Think Medicare Pay Rate for Doctors Favors Surgeons?
Surprising study still does not explain why
proceduralists and surgeons earn much more money than primary doctors
22, 2014 - A surprising new study pulls back the curtain on one of the
most contentious issues in health care: differences in payment by
Medicare and income between physicians who perform operations,
procedures or tests, and those who don't.
Contrary to perception, the research indicates, the
physician payment system is not inherently "rigged" to favor surgeons
and other procedure-performing doctors.
The new findings counter the widely held belief
that a simple difference in pay per minute explains why doctors who
perform procedures often earn nearly twice as much money in a year as
those who provide care mostly in office visits.
Instead, it appears the difference has more to do
with how long it takes doctors to provide whatever care they give or
rather, how long the influential Medicare payment system assumes it
takes them. The results, compiled by a team based at the University of
Michigan Medical School, are published in the Annals of Surgery.
Some have thought that because the panel that makes
payment recommendations to the Medicare system includes mostly members
of medical specialty societies, they allocate more dollars to the
standard payments for their services.
But the team's exhaustive analysis of the Medicare
Physician Fee Schedule finds that the rate surgeons are paid per minute
while they perform surgery or a procedure is about the same as what
primary care doctors or other "cognitive" physicians are paid per minute
during a routine office visit.
Medicare's payment system includes codes for more
than 6,000 types of physician work and the estimated times it takes
doctors to perform each one. It has wider implications because it also
influences the amounts private insurers pay.
The new analysis shows that the difference in pay
between physicians arises mostly because of differences in the number of
minutes that Medicare's formula assumes it takes doctors to do any
particular operation, procedure or exam. The system is based on
measurements called RVUs, for Relative Value Units. These RVUs are later
directly converted to dollar amounts by Medicare using a separate
Lead author Kevin Kerber, M.D., M.S., was surprised
that nearly all of the differences in RVUs among the codes was explained
by differences in the time estimates for the work. "This is a huge
issue," says Kerber, "because we really need to understand our payment
system before we can make effective changes that achieve desired
outcomes." He is an associate professor in the U-M Department of
Neurology and member of the U-M Institute for Healthcare Policy and
"It is amazing to me how many people, including
doctors, actually have no idea how payments per service are determined,"
he adds. "It is also amazing how many incorrect or ill-informed
assumptions are out there about this issue. This is despite the fact
that we are dealing with enormous amounts of money and that payment
decisions can basically determine practice patterns. Doctors are human
and thus susceptible to incentives."
The analysis did show that there are some outlier
codes that paid substantially more or less per minute than average. But
all are for types of services that aren't common, and therefore cannot
explain large differences in income.
On average, surgeons and procedure-performing
doctors earn about $300,000 per year, compared with about $160,000 for
primary care physicians.
"Our main interest in performing this work was not
to identify outliers, but more simply to assess if the large differences
in pay among specialties could be explained by differences in payment
per time per service," Kerber says.
"If that was true, then we would have had to assume
that the groups who assign payments are giving more value to procedures
and tests than to office visits. But, we did not find evidence to
support that possibility, even after adjusting the analysis for the
utilization of codes.
What this means is that basically those who set
RVU values for types of physician work are doing little more than
assigning a standard RVU per minute amount to each and every service
regardless of the type or specialty of the work."
The RVU values for each code are set by the federal
Centers for Medicare and Medicaid Services, which takes input from the
American Medical Association's Relative Value Scale Update Committee or
RUC, which is made up of physicians from a wide range of specialties.
Kerber explains, "What this research shows is that
the largest and most influential payer in healthcare Medicare and
the panel of doctors that advises them the RUC are not overtly
setting payment rates higher for surgeons and proceduralists than
primary doctors." Yet, that still does not explain why proceduralists
and surgeons earn much more money than primary doctors.
Kerber says that it remains possible that the times
assigned to the codes may not be completely accurate. The time estimates
are determined by surveys of physicians, which are subject to error.
If the times allocated to the RVUs are too short
for office visits and too long for many surgeries and procedures, that
would create actual differences in pay per minute, which would be much
harder to identify. Another potential source for income difference could
be in the additional payments that Medicare makes for the overhead costs
involved in each service, such as tools and equipment. It is possible
that these payments unintentionally create profit sources and incentives
Other possibilities that could explain income
differences are work hours or alternative income sources. The average
proceduralist or surgeon works 5 percent to 10 percent more hours per
week than the average primary care doctor. But the work hour difference
doesn't even come close to explaining the magnitude of the differences
in income. Proceduralists and surgeons could also have more non-patient
care related income, such as income from administrative work or
Kerber notes that another reason that understanding
physician payments is important is that medical students seriously
consider future income in their career decision. "Some students will
choose a high-income surgical specialty over primary or cognitive care,
even if their passion is really with office-based work," he says. "That
is a problem because our payment system is largely dis-incentivizing
some of the most important careers in medicine."
Notes: The data for the study came from the
CMS website, and the researchers did not have outside funding. In
addition to Kerber, who advises the American Academy of Neurology on RVU
issues, the authors are Marc Raphaelson, M.D., who also advises the AAN
on RVU issues; Gregory Barkley, M.D., who serves as an alternate on the
AAN committee, and U-M neurologist James F. Burke, M.D., M.S. Burke is
also a member of IHPI.
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