Evidence based insights into physician compensation, RVUs, contracts, investing, leadership, and the economics of healthcare.
Life and Business in Medicine.
What Is This About?
Let's start with a question. Who decides how much physician, nurse practitioner or physician assistant’s work is worth? If you are like most healthcare professionals, you have probably never thought about it. So, who makes those decisions?
Why Should Medical Professionals Care?
As we discussed in previous episodes, official RVU values assigned to office visits, procedures, surgeries, and countless other healthcare services, are published by the Centers for Medicare & Medicaid Services, better known as CMS.
But CMS does not create those values entirely on its own. There is a committee whose recommendations influence physician compensation throughout the United States. That committee is called the Relative Value Scale Update Committee, or simply, the RUC.
The RUC is a committee composed of 32 physicians and healthcare representatives. Twenty-two of those members are appointed by national medical specialty societies. Organizations such as the American College of Obstetricians and Gynecologists, the American Academy of Pediatrics, and many other specialty societies select representatives to participate in the process. The remaining members represent primary care and other healthcare organizations.
The committee meets several times each year to evaluate how medical services should be valued. Their task is simple to describe, but difficult to perform. How much is physician work worth?
When evaluating a service, the committee reviews information collected from physicians who perform that service. They analyze factors such as: How much time is required? How technically difficult is the procedure? How much training is necessary? How much mental effort and clinical judgment are involved? How intense is the work?
For example, imagine a new surgical procedure becomes available. The committee must determine how that procedure compares with existing procedures. Does it require more training? Does it take longer to perform? Is it technically more challenging? Does it involve greater risk?
To answer those questions, the committee reviews survey data and specialty-specific information before discussing the evidence and voting on a recommendation. That recommendation is then sent to CMS. And this is an important distinction. The RUC does not make the final decision. CMS does.
CMS reviews the committee's recommendations and may accept them, modify them, or reject them. The final values are then published in the Medicare Physician Fee Schedule. That fee schedule becomes the foundation for Medicare reimbursement and heavily influences payment systems throughout the healthcare industry.
They can influence physician compensation, practice finances, specialty income differences, hospital budgets, and workforce trends. Not surprisingly, the RUC has generated both support and criticism over the years.
Some critics have argued that the committee historically favored procedural specialties over cognitive specialties. Others argue that the committee provides essential expertise that allows CMS to better understand the realities of medical practice. Regardless of where you stand on that debate, understanding the RUC is important because it helps explain how RVU values are created in the first place.
But there is something even more interesting. Let's assume the RUC determines that a particular service deserves a higher RVU value because it requires more time, more skill, or greater intensity. Can CMS simply increase that value without consequences? Not exactly. The RUC operates within a system that places significant limits on how Medicare physician payments can grow. In fact, increasing the value of one service can sometimes create pressure to reduce payments elsewhere in the Medicare Physician Fee Schedule. Understanding that concept is critical to understanding why some specialties see reimbursement increases while others experience cuts. And it helps explain many of the debates surrounding physician compensation today.
In our next episode, we will discuss one of the most important and often misunderstood concepts in physician reimbursement: budget neutrality, and why one specialty's gain can sometimes become another specialty's loss.
This blog is for informational and educational purposes only and does not constitute financial, legal, tax, investment, contract, coding, billing, or medical business advice. Listeners should consult qualified professionals regarding their individual financial, legal, tax, employment, contract, coding, billing, and medical business decisions.
The Bottom Line
The recommendations made by a relatively small group of physicians can have effects that reach nearly every corner of American healthcare.
Key Takeaways
✓ CMS publishes the official RVU values, but it relies heavily on recommendations from the RUC, a committee made up primarily of physicians and representatives from national medical specialty organizations
✓ The RUC evaluates the time, technical skill, clinical judgment, training, intensity, and risk involved in providing a medical service before recommending how that service should be valued.
✓ Changes in RVU values have consequences across the healthcare system. Because Medicare physician payments operate under budget-neutrality requirements, increasing the value of one service may place downward pressure on reimbursement for other services.
“The entire American healthcare system is influenced by a relatively small group of physicians”.
MD&D Quote of the Day
What’s Next?
Next: Budget Neutrality
Why one specialty’s gain, may be another specialty’s loss
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Bruno Casanova, MD
Founder & Host
Medicine, Dollars & Decisions
Life and Business in Medicine.