New Medicare price review panel proposed

Washington -- When it comes to advice federal officials receive from physicians on how much to pay for individual medical services, Medicare advisers recommend seeking a second opinion.

The Medicare Payment Advisory Commission called on the Centers for Medicare & Medicaid Services to establish an expert panel to help identify physician services overvalued by the government. CMS receives its only advice on how to weight individual services from the American Medical Association's Relative Value Scale Update Committee, or RUC. The panel consists of practicing physicians representing a broad range of medical specialties.

The committee conducts a major review of Medicare services every five years to determine which should be assigned different weights. A newer, more complex procedure, for example, might need a relatively higher rate to start, because it takes physicians more time to complete. But once the procedure has become more common in doctors' offices, the rate might need to come down to reflect the lessened drain on physicians' time and resources.

The problem is the specialists on the RUC more readily highlight services for which Medicare pays too little than those for which the program pays too much, MedPAC said in its annual March report to Congress. The document calls into question the complex system federal officials use to try to pay physicians fairly for the more than 7,000 individual services they provide to Medicare beneficiaries.

"Although we recognize the valuable contribution made by the ... RUC, we conclude that CMS' five-year review process does not do a good job of identifying services that may be overvalued," the commissioners state. "CMS has relied too heavily on physician specialty societies to identify services that are misvalued and provide supporting evidence."

This situation could be corrected by having a separate panel whose members have a different perspective on Medicare payment and could target improperly priced services, MedPAC said.

The commissioners said economic experts with substantial knowledge of physician payment, as well as people with clinical knowledge of the services in question, would be essential recruits for the new entity.

In the long run, finding Medicare services overvalued by the government and correcting their rates will benefit all physicians, said MedPAC Chair Glenn Hackbarth.

Mispriced services that favor certain physician specialties, for instance, could distort the payment system by effectively driving dollars from the already embattled primary care field, he said. In addition, if physician spending in some sectors goes up too much because of inequitable payment weights, the medical community as a whole could suffer when Medicare's predetermined spending limits were exceeded and across-the-board cuts automatically took effect.

"It's a zero-sum game," Hackbarth said. "At the end of the day, increases in value have to be offset so that they don't increase total Medicare payments. This is a system for distributing a fixed pool of dollars."

Despite calling for the extra check on the RUC review process, MedPAC is not saying physicians as a whole are being adequately reimbursed. Instead of the roughly 5% overall rate reduction set to go into effect in 2007, for instance, the commission is calling for a 2.8% increase based on growth in practice costs.

Physician groups, such as the AMA and the American College of Physicians, expressed interest in adding another expert panel to the rate review process, but they cautioned federal officials to be careful in their approach.

"The AMA is pleased that MedPAC recognized the value of the RUC, which is constantly improving on its own process," said AMA President J. Edward Hill, MD. "If an additional expert panel is appointed to help identify services to be reviewed by the RUC, it should represent current practicing physicians."

Hackbarth said that while some of the new panel's members should be practicing doctors, they should not have a direct financial stake in how the prices of medical services are set. Health plan medical directors and academic medical center faculty, for instance, would be logical choices to provide an impartial assessment, he said.

American College of Physicians President C. Anderson Hedberg, MD, backed the plan during March 1 testimony before Congress on the MedPAC report. But doctors would not support the new panel if overpayments it identifies go back into federal coffers rather than toward boosting reimbursements for undervalued services, he said.

"Our support is predicated on maintaining the current requirement that all reductions ... that result from this process must be put back into the total relative value unit pool," Dr. Hedberg told the House Ways and Means health subcommittee.

CMS is reviewing the MedPAC recommendations to determine whether the new panel is a good idea, an agency spokesman said. But even if federal officials take the commission's advice, lawmakers must be convinced as well.

CMS can convene the panel via administrative order, but a significant amount of funding likely would be necessary to pay for the extra work the agency would be expected to undertake, Hackbarth said.

The RUC last month submitted recommendations from its five-year review, opening the door for CMS to implement any of the proposed value changes. The agency typically approves the vast majority of what the committee suggests.