Reference Pricing: Another Fad


There have been a number of good discussions of reference pricing. This concept is mainly applicable only to large employer sponsored plans. As Ricardo Alonso-Zaldivar from the Associated Press observed, “However, the strategy appears to be suitable only for a subset of medical care: procedures and tests that are frequently performed, where the prices charged vary widely but the quality of results generally does not. In addition to knee and hip replacements, that could include such procedures as MRIs and other imaging tests, cataract surgery and colonoscopies.” The idea is essentially incompatible with the insurance exchanges and narrow networks. And, is there any reason to trust the insurance companies to use a fair, patient-centered set of standards in establishing any given price? Or is it possible that they will game any such system to their own advantage? For instance, they have already found a way to make sure any additional expenses incurred by the patient will not be allowed to apply to the out-of pocket caps required by the ACA.  Sarah Lazare in Common Dreams discusses some of the pitfalls in this latest experiment by CMS. In June, 2014, FamiliesUSA published an excellent brief by Lydia Mitts, “How To Make Reference Pricing Work For Consumers.” Ms. Mitts points out the potential financial risks of cost shifting to consumers if the insurance companies set their pricing too low making it difficult for patients to find providers who will accept the payments. She also mentions that those who do accept the prices might raise prices for other services. She concludes with an excellent list of key elements that would be necessary in order to make such a system work for patients. Unfortunately, the health insurance industry has shown little interest or ability to do such things as providing adequate networks or prioritizing (or even, measuring) quality. Don McCanne provided a good commentary back in 2013, which he summarized by saying, that CMS is saying “we should shift risk to the patients – exposing them to financial penalties should they not make perfect decisions in their health care purchasing, even as the private insurers create yet more barriers to perfectly priced health care!”

The goal to bring down prices of medical care is admirable but one more payment system just adds to the incomprehensible world of multiple payers, multiple (often conflicting) rules and regulations, confused eligibilities, unintended consequences, profit-making, rent-seeking and cost-shifting to the “consumer.”

Can Physician Performance Be Measured?

In response to Comments in Becker Hospital Review I received these questions:

“Dr. Dave – I’d be interested in what outcomes you’d measure that really matter in the care of patients. And, what you’d suggest for a delivery and payment model(s).”

I submit the following answer:

I don’t know what background you are coming from. I’m a retired family doc with 27 years in private practice, 10 years working in and running a (salaried) rural health clinic and 7 years (salaried) doing urgent care in a >200 docs physician owned medical clinic and 6 years part-time in a low income clinic.

When talking about “measuring outcomes” remember the old saying (falsely attributed to Einstein) “Not everything that counts can be counted, and not everything that can be counted counts.”  What are outcomes;  mortality rate, days of pain free existence, avoidance of bankruptcy, peace of mind, years of life lost due to premature mortality (YLLs), years lived with disability (YLDs), healthy life expectancy (HALE) ?  And to whom do we attribute increase and decrease; the patient, which doctor, an institution, the system, society?  And, again, can numbers represent compassionate, concerned, competent care?  So what does it mean to “measure”?

There are numerous problems with current pay for performance problems. One of the biggest problems is thinking that any sense can made of the current Rube Goldberg system of Obamacare plus >2000 insurance carriers. Any real solutions need to benefit every single person in our country. Pretending to measure performance in medical care is a political diversion of both CMS and the insurance companies.

As far as I’m concerned putting all physicians on salary with reasonable negotiations is the only way to help gain control of medical costs and create the leverage for improving quality by eliminating incentives for cursory encounters and unnecessary medical procedures.

Pay-for-Performance is a poisonous concept whose unintended consequences are far greater that any conceivable benefits. System improvement and re-development of the culture of a medical “calling” and ethos of peer responsibility are essential. So-called P4P and quality improvement efforts cannot begin to deal with the multitude of problems that face us.

We can’t (and shouldn’t) go back to a Dr. Welby picture but we don’t have to keep going in the wrong direction.

I’m in favor of a single payer system (improved Medicare for All). I’m also in favor of starting that improvement now.  And I’m in favor of medical care reform in many areas (physician, hospitals, pharmaceuticals, medical appliances, costs, integrity, transparency, etc.)  A single-payer system would require a tremendous amount of work to create the needed reforms  but it’s the only system that can have the muscle to overcome the self-interest of the powerful stakeholders and ensure compassionate, competent, and cost-effective care for  everybody.

I invite you to visit my blog site (HC-Reform) and “Like” what you like. For our present discussion I would start with Pay-For-Performance (

Dr. Dave

Primary Care Dissed By A.M.A.

 The Disappearance of Primary Care 

As Uwe Reinhardt, the Princeton University economist writes, “Surely there is something absurd when a nation pays a primary care physician poorly relative to other specialists and then wrings its hands over a shortage of primary care physicians.”(1)  Improving Medicare in preparation for an expanded Medicare-For-All can start here.

It is generally understood that any solution to the high costs and compromised quality and access to our medical system will depend on developing an adequate primary care base. Over the last 16 years the number of U.S. medical graduates choosing family practice residencies has dropped from over 50% to 8% (1500/year). Among pediatric and internal medicine residents only 2% will go into primary care. The rest are going into subspecialties.  Half of the family practice residencies positions are being filled by graduates of foreign medical schools.(2) 21% of the U.S. populations live in physician shortage areas where primary medical care is badly needed. Now, with the Affordable Care Act, there will be an increasing demand for primary medical care because of increased insurance coverage.  The aging population and aging family doctors will add to this need. It has been estimated that we will need to add an additional 52,000 primary care doctors by the year 2025.

So why do we face the disappearance of primary care physicians?  It starts with money, of course. Costs for medical school leave school loans averaging $140- to $200,000. Then just as the student starts his/her 3 year residency program the loans start accumulating interest. After that the income from family practice is half that of the procedure oriented specialties. As with the rest of our society higher income implies higher status. This concept carries over into most medical schools where the family practice program is treated as an afterthought (although there is more lip service these days). The result is that any initial interest in family practice is soon suppressed.

Please bear with me for a brief history of the physician pay discrepancy.

One of the many ironies in our health care crisis is the role the American Medical  Association has played in killing off primary medicine. This, of course, has been done with the approval of Congress and the Center for Medicare & Medicaid Services (CMS). Since 1991 Medicare fees for physicians have been based on the Resource-Based Relative Value Scale (the RBRVS). This system places high value on procedures and tests and low value on the thoughtful diagnosis, coordination and the caring for patients in their vast variety of medical needs. The values are applied to the items in the Current Procedural Terminology (CPT), a book published by the AMA for which it receives millions in royalties.(3) In1991 the AMA formed the Relative Value Scale Update Committee (RUC) to advise CMS on updating the relative value units. Because the CMS accepts 90% of its recommendations physician pay is essentially determined by this committee. This allegiance by CMS is unbelievable considering that the AMA represents only about 17% of practicing physicians in the U.S.(4)  And the 31 member RUC has only 7 members representing primary care.(5) Until recently the membership on the committee has been undisclosed.  And the minutes and proceedings of the committee were still kept secret. Under pressure the RUC is now releasing minutes but not the voting records of individual members. It should be noted that private insurers use the same relative value system but may pay somewhat more than Medicare by using a different conversion factor (with the same bias toward expensive procedures). Any permanent solution to this problem will require a different payment system for physicians. At the present time there is no unified and effective force that can address and solve this workforce problem.

So we have a non-representative medical organization (guild) designing a national physician payment plan that has effectively put primary medical care out of business. We might ask how they obtained so much power. The answer, one suspects, might revert back to the money. Since 1990 the American Medical Association has spent $30,097,082 on political contributions and $286,377,500 on political lobbying.(6) It would have been nice if this money had been spent on developing a primary care based universal health system for the United States.

It is time to move beyond the incrementalism of SGR and RBRVS debates, the no-value-added administrative costs and insurance company profits and the complexities of a 2900 page lobbyist-written health care law (Obamacare), the restricted access to care and the defects in quality care when compared to other countries. It is time for medical system reform powered by single payer financing. This would be improved Medicare for all. This is urgent. We have already lost almost a whole generation of primary care physicians.


  1. Uwe E. Reinhardt  The Little-Known Decision-Makers for Medicare Physicians Fees. /the-little-known-decision-makers-for-medicare-physicans-fees/
  2. National Resident Matching Program. Results and Data 2013 Main Residency Match.
  3. Why The American Medical Association Had 72 Million Reasons To Help Shrink Doctors Pay.
  4. American Medical Association Membership Woes Continue.
  5. Replace the RUC. Adding Seats: The RUC’s Slight of Hand adding-seats-the-rucs-sleight-of-hand/#more-
  6. The American Medical Association. Heavy Hitter



AMA Killing Primary Care

Katie Jennings in POLITICAL gets after a problem I have been harping on. The AMA and the RUC’s role in killing off primary care for decades. In my blog, “Primary Care Dissed by AMA” ,  I spelled out this issue. This committee has always been super secret. Now, under pressure, they are releasing their numbers but still no meeting notes or conflict of interest. report.  This is a 31 person committee which only recently increased the primary care representation to 7 members. This committee uses their copyrighted procedure manual (CPT) to make pricing “recommendations” to CMS which follow them 90% of the time. We should elaborate that the AMA represents only about 17% of practicing physicians.

Too Late, Too Little: Too Much, Too Soon

We Need an Improved Medicare

We should all be looking at ways we can increase the quality of our medical care and decrease the costs at least to equal the accomplishments of the rest of the industrialized world. It makes sense to work on improving Medicare so that when we finally exhaust all of the other alternatives (the American way) and adopt a single payer system, “Improved Medicare for All” we will already have accomplished a lot of the improvement. But Centers for Medicare and Medicaid Services (CMS), while administering Medicare and the Affordable Care Act, seems determined to spend a lot of money on “experiments” that don’t even make sense much less have any evidence to suggest that they are viable.  And they seem to spend no effort on predicting unintentional consequences. The effect of these diversions is going to be a further degradation of the medical care available not only to the Medicare eligible but to the entire population. The latest example is the new twist on Chronic Care Management (CCM) services. This was recently discussed in the New York Times in an article by Robert Pear, published August 16, 2014.  This is a plan to pay doctors a separate fee of $41.92 a month for managing the chronic care of some Medicare patients after January 1, 2015. This is for non face-to-face development and revision of care plans, communication with other care providers, prescription drug management, etc. see ADDENDUM. It will be classified as a G code with the description,” Chronic care management services furnished to patients with multiple (two or more) chronic conditions expected to last at least 12 months, or until the death of the patient, that place the patient at significant risk of death, acute exacerbation/ decompensation, or functional decline; 20 minutes or more; per 30 days.”

There is no question that care coordination is an increasing problem as patient care has transitioned to specialists and hospitals. Medical care of patients with chronic conditions is especially disjointed and plagued with discontinuities. This breakdown in care over the last 20 years has occurred as primary care, basically family practice, has been driven back to an office based medicine with little communication with hospitals, specialists, urgent care centers and other health care providers.

The Problems
The creators of this program have done an excellent job of incorporating many of the concepts that are being developed for complex ambulatory medical care, including the Leap Project.

Unfortunately the Chronic Care Management formula presents a number of consequences (which should be foreseen);The number of patients who will fall within the eligible parameters will probably be less than half of the Medicare population. And, in turn, the Medicare population represents  16.5% of the total population in the United States.

Excel Table3

This creates two major problems: The small, age defined group of beneficiaries will not provide ample sampling size or randomness to derive useful data for improving chronic care over-all. The additional fixed costs to medical providers for participation will be very high considering the small percentage of their practices affected and the reimbursement limited to the Medicare panel.

The matter of cost to the practitioners will limit participation to large groups and corporations. Rural and underserved areas will again be excluded from some of the benefits of Medicare. Keep in mind that as of 2010 almost half of primary care physicians saw their patients in offices of one or two physicians. Since then, of course, many have left practice.

  • Certified Electronic health records are required in this new plan but practice size is a major determinant of physicians’ use of EMRs and HIT capacity, including exchanging patient information electronically and providing electronic access to their patients. Half of physicians in solo practices report using EMRs, compared to 90 percent of those in practices with 20 or more physicians; likewise, there is a 4-fold difference between solo and large practices in achieving multifunctional HIT capacity (11 vs. 45 percent).
  • Participant practices will have to have a supervised staff person on call, after-hours, 24/7,  to address the “urgent chronic care needs” of the patients.
  • Tremendous amounts of paperwork, manpower and teamwork will be required to monitor, coordinate, and document all of the requirements of this plan. For a recent CMS list of these requirements see the ADDENDUM below.
  • Deborah N. Peikes discovered in her analysis of the similar team-based Comprehensive Primary Care Initiative that “At baseline, most CPC initiative practices used traditional staffing models and did not report having dedicated staff who may be integral to new primary care models, such as care coordinators, health educators, behavioral health specialists, and pharmacists. Without such staff and payment for their services, practices are unlikely to deliver comprehensive, coordinated, and accessible care to patients at a sustainable cost.”

It is understood that from the perspective of Medicare the high costs of the top 20% of the chronic care patients create the greatest expenditure. But our medical cost and care problems are much bigger than this small corner of the landscape. And all we have to help us is CMS with Medicare, Medicaid, and the Affordable Care Act. Of course if we had everyone in and nobody out we could tackle the bigger problems.

This program is serving as a diversion from solving the problem of adequate compensation for primary care in general. Meanwhile, our family practice workforce continues to decline while Nero fiddles. If as much energy had been put into solving the RVU and physician income disparities we could be on our way to re-establishing a primary care base. Unfortunately the new proposal only aggravates these problems. Two of the major factors that are driving medical students away from primary care is the low future income combined with the high student debt.  The third problem is the large burden of office practice administration. The cost of compliance and documentation with all of the existing programs is already overwhelming . This leaves the primary care profession with no time left over to worry about coordination but with a big desire to abandon this field of medicine. CMS has no solution to this and yet they want to add one more program that requires more continuous documentation, appeals of denial to file, cost of extra personnel, etc. CMS states that as part of the new service, doctors will assess patients’ medical, psychological and social needs; check whether they are taking medications as prescribed; monitor the care provided by other doctors; and make arrangements to ensure a smooth transition when patients move from a hospital to their home or to a nursing home. This workload is multiplied by the fact that the target patients are the sickest and oldest. They have a high mortality rate so the paperwork starts all over for the next replacement on the panel. For $42/month.

The Solution
Who in primary care is left to carry out the program?  Basically, it will be members of large group practices and hospital and other institutional employers in urban centers. The growing supply/demand incongruence of available primary care physicians will make that option even more profitable for the physicians. That leaves out the rest of America. And the uninsured and underinsured will continue to be left out in the cold. We need a broader vision. We need an Improved Medicare for All.

(CMS Statement)

“To assist stakeholders in commenting, we remind you of the elements of the current scope of service for CCM services that are required in order for a practitioner to bill Medicare for CCM services as finalized in the CY 2014 final rule with comment period. We would note that additional explanation of these elements can be found at 78 FR 74414 through 74428. The CCM service includes:

  • Access to care management services 24-hours-a-day, 7-days-a-week, which means providing beneficiaries with a means to make timely contact with health care providers in the practice to address the patient’s urgent chronic care needs regardless of the time of day or day of the week.
  • Continuity of care with a designated practitioner or member of the care team with whom the patient is able to get successive routine appointments.
  • Care management for chronic conditions including systematic assessment of patient’s medical, functional, and psychosocial needs; system-based approaches to ensure timely receipt of all recommended preventive care services; medication reconciliation with review of adherence and potential interactions; and oversight of patient self-management of medications.
  • Creation of a patient-centered care plan document to assure that care is provided in a way that is congruent with patient choices and values. A plan of care is based on a physical, mental, cognitive, psychosocial, functional and environmental (re)assessment and an inventory of resources and supports. It is a comprehensive plan of care for all health issues.
  • Management of care transitions between and among health care providers and settings, including referrals to other clinicians, follow-up after a beneficiary visit to an emergency department, and follow-up after discharges from hospitals, skilled nursing facilities, or other health care facilities.
  • Coordination with home and community based clinical service providers as appropriate to support a beneficiary’s ’s psychosocial needs and functional deficits.
  • Enhanced opportunities for a beneficiary and any relevant caregiver to communicate with the practitioner regarding the beneficiary’s care through, not only telephone access, but also through the use of secure messaging, internet or other asynchronous non face-to-face consultation methods.Similarly, we remind stakeholders that in the CY 2014 final rule, we established particular billing requirements for CCM services that require the practitioner to:
  • Inform the beneficiary about the availability of the CCM services from the practitioner and obtain his or her written agreement to have the services provided, including the beneficiary’s authorization for the electronic communication of the patient’s medical information with other treating providers as part of care coordination.
  • Document in the patient’s medical record that all of the CCM services were explained and offered to the patient, and note the beneficiary’s decision to accept or decline these services.
  • Provide the beneficiary a written or electronic copy of the care plan and document in the electronic medical record that the care plan was provided to the beneficiary.
  • Inform the beneficiary of the right to stop the CCM services at any time (effective at the end of a 30-day period) and the effect of a revocation of the agreement on CCM services.
  • Inform the beneficiary that only one practitioner can furnish and be paid for these services during the 30-day period. With the addition of the electronic health record element that we are proposing, we believe that these elements of the scope of service for CCM services, when combined with other important federal health and safety regulations, provide sufficient assurance that Medicare beneficiaries receiving CCM services will receive appropriate services. However, we remain interested in receiving public feedback regarding any meaningful elements of the CCM service or beneficiary protections that may be missing from these scope of service elements and billing requirements. We encourage commenters, in recommending additional possible elements or safeguards, to provide as much specific detail as possible regarding their recommendations and how they can be applied to the broad complement of practitioners who may furnish CCM services under the PFS.”
    Federal Register Vol 79 No. 133 July 11, 2014


Pay for Performance: Where is the Evidence?



One of the greatest accomplishments of the Affordable Care Act is that it has helped in shining a light on the disconnects of American health care.  This huge, complex, expensive, stakeholder written behemoth is demonstrating our inability to lessen costs, improve the payment system, cultivate quality and provide equity in the delivery of health care.

The problems of the existing fee-for-service method of compensating physicians has been discussed in an earlier blog.1  So called “pay-for-performance” (P4P) is the least effective solution being offered by the health policy wonks.

Now we are involved in the old past-time of debating how to pay-for performance.  The ACA is toying with Accountable Care Organizations (ACO’s),  physician quality reporting, value bases purchasing and other cost control attempts masquerading as quality initiatives. In addition to the Centers for Medicare and Medicaid Services (CMS), state Medicaid programs and the private sector have all developed numerous P4P experiments. 

As we shall see, the inherent weaknesses of the P4P concept are playing out in the thoughtless drive to pursue the latest iterations of this fad. We will look at the difficulties and dangers of trying to define and codify “quality” and “value.” An excellent article on this subject can be found at Health Policy Brief: Pay-for-Performance, Health Affairs, October 11, 2012.

Performance definition

In order to pay for performance you have to be able to measure it. You have to have numbers that you can translate into dollars. This immediately brings up the old adage (often falsely attributed to Einstein), “Not everything that counts can be counted, and not everything that can be counted counts.” When physician performance is being evaluated we most often see an old list of processes, such as laboratory tests ordered for a certain diagnosis, screening tests, blood pressure recordings, smoking counseling, aspirin, etc.  These processes have very little real relationship to the totality of what a good physician does for his patients.  They are items that are easy to monitor once you have forced the physicians to pay for an expensive electronic medical record system. But they are meaningless, costly, and do not refer significantly to a paradigm of individual patient care. 


That being said, numerous studies have shown no lasting, meaningful improvement with various reward/penalty systems of this type.  Rosenthal and Frank stated that “The authors review the empirical literature on paying for quality in health care and comparable interventions in other sectors. They find little evidence to support the effectiveness of paying for quality.”2  Ruand and Blustein reported “Despite offering substantial financial incentives, the MassHealth P4P program did not improve quality in the first years of implementation.” Campbell et al reported from Britain that a study of family practices showed no differences in performance between the controls and those provided incentive payments. In fact, continuity of care had decreased.4 U.S. hospital P4P was equally ineffective in the large (780 hospitals) Premier study.5 The respected Cochrane Organization did an evidence-based review of multiple studies and concluded that there is no good evidence that pay for performance schemes increased quality.6

Risk Adjustment

In addition to process-directed efforts we occasionally see outcome oriented plans.  These attempt to focus on more meaningful outcomes of medical interference such as death, strokes, heart attacks, etc.

They are even more difficult to measure for individual physicians and their patients because outcomes are so dependent on co-existing illnesses, multiple physician involvement, patient cooperation, socio-economic class, etc. These elements are the data of the risk-management discipline which insurance companies developed decades ago.  If there are rewards for caring for high risk patients then many more patients find themselves categorized as high risk. If there is income loss because a system does not compensate for the high cost of high risk patients then those patients will face loss of access to medical care. There is no incentive in any system that depends on metrics that are not under the control of the physician. The latter includes many socioeconomic factors that decrease the effectiveness of medical care.7


Both process and outcome definitions of performance simply set new rules for gaming the system. They do not assure quality and they do not diminish costs. Cherry-picking is one of the numerous ways to stack the deck. For physicians this could mean continuously culling one’s practice to exclude patients who do not contribute to a high performance score. Up-coding is another well-known method of increasing payments. As Woolhandler writes,  ”the system is too easy to game–too hard to set up.” 8

Complexity of Players

A 2007 study showed that Medicare patient visits revealed that a median of two primary care and five specialty physicians provide care for a single patient. It is difficult to see how a P4P system can assign responsibility and rewards for these patients. This doesn’t count the effect of urgent care and emergency room visits that effect the parameters being measured by someone’s incentive profile. 9

Behavioral Economics

Woolhandler and Ariely 10 give an excellent discussion of some of the lessons of behavioral economics. Of special interest in the evaluation of the concept of P4P are the findings concerning motivational crowd-out.  This refers to the numerous studies showing that tangible rewards (like money) have a strong ability to “crowd-out” or destroy intrinsic motivation (doing something for its own sake).11 


With our present day complex, uncoordinated, multiple payer health system all of the above writings, research, arguments and theories will not lead to any method for lowering medical costs or improving quality.  A single payer system would have the weight necessary to establish a payment system flexible enough to provide fair compensation for physicians without the inherent weaknesses discussed above. We are seeing a strong physician movement toward salaried positions as hospitals and large clinics hire an ever larger percentage of both new and older physicians.  Over time this may turn out to be the key that frees physicians to concentrate on patient care.  For primary care this will require vigilance to avoid gate-keeper roles with restrictive cost monitoring.  Then the incentives can truly focus on quality.  A single payer system would be able to devise an appropriate mix of payment systems to fit the various practice settings in which physicians work. 

Suggested Reading

1) Paying for Primary Care: Fee-for-service has got to go 

2)Rosenthal, MB, Frank, RG. What is the empirical basis for paying for quality in health care? Med Care Res Rev. 2006 Apr 63(2):135-57

3) Ryan, A. M. and Blustein, J. (2011), The Effect of the MassHealth Hospital Pay-for-Performance Program on Quality Health Services Research, 46: 712–728.

4) Campbell, S. M., Reeves, D., Kontopantelis, E., Sibbald, B., & Roland, M. (January 01, 2009). Effects of pay for performance on the quality of primary care in England. The New England Journal of Medicine, 361, 4, 368-78.

5) Ashish K. Jha, M.D., M.P.H., Karen E. Joynt, M.D., M.P.H., E. John Orav, Ph.D., and Arnold M. Epstein, M.D. , The Long-Term Effect of Premier Pay for Performance on Patient Outcomes.N Engl J Med 2012; 366:1606-1615 April 26, 2012

6) Scott A, Sivey P, Ait Ouakrim D, Willenberg L, Naccarella L, Furler J, Young D. The effect of financial incentives on the quality of health care provided by primary care physicians. Cochrane Database of Systematic Reviews 2011, Issue 9. Art. No.: CD008451

7)  National Quality Forum: Draft Risk Adjustment for Sociodemographic Status or Other Sociodemographic Factors Report (PDF)

8)  Should Physician Pay Be Tied to Performance? No: The System Is Too Easy to Game — and Too Hard to Set Up.By Steffie Woolhandler. M.D 

9) Pham HH et al. (2007-03-15). “Care patterns in Medicare and their implications for pay for performance”. The New England Journal of Medicine 356 (11): 1130–9.

10) Wollhandler, S and Ariely, D. Will Pay For Performance Backfire? Insights From Behavioral Economics.

11) A meta-analytic review of experiments examining the effects of extrinsic rewards on intrinsic motivation. Deci, E.L., Koestner, R., Ryan, R.M. Psycol Bull. 1999 Nov;125(6): 627-68; discussion 692-700.

Fee-for-service Has Got to Go

Paying for Primary Care: Fee-for-service has got to go                                                                                                      

While the U.S. has been watching the disappearance of primary medical care, the federal government continues to use a payment system that drives physicians away from primary care.(1) This in spite of the fact that it has been well documented that the quality of medical care is higher and costs are lower in regions that have a high percentage of primary care physicians.

Reimbursement rates for health care services have been established by physicians’ organizations since the 1950s, starting with the relative value scale devised by the California Medical Association. That scale was later refined as the resource-based relative value scale (RBRVS). From the beginning, it has valued surgical and diagnostic procedural services over more time-intensive primary care services. In 1991, the American Medical Association convened its Relative Value Scale Update Committee (RUC), which meets three times a year to recommend valuations for billing codes. That committee is dominated by specialty and subspecialty societies with very little primary care representation.

The problem is that the fee-for-service system (FFS) undervalues the work of the primary care physician, the time consuming office visits needed for health maintenance, complex diagnostic work-ups, care of chronic illnesses and coordination of care. The paperwork and amount of uncompensated work combined with the high office overhead of the generalist’s office drives the physician to see as many patients as possible in a day’s work. There is very little time to listen to the patient’s narrative, to answer questions, to review previous records, to coordinate with the care being given by other physicians, to formulate and explain a treatment plan, to order necessary tests and treatments, and to update all of the patient’s health maintenance needs.

The result of all this is to lower the satisfaction of both the patient and the physician. Health care becomes less personal, increasingly fragmented and expensive

While all of this is happening, medical and surgical specialists who perform procedures enjoy high rewards through FFS for doing those procedures. The private insurance industry, as well as Medicare and Medicaid, use the same scheme in their payment policies. It is no wonder that our medical school graduates are turning away from primary care.(2) As Uwe Reinhardt, the Princeton University economist writes, ”Surely there is something absurd when a nation pays a primary care physician poorly relative to other specialists and then wrings its hands over a shortage of primary care physicians.”(3)

It is estimated that by the year 2025 we will need an additional 52,000 primary care doctors. In the past 16 years the number of U.S. medical school graduates choosing family practice residencies has dropped over 50% to 1,500 per year. There is no provision in the present Affordable Care Act  (Obamacare) to significantly reverse this trend.

Today’s  fee-for service payment system in the United States isn’t working and can’t work. What is needed is universal health coverage and all physician salaries negotiated with a single payer, i.e., a judiciously improved Medicare for all.

Suggested Reading: (ctrl-click to links)

  1. What Every Physician Should Know About the RUC.   AAFP
  2. Results and Data 2013 Main Residency Match. NRMP
  3. Uwe E. Reinhardt The Little-Known Decision-Makers for Medicare Physicians Fees. N.Y. Times (complete reference)