Researchers: Time to revise the fee schedule for doctors

Two health policy researchers analyze the complexity of the current Medicare Physician Fee Schedule and recommend that the Centers for Medicare and Medicaid Services (CMS) fundamentally revise the current Physician Fee Schedule and move away from the current model to a hybrid model that also includes population-based payments. In the July issue of Health matters Under the headline “The Road to Greater Value Cannot Be Paved with a Flawed Medicare Physician Fee Schedule,” Robert A. Berenson and Kevin J. Hayes explain that “value-based payments and the fee schedule should be viewed as complementary, not separate silos.”

And the authors of the article explain: “First, the Centers for Medicare and Medicaid Services should correct the mispriced performance and implement a hybrid payment for primary care that combines performance-based payment with population-based payment. Second, Congress should change the 35-year-old statutory basis for setting Medicare fees to allow CMS to explicitly consider policy priorities, such as staffing shortages, when adjusting fee levels.” Robert A. Berenson is an Institute Fellow at the Urban Institute (Washington, DC).

In the first part of their article, Berenson and Hayes trace the evolution of Medicare physician reimbursement and the creation of the physician fee schedule in 1992. “Initially,” they write, “the fee schedule promoted the desired shift in payments from treatment and imaging services to primary care and other specialties where most work involves patient visits, while also addressing the goals of beneficiary access and geographic payment equity. After initial progress, however, evidence mounted that inadequate updating of relative value units (RVUs) led to payment distortions that favored treatment at the expense of physician and hospital visits.”

Therefore, the authors say, a new path must be created. “The National Academies of Sciences, Engineering, and Medicine have developed the idea of ​​a ‘hybrid’ payment model consisting of a mix of fee-for-service and population-based payment, which is intended for adoption in the Medicare Physician Fee Schedule,” they write. “In particular, a composite population-based payment is appropriate to pay for ongoing patient-practice communications, which now include not only phone and email, but also patient portals and text messaging, as well as telehealth services.”

In particular, they point out that “at the time of its enactment more than 30 years ago, the Medicare Physician Fee Schedule represented a welcome improvement over the existing fee-based reimbursement system. A modernized fee schedule, particularly given its integral role in APMs (alternative payment models), can meet expectations of creating value incentives, but congressional action is needed to empower CMS to improve longstanding payment inaccuracies and design payments to meet value-based policy goals.” They offer a number of concrete suggestions, including estimating relative resources based on valid and reliable data, reducing code proliferation by consolidating some of the more than 10,000 payment codes, and reducing over-reliance on the American Medical Association’s Relative Value Scale Update Committee to effectively determine labor RVUs.

“The road to value has proven to be long and rocky, with frequent and unavoidable detours,” they write. “However, the obvious deficiencies in the Medicare Physician Fee Schedule are an obstacle, and there are no detours. Although worthy alternative payment models are being tested, the simple fact remains that the vast majority of the revenue physician practices receive from Medicare and other payers is based on a Medicare fee schedule that contains embedded incentives that do not promote value.”

Indeed, the authors conclude: “Reform requires a greater reliance on current, empirical data to determine labor and practice costs to replace faulty estimates by self-interested clinicians while reducing the fee schedule’s mind-numbing complexity in coding and payment. CMS’s reliance on the RUC and the RUC’s resistance to long-overdue reforms in determining clinicians’ relative labor undermine the search for value. Value must be sought in both the fee schedule and the APMs. The current fee schedule reflects the values ​​of organized medicine, not those of the patients it serves. It is time,” they emphasize, “to reject the judgment that fees for services have nothing to do with quality and value.”