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RBRVS: How well is it working?


Medicare's formula has revolutionized the way you're paid, and not just by the Feds. We took a look at the pros and cons 10 years after its birth.


RBRVS: How well is it working?

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Choose article section... Even primary care doctors have some complaints PCPs and specialists agree on growth rates, but little else Non-Medicare use grows, but problems persist

Medicare's formula has revolutionized the way you're paid, and not just by the Feds. We took a look at the pros and cons 10 years after its birth.

By Wayne J. Guglielmo
Senior Editor

There were definite drawbacks to being a primary care doctor in rural Oklahoma in the mid-1970s. Just ask FP Ray E. Stowers.

"If a primary care physician and a specialist did the same procedure, Medicare paid the primary care doctor less," says Stowers, who was in private practice for 25 years in Medford, OK, in the northern part of the state. As a rural physician, Stowers also got paid less—sometimes 30 to 40 percent less—than primary care colleagues providing the same services in towns like Ponca City and Blackwell, less than two hours away. These imbalances continued for many years, although the adoption of a statewide payment locality in the late 1970s helped ease the rural-urban imbalance somewhat.

Then, in 1992, Medicare rolled out a new way of paying for physicians' services. From then on, payment would be based on the resource costs—physician work, practice expense, and professional liability insurance—needed to provide the services. To compute the payment for a service, HCFA (now CMS) would multiply the combined costs of that service by an annual conversion factor or dollar amount, and then adjust the result for regional differences in resource costs.

Ten years and many heated discussions later, how well has the resource-based relative value scale worked? The answer depends upon whom you ask. Generally, primary care doctors like Ray Stowers are mostly pleased; proceduralists—particularly surgeons—aren't.

Neither group likes the way Washington converts relative values to real bucks. But unanimity fades again when it comes to the growing non-Medicare adaptation of RBRVS, especially among third-party payers, whom PCPs accuse of tweaking the system in favor of the proceduralists.

We spoke with physicians on both sides, to see whether RBRVS' 10-year birthday deserves applause or boos.

Even primary care doctors have some complaints

Primary care doctors and even some subspecialists readily cheer Medicare's use of RBRVS.

"It was a good idea then, it's a great idea now," says FP Douglas E. Henley, executive vice president of the American Academy of Family Physicians. In particular, Henley points to the system's success in "righting the balance between procedural and cognitive services."

"The data and evidence are very clear," agrees Robert B. Doherty, senior vice president of government affairs and public policy for the American College of Physicians-American Society of Internal Medicine. "There's been a huge narrowing of the gap in the comparative value Medicare once placed on services like office visits and surgical procedures."

The gap hasn't closed completely, though, says Lorain, OH, cardiologist John W. Schaeffer, who chairs the Economics of Health Care Delivery Committee of the American College of Cardiology. "But then, that was never the intention," says Schaeffer.

Still, some doctors grumble. The continuing disparity between rural and urban fees is one reason, especially in states that didn't adopt a statewide payment locality in the mid-'70s. To account for regional differences, such states depend on Medicare's geographic practice cost indices, which some say aren't up to the task. "The GPCIs don't adequately point up differences within states," says Ray Stowers, who's a member of the Medicare Payment Advisory Commission and an official with the American Osteopathic Association.

The AAFP's Doug Henley agrees: "Often, the cost of doing business for a primary care doctor is actually higher in a rural area, despite lower rents, because he's got to be ready to provide a wider range of services"—and, typically, to fewer patients than justify the additional outlay. To adjust lower fees for country doctors, the AAFP advocates "an additional multiplier beyond the GPCI."

Another concern is the RBRVS system's resource-based practice-expense component, which wasn't fully implemented until this year. The old methodology relied on historical charges, rather than actual expenditures. As a result, doctors whose expenses were paid by someone else (a hospital, for example) benefited, while office-based physicians didn't. The gradual phase-in of a true site-specific resource methodology, says Henley, "delayed some of the improvements in office-based reimbursement."

Some doctors fault the system for scanting the work involved in caring for patients with chronic conditions, especially those with multiple problems. "Taking care of patients with heart disease, diabetes, and renal insufficiency, for instance, can get complicated because of the sheer volume of what you have to do, especially over time," says cardiologist Douglas L. Wood of the Mayo Clinic in Rochester, MN.

