A Conflict of Interest in the Way Medicare Pays Docs?
Policy + Politics

A Conflict of Interest in the Way Medicare Pays Docs?


A small but powerful panel of physicians has long played a major role in determining how much the federal government pays its Medicare doctors.

The problem, according to auditors from the Government Accountability Office, is that the panel’s recommendations rely “on the input of physicians who may have potential conflicts of interest with respect to the outcomes of CMS's process.”

Indeed, a 2013 investigation by The Washington Post found that the panel’s estimates for the time involved in procedures was greatly exaggerated—meaning doctors were being paid far more than they should have been for those procedures.

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For example, the panel estimated that colonoscopies, on average, take about 75 minutes to complete (time spent is one of the measure of cost). However, The Post cites several studies and doctors’ records saying the procedure actually takes about 30 minutes on average. The time dedicated to a colonoscopy, however, is not just for the procedure. It includes a pre- and post-exam and a lot of paperwork.

For example, patients must receive instructions on how to prepare for the exam, and they must sign a copy of the post procedure instructions and medication reconciliation form. They pre-procedure prescription must be written by the doctor or a qualified nurse—whoever delivers the information to the patient is costing the doctor money.

Next, you’re being prepped for anesthesia. The surgeon is dictating all the procedural notes during this time of the patient’s condition, including the patient’s mental status, airway examination, CV examination, etc. The patient’s vitals are monitored and recorded during and after the procedure. Finally, a lengthy description of the procedure is written and delivered to the patient along with photographs of the colon. If polyps are to be removed, even more time is spent during the procedure.

The post-op procedure is short, but requires a nurse or other administrator—someone on the doctor’s staff who must be compensated. Finally, there is the report and billing.  Does all this take one hour and 15 minutes?  

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Since 1991, the federal government has relied on recommendations of the American Medical Association’s Specialty Society Relative Value Scale Update Committee, or RUC, to figure out how to set its reimbursement rates.

Medicare determines rates based on the “relative value” of each provider service, and RUC recommends what that value might be. It’s decided by both the time and intensity of the procedure, and cost of malpractice insurance. Then it’s calculated against a cost of living scale by zip code. If a procedure takes longer and requires more specialized skills, it will cost more.

The GAO said the panel operates somewhat secretively. Although the meetings are technically public, all attendees must sign a confidentiality agreement not to disclose what is discussed.

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The auditors also suggest that doctor groups are extremely eager to have influence over the panel. According to the report, provider groups donate about $8 million a year to the committee and “hundreds of physicians” volunteer to be on the panel.

If there are conflicts of interest that skew the panels’ reimbursement rates recommendations, it could have huge implications for the health care system, as well as the federal government, which makes about $70 billion annual in Medicare payments.

The GAO recommended that the Centers for Medicare and Medicaid Services be more transparent about how they set rates by better documenting the process.

Separately, groups like the American Academy of Family Physicians say that CMS should take recommendations from other medical professionals including more primary care physicians, heath economists and consumer advocates, according to California Healthline.

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