The Wall Street Journal published a very good article several weeks ago about how payment is set for physicians provided clinical services. It does a good job of highlighting a little known aspect of care, the “fee schedule.” Historically, fees were set in a very disorganized fashion and the introduction of Medicare necessitated the creation of an infrastructure (one might even describe it as a bureaucracy) to establish a fair amount to pay physicians. Importantly, many other insurances use Medicare as a basis to set their rates. Over the years there has been much give and take regarding who can request payment for a certain procedure and what the payment should be. For as long as I have been a physician, my colleagues have complained about non-physicians determining who gets paid and how much. Turns out it’s been the physicians setting the rates all along. Reading this article will give those who want to allow physicians to police their own profession without non-physician oversight pause.

Much of the payment structure was established when physicians did a lot more in the hospital with only occasional tweaking over time. The payment was bundled, with each procedure having a pre-hospital component, a component in the hospital, and a post-procedure follow-up visit. This was supposed to even out (I suppose) unpredictable complications. In the interim, much of the care has moved away from the hospital but

For instance, one operation to treat male urinary incontinence wraps in payment for 118 minutes of hospital visit time after the day of surgery, though 2008 Medicare data show it is done around 80% of the time outpatient or in a doctor’s office. Stephanie Stinchcomb, manager of reimbursement for the American Urological Association, says the surgery used to be largely inpatient; its payment was last updated based on a RUC evaluation in 2003. It’s not clear if a new analysis will find doctors should now be paid less for it, she says.

It seems that the committee only moves in one direction

Out-of-whack Medicare doctor payments are supposed to be corrected in a required review every five years. MedPAC says in the three previous reviews, the RUC endorsed boosts for 1,050 services, and decreases for just 167. Many recommendations on which services to examine came from doctor societies. The upshot may be that payments don’t keep up with medical realities when procedures become easier or faster, MedPAC said.

And has ended up accomplishing one thing

A recent analysis for the Medicare Payment Advisory Commission, or MedPAC, a Congressional watchdog, calculated how much American doctors would make if all their work was paid at Medicare rates. It found that the primary-care category did the worst, at around $101 an hour. Surgeons did better, at $161. Specialists who did nonsurgical procedures, such as dermatologists, did the best, averaging $214, and $193 for radiologists.

These disparities have increased tremendously over the past decade. To be honest, I feel well compensated for what I do but I can guarantee you that students are well aware of the pay differential and it enters into specialty selection.

What should we do? One physician posted a comment

I don’t really understand this attack on medical specialists. I am one such physician and I can tell you that we serve a valuable role in the medical community. … Thus, I propose a different alternative. I believe the days of primary care physicians are coming to an end. Like the death of the dinosaurs. They will be replaced by lower cost medical providers like PAs and ARNPs most likely in the next quarter century. Perhaps PAs and ARNPs could serve as the hub/organizer to refer to the most appropriate specialist. This may save the system money. …. I am a big fan of primary care physicians but I still believe it is inevitable they will be extinct.

If you have read this blog, Josh Freeman’s blog, Paul Grundy’s work, or Barbara Starfield’s work you will know that this is not the case. This would, however, help certain physicians to maintain their income. As I have previously discussed, it will lead to more procedures on unsuspecting patients who are told that more is better. Let’s change the system instead, shall we?

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