would have provided more money to primary care physicians. He split it up into several different categories. This probably wasn't the right approach, but again, he was trying to work through the problem, trying to provide more money for primary care. His heart was in the right place.

There are a number of important points here.

First, a former CMS administrator charged that the RUC has a substantial role in the decline of primary care in the US. Such charges have been made by well-reputed academics who have analyzed the role of the RUC from the outside. But as we have said before, aspects of what the RUC does are obscure, especially because the proceedings of RUC meetings are not made public. But now someone more directly involved has made the same charges.

Second, a former CMS administrator has called the "RUC process ... incredibly flawed." Even the second Bush administration felt these flaws were sufficient to have "a number of discussions," but found "it's a hard nut to crack." Hence he said that although there is something fundamentally wrong with the "RUC process," the government could not easily fix it.

Yet RUC leadership has repeatedly said that the RUC is merely a private advisory committee which gives recommendations to CMS using its rights to free speech and to petition the government. (Note also that above, Inglehart first said that the RUC was formed as "an expert panel" to make "recommendations." But then he said the committee "determines ... how much doctors will earn.") If the RUC is simply an advisory committee, and CMS did not like the advice the RUC was giving, why couldn't CMS leaders simply ignore the RUC?

Weems' remarks do not make sense if the RUC is merely an outside private group providing advice. But they do make sense if the RUC is acting like a government agency.

So this interview once again raises the question: why does CMS rely exclusively on the RUC to update the RBRVS system, apparently making the RUC de facto a government agency, yet without any accountability to CMS, or the government at large?

A response by the Chair of the Board of the AMA

Within days of this interview, Dr Rebecca Patchin, the Chair of the Board of Trustees of the American Medical Association (AMA), wrote a response to the Weems interview. (Amazingly, the response appeared as a blog post on the Health Affairs Blog.)

First, she implied that a former CMS administrator did not know what he was talking about when it came to the RUC.

In the interview, inaccurate statements were made about the role of the AMA/Specialty Society RVS Update Committee (RUC), which advises CMS regarding the relative levels of reimbursement for different medical procedures performed by physicians.

Now I feel like I am in good company. The leaders of the RUC have charged that I made inaccurate statements about the RUC as well (see post here).

However, Dr Patchin failed to identify any particular statements by Kerry Weems or his interviewer as inaccurate, much less provide any evidence to that effect. Note that while the RUC leaders also charged me with making inaccurate statements, they did not specify any particular statements as inaccurate, much less produce evidence in support of their contentions.

Next, Dr Patchin wrote:

Every time the RUC has been asked to review payments for E&M (evaluation and management) codes, the RUC has sent CMS recommendations that would lead to higher payments.

This may be so, but it ignores an important issue. While the RUC may have made some recommendations to increase payments for cognitive services, it has made many more recommendations to increase payments for procedural services. Furthermore, while payments for individual procedures went up, and the volume of procedures also went up, the global budget for physicians' services, called the Sustainable Growth Rate (SGR), resulted in across the board cuts. Since raises for procedures were larger and more frequent than raises for cognitive services, the net effect was that payments for procedures increased relative to cognitive services.

Even more important, it begs that question: what has the RUC done at times when no one asked it "to review payments for E&M ... codes?" After all, the RUC leadership has argued again and again that it is only a private advisory committee (and see below for another such argument). As such, it should be able to choose how often it deals with payments for cognitive services. It should not have to wait to be asked to review them. So why wasn't the RUC reviewing these payments more frequently?

Then, Dr Patchin reiterated:

To clarify: The RUC makes recommendations to CMS, and then CMS makes its payment decisions.

and again,

Bottom line: the RUC makes recommendations, CMS makes payment decisions.

This, once more, begs the questions. Why didn't the RUC make more recommendations to improve payments for cognitive services? Why doesn't CMS get recommendations about payments to physicians from sources other than the RUC? Why doesn't CMS make the process for setting physicians' payments, and updating and revising the RBRVS system more broad-based and transparent? Why did the administrator of CMS feel unable to change or ignore the "RUC process?"

I don't have the capacity to find out the answers to these questions. Answering them might take some investigative reporting, or even a Congressional investigation. Given that physicians' payments are key incentives driving the health care system, and that payments favoring procedures are likely to be a major cause for rising volume and costs of procedures, which, in turn, is likely to be a major reason our health care system is so expensive, why do we know so little about how these payment rates are set?

References

1. Bodenheimer T, Berenson RA, Rudolf P. The primary care-specialty income gap: why it matters. Ann Intern Med 2007; 146: 301-306. Link here.
2. Goodson JD. Unintended consequences of Resource-Based Relative Value Scale reimbursement. JAMA 2007; 298(19):2308-2310. Link here.
3. Iglehart JK. Doing more with less: a conversation with Kerry Weems. Health Aff 2009; http://content.healthaffairs.org/cgi/content/full/hlthaff.28.4.w688/DC1

7:06 AM