The Relative Value Scale Update Committee (RUC) And Primary Care Compensation

The American Medical Association (AMA) has been deputized by the U.S. Department of Health and Human Services (HHS) to propose relative values to thousands of medical procedures.  The judgements of the Relative Value Scale Update Committee (RUC) directly affect the compensation of doctors practicing different specialties, to the detriment of primary care:

https://prospect.org/health/2025-01-07-how-ama-undermines-primary-care/

How the AMA Undermines Primary Care
Federal regulators, under Democrats and Republicans alike, help them do it.
By Robert Kuttner - January 7, 2025

More than other nations’, the American medical system is biased in favor of intensive and costly surgical procedures and against basic public health.

The American Medical Association is the professional association and political lobby of the nation’s physicians. Ever since President Harry Truman proposed national health insurance in 1945, the AMA has been an implacable enemy of a single-payer system, though today many harried doctors wish we had it.

It turns out that the AMA is also a prime driver of the gross imbalance between primary care doctors, who tend to be overworked and underpaid, and specialists who make a fine living and have more control over their schedules. The AMA does this via a secretive panel called the Relative Value Scale Update Committee (RUC).

The relative value scale was legislated by Congress in 1989 as a way to assign values to thousands of medical procedures and restrain Medicare costs. The RUC was created by the AMA in 1991 to make sure that that the AMA would dominate the process.

The Department of Health and Human Services then deputized the AMA’s RUC panel to determine how Medicare should compensate different forms of care. HHS accepts about 87 percent of the AMA committee’s recommendations. Medicare compensation in turn heavily influences other compensation.

Though primary care physicians account for more than a third of all doctors, the AMA makes sure that specialists are grossly overrepresented on the RUC panel. The panel typically has between 22 and 26 specialists and subspecialists, out of 32 members.

As a consequence, the standards that the panel uses are biased toward interventionist procedures that favor specialists, and against prevention and engagement with patients, of the sort that good primary care doctors prize. The result is a disparity of pay, which in turn intensifies the squeeze that is leading to primary care doctor burnout, as well as increased costs to the system.

Family physicians and pediatricians typically earn around $200,000 or less. Surgeons earn upwards of $500,000, and more if they are subspecialists. Dermatologists, gastroenterologists, cardiologists, oncologists, and radiologists are also paid handsomely relative to primary care doctors.

There is one other gross conflict of interest. The value scale is based partly on diagnostic codes known as CPT codes, which were also invented by the AMA. Amazingly, CPT codes are copyrighted by the AMA. All hospital systems have to pay the AMA a royalty to use the codes. AMA royalty income runs around $300 million a year, dwarfing other sources of AMA income. This by itself is an appalling and costly capture of a function that should be public.

More than other nations’, the American medical system is biased in favor of intensive and costly surgical procedures and against basic public health. Part of this neglect reflects the fact that despite the Affordable Care Act, close to 100 million Americans spend some part of each year uninsured. Tens of millions more are underinsured, given high deductibles and co-pays, and high rates of claim rejections by insurance companies.

However, the failure to use less costly public-education and public-health strategies to keep Americans healthy is also the result of our disproportionate reliance on costly specialists and invasive procedures. The specialist domination of the RUC panel is one factor among many, but it reinforces the imbalance and the burnout.

I recently wrote an investigative piece on the dominant vendor of electronic databases for hospitals, Epic Systems, which hospitals use to bill. Hospitals that use the AMA-licensed CPT codes to add diagnoses to patients, even if they are not treating those ailments, earn higher reimbursement from Medicare. Most of the burden of this time-consuming data entry—not for clinical uses but for profit maximization—falls on primary care doctors.

So the undervaluing of primary care, courtesy of the AMA, and the administrative chores added by Epic interact to promote doctor burnout. It’s no accident that the campaign by doctors to unionize, even at the nation’s most prestigious hospitals like Boston’s Mass General Brigham, is led by burned-out primary care doctors.

THE AMA IS SUCH A POWERFUL PLAYER POLITICALLY that the Department of Health and Human Services, even under Democrats, has never had the political guts to challenge its domination of the system. In fact, there is an alternative to the AMA’s copyrighted CPT codes. It’s called the International Classification of Diseases, operated by the World Health Organization, and used by most countries. And the ICT is in the public domain.

On a few occasions, Congress has threatened to change the system, but the AMA invariably finds a way to cut a deal. In 2003, the Senate actually passed legislation to switch to the ