The Authors

The Healthcode System  ...  Chapter 3

A dictionary can feel like weather. The codes arrive each year, revised and reissued, and to the people who must use them they have the quality of climate: given, impersonal, no more authored than rainfall. That feeling is the most useful illusion the system keeps. Someone wrote the dictionary. Someone decides, every year, what the words are worth. Tracing who did the writing, and who holds the pen now, explains more about American medicine than any chart of premiums.

Begin in 1965, the year Medicare was signed into law and the federal government became the largest buyer of medical care in the country.[1] At the start the arrangement was almost quaint: physicians were paid according to their "usual, customary and reasonable" charges  ...  which is to say, more or less what they said they charged.[2] The doctor named the fee; Medicare, by and large, paid it. A profession accustomed to setting its own prices simply kept setting them, now with the Treasury as the payer.

Predictably, spending climbed faster than anyone had budgeted. The cure for an open-ended fee was a fixed one, and over two decades the government built the machinery to impose it. Hospitals went first. In 1983 Medicare began paying them by diagnosis-related group  ...  a flat, predetermined sum tied to the patient's diagnosis rather than to whatever the hospital spent, leaving the institution to absorb any costs above the set amount.[3] Physicians followed. Legislation in 1989 laid the groundwork, and in January 1992 the "usual and customary" world ended: each service would now be priced by a Resource-Based Relative Value Scale, the RBRVS, which assigns every procedure a bundle of relative value units and multiplies them by a national conversion factor to produce the fee.[4] The values are meant to capture the resources a service consumes  ...  physician work, practice overhead, malpractice exposure  ...  and the work component alone accounts for roughly half of most payments.[5]

Which raises the question that the whole system depends on not being asked too loudly: who decides what a procedure's work is worth? The answer is a committee most physicians have never heard of. Anticipating the 1992 change, the American Medical Association  ...  already the owner of the CPT procedure dictionary  ...  convened a body called the Specialty Society Relative Value Scale Update Committee, the RUC, in 1991.[6] Its method is straightforward and, from a certain angle, entirely reasonable. Specialty societies survey their own members on the time and difficulty a procedure demands; the specialists who actually perform that procedure present the proposed value to the committee; the committee forwards its recommendation to the government.[6] Who, after all, understands the work of a heart operation better than the cardiologists who do them?

The trouble lives inside that same sentence. The people best positioned to describe the value of a procedure are also the people paid by it. The committee that recommends the prices is convened by the association that owns the words. The government, holding the formal authority to decide, has agreed almost every time: by the AMA's own count, CMS has accepted more than ninety percent of the RUC's recommendations  ...  by some figures, more than ninety-four.[7] One health economist described the agency as accepting them slavishly. The AMA's position is that it merely advises, and that CMS makes every final call. Both things are true at once, which is precisely how the most durable arrangements work.

A committee weighted toward proceduralists tends, over time, to price procedures generously and to price the quieter work  ...  the conversation, the examination, the counsel that keeps a procedure from ever being needed  ...  comparatively thin. That tilt is not the scandal of any one meeting; it is a property of who sits in the room... Hold that thought. It returns, with consequences, several chapters from now.

One more fact closes the circuit. The RBRVS is not Medicare's private instrument. It is the scale used by Medicare and most other payers, the reference against which the wider commercial market sets its own rates.[8] When the committee revalues a code and the government assents, the new price ripples outward through nearly every insurer in the country. A single fee schedule, recommended in large part by the interested, governs what almost all of American medicine is worth.

The dictionary, then, is not weather. It was authored  ...  and the authors did not stop at the definitions. They stayed on to help set the prices, and the word for someone who both writes the language and decides what it is worth is not author but authority. We did not stumble into a health-code system. We appointed its lexicographers, handed them the pen, and agreed not to look too hard at the conflict of interest sitting in plain view... a habit the chapters ahead examine, as the bill for it comes due.

Notes

1. Medicare was signed into law in 1965, making the federal government the country's largest purchaser of medical care. Medical Economics, "Medicare reimbursement rates explained"; Mercatus Center, "The Medicare Physician Fee Schedule."

2. Under the original Medicare framework, physicians were reimbursed on "usual, customary and reasonable" (UCR) charges. Medical Economics, "Medicare reimbursement rates explained"; The Hospitalist, "Where 400 Years of Fee for Service Has Led Us."

3. In 1983 Medicare adopted prospective payment for hospitals via diagnosis-related groups (DRGs), a flat per-diagnosis sum that placed hospitals at financial risk for costs above the set amount. Medical Economics, "Medicare reimbursement rates explained."

4. The Omnibus Budget Reconciliation Act of 1989 laid the groundwork for the Resource-Based Relative Value Scale, effective January 1992, replacing UCR for physician services. Medical Economics, "Medicare reimbursement rates explained"; Mercatus Center, "The Medicare Physician Fee Schedule"; AAPC, "Learn the Three Rs of Physician Payment."

5. RBRVS prices each service from work, practice-expense, and malpractice relative value units times a conversion factor; the physician-work component averages slightly more than half of the total. American Medical Association, "RBRVS overview"; AAPC, "The Three Rs."

6. The AMA, which owns the CPT code set, convened the Specialty Society RVS Update Committee (RUC) in 1991; specialty societies survey their members and the specialists who perform a procedure present its proposed value to the committee, which forwards recommendations to CMS. AMA, "An Overview of the RUC Process"; KFF Health News, "Little-Known AMA Group Has Big Influence On Medicare Payments."

7. Historically CMS has accepted more than 90 percent of RUC recommendations  ...  more than 94 percent by AMA figures; economist Uwe Reinhardt characterized CMS as accepting them "slavishly," while the AMA holds that CMS makes all final decisions. KFF Health News, "Little-Known AMA Group"; Specialty Society Relative Value Scale Update Committee (encyclopedic overview citing Reinhardt); AMA, "RVS Update Committee (RUC)."

8. The RBRVS is the physician-payment scale used by CMS "and most other payers." American Medical Association, "RBRVS overview."