Insight, analysis & opinion from Joe Paduda

< Back to Home


Medicare-based fee schedules and work comp

Medicare bases the physician fee schedule, known as RBRVS, on estimates of how much time it takes docs to do specific things, plus their operating expenses adjusted for regional cost factors.  That’s a gross oversimplification but close enough. (more on the details of the price-setting process is here.)

Turns out the time estimates are (generally) way overstated, resulting in higher compensation for docs, higher costs for taxpayers, and a whole raft of downstream unintended effects – including higher costs for work comp payers.

The AMA’s Resource Based Relative Value System Update (RUC) Committee actually does the estimating.  According to a great piece in the Washington Post, “the AMA’s estimates of the time involved in many procedures are exaggerated, sometimes by as much as 100 percent [emphasis added]…If the time estimates are to be believed, some doctors would have to be averaging more than 24 hours a day to perform all of the procedures that they are reporting. This volume of work does not mean these doctors are doing anything wrong. They are just getting paid at the rates set by the government, under the guidance of the AMA.”

Who sits on the committee was essentially a secret until a couple years ago, when the Replace the RUC Committee published the names of Committee members, along with their potential conflicts of interest.  Pretty scary reading.

The AMA RUC committee’s estimates come from surveys of physicians, who are explicitly told the surveys are used to set payment levels.  Shockingly, their estimates are seven times more likely to raise the estimate of time required than to lower it, making medicine the only industry that has gotten less efficient over the past decades.

I’d be remiss if I didn’t acknowledge that experts including Brown University’s Dr Roy Poses have been on the RUC story for years; Here’s one of his gentler statements:

The RUC seems to embody a corporatist approach to fixing prices for medical services to create perverse incentives for physicians to do more procedures, and do less conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.  More procedures at higher prices helps physicians who do procedures.  It may help even more the corporations that provide the devices and drugs whose use is necessitated by such procedures, and the hospitals who can charge a lot of money as sites for performance of procedures.

Impact on workers’ comp

Of the 33+ states with fee schedules for physicians and other providers, all save one – California – use RBRVS as the basis, and California is adopting RBRVS.  The RUC’s time estimates have resulted in estimates that are often twice the actual time it takes to perform a procedure.  Significantly, the Post article cited orthopedics as one area where time estimates are particularly generous.

It is important to note that CMS sets the dollars per time unit, so the ultimate cost is partially based on that as well as the AMA’s time estimate.  But there’s no getting around the AMA’s RUC is inflating the time, and thereby inflating their members’ income, and employers’ and taxpayers’ work comp costs.

Kudos to the WaPo for their terrific investigative reporting, and to Roy Poses for being on top of this for years.  

What does this mean for you?

A deeper understanding as to why our health care system is – by far – the most expensive in the known universe.

8 thoughts on “Medicare-based fee schedules and work comp”

  1. I think you left out that many if not most doctors these days are employed by for profit corporations in mega clinics. Those clinics seem to require their doctors to refer patients to additional providers within their clinics for everything from a simple throat culture to other specialties. The point I’m trying to make is that doctors are now mostly employed by corporations and therefore it should be no surprise that their primary concern is profits and not outcomes.

  2. And from an work comp perspective there is no representation from Occ Docs on the RUC. I guess ACOEM, being around since 1916, doesn’t count for much. Soo much for parity.

  3. Joe, as chair of ACOEM’s Work Fitness & Disability Section, I too have been curious about the CPT-code creation process as well as the RVRBS time-estimating process. In addition to what you have reported, we have discovered that these committees are highly political within the “house of medicine” (this is ultimate insider baseball).
    To date, ACOEM has been unsuccessful in getting codes created that would allow doctors to bill for the time-consuming process of providing guidance about work capacity, specific issues addressed in workers’ compensation and disability benefits programs, and other multi-party communications required by the stay-at-work and return-to-work process. CMS’ lack of interest in the impact of health conditions on working age people’s ability to function distorts the process.
    However, I would like to point out that the quote you cited above also pointed out that the comparatively LOW VALUE assigned to non-procedural codes also DISCOURAGES doctors from: ” …conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.”
    I hope we ALL AGREE that doctors should be REWARDED for spending more time listening to, educating and counseling their patients, as well as researching and developing evidence-based long-term treatment plans. The science shows these things improve outcomes.
    Sadly, the lopsided structure of codes that favor procedures and discourage thinking / talking been recognized and lamented for a LONG TIME but NOTHING SIGNIFICANT has been done to rectify it — yet.

  4. I get everyone is anti – procedural now a days. However, by reducing the physician fee schedule so drastically, you are discouraging physicians from doing these procedures in a lower cost outpatient settings to higher cost hospital setting. Where, I might add, outcomes and infection rates are worse. Especially with the elderly and chronically ill patients (where most of your costs come from) – a consultation is not going to save some ones leg or have someone be able to dialyze if their veins and arteries are clotted.

    These across the board, sweeping cuts (or revaluations) are not sound policy, not good for clinical outcomes – nor will it save costs.

  5. A very interesting piece, Joe. Medicine is indeed the only industry that always seems to be the less efficient one. But, I don’t see any reforms or revaluations being done anytime soon.

    1. The proposed 2014 Physician Fee Schedule has revalued the work RVU’s and physician costs RVU’s on many CPT codes – and in many cases there have been drastic cuts. I don’t think there is a specialty that has not been touched. Medicare has been cutting (in most areas) for years now – whether is lowing the conversion factor, GPCI, revaluation… sequestration… and at some point it’s not going to make any sense in treating Medicare patients, that’s a stark reality. Death by a 1000 cuts.

  6. I completely disagree. RBRVS values are not overstated, they are understated. Take for example a typical doctor’s visit (CPT code 99241). It includes a low complexity problem with a limited history and physical examination. The visit would be about 20 minutes in total length. What it does not include is the time the doctor needs to document the visit (charting), the prescription (if any) the doctor has to write, the telephone calls the doctor answers, etc…. Who pays for that? Is that supposed to be free? When we see a lawyer, does his billing stop after we leave his office? Of course not, but noboby complains about that.

    Why do you think there’s a shortage of doctors? Does anyone want to give away for free part of their valuable work? Why do we expect that from doctors but not lawyers, or other professionals?

    Perhaps a solution is to allow doctors to bill for their time, like lawyers. It is certainly one way to compensate doctors for their valuable time & expertise. Also, it may also help to get users to pay attention to medical utilization.

    No, I am not a doctor.

Comments are closed.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



© Joe Paduda 2023. We encourage links to any material on this page. Fair use excerpts of material written by Joe Paduda may be used with attribution to Joe Paduda, Managed Care Matters.

Note: Some material on this page may be excerpted from other sources. In such cases, copyright is retained by the respective authors of those sources.