PCPs and specialists agree on growth rates, but little else

Despite these complaints, many primary care doctors are less concerned about the infrastructure of the RBRVS system than about what ends up in their pockets. And that bottom-line number has more to do with the nitty-gritty of politics and social policy than the elegance of relative value units.

Says ACP-ASIM's Bob Doherty: "Sure, RBRVS divides up the pie, but it doesn't tell you how big that pie will be. The size of the pie is principally decided by the conversion factor, and that's been subject to all kinds of political constraints and budget cuts over the years."

The latest wrinkle is the sustainable growth rate, a product of the Balanced Budget Act of 1997. Among other things, the SGR ties the annual conversion factor to growth in the gross domestic product, the measure of the nation's output of goods and services. In simple terms, if the GDP goes up, as it did during the '90s, the conversion factor goes up too; if it goes down, as it did last year, the conversion factor follows and doctors experience cuts. In January, the SGR triggered a 5.4 percent across-the-board cut.

Even in flush times, critics say, the sustainable growth rate doesn't reflect the true cost of doing business. "Health care expenditures have nothing to do with the GDP," says Doug Henley. The Medicare Payment Advisory Commission agrees, and recommended to Congress last March and again this January that the SGR be replaced with a better system for updating physicians' actual cost of doing business. Medical groups, including ACP-ASIM, AAFP, ACC, and the AMA, are pressing Congress to adopt the long-term recommendation. More immediately, they're throwing their weight behind a GOP proposal that would replace next year's 5.7 percent cuts with a 2 percent hike.

Specialists are no fans of the sustainable growth rate, either. But, unlike primary care doctors, they're also less than pleased with the RBRVS system itself.

"The pain hasn't been worth any gain realized—not from the perspective of my members, at least," says Cindy Brown, director of advocacy and health policy of the American College of Surgeons. "My members get paid half of what they got in the 1980s, before adjusting for inflation."

Brown is especially critical of the malpractice expense component, which, she says, hasn't kept pace with skyrocketing insurance costs for the riskier specialties like surgery. "Malpractice premiums are escalating all over the country, and the only way to get more money for a specialty is to take it away from somebody else"—that is, another specialty or PCPs.

Non-Medicare use grows, but problems persist

The non-Medicare use of RBRVS avoids some of these troubles, but many argue that it creates others.

In 2000, nearly 20 percent of all physician practices that responded to a survey conducted by the Medical Group Management Association were using relative-value units in their compensation formulas to gauge productivity. Other MGMA data suggest that from multispecialty to single-specialty groups, including family practice and internal medicine groups, the use of RVUs for this purpose is growing. (Collections and gross charges still lead the list.) "Since most physician practices are professional corporations or partnerships, members are paid proportionately, based on productivity as measured by RVUs" says David Gans, MGMA's director of practice management resources. For critics, the problem arises when groups modify the system for their own purposes. A practice intent on rewarding members who see more patients, for example, might inflate the RVUs assigned to certain office-visit codes. To some, such a move distorts the overall system, but Gans argues otherwise: "Is it pure? No, it isn't. But such tweaking is usually designed to meet the specific characteristics of a single organization."

Health plans and other insurers also tailor the system to their own needs, typically by adopting multiple conversion factors, according to a survey by the AMA. The rule-bending infuriates many primary care doctors, who think it often disproportionately rewards proceduralists. "You lose the relative valuation of one service to the other, and that we object to greatly," says Doug Henley of the AAFP.

Henley acknowledges that the imbalance may very well continue. "Historically, some specialties have had the income to boycott contracts in certain localities," he says. If patients and employers complain loudly enough over lack of access, he says, the insurance company caves in to the demands of the specialists and awards them a higher conversion factor.

These problems prove one thing: Whether in or outside Medicare, RBRVS is far from a perfect system. Still, from primary care doctors' viewpoint, at least, it's a good deal better than anything else we've had.

So . . . happy birthday RBRVS!


Wayne Guglielmo. RBRVS: How well is it working?. Medical Economics 2002;13:69.

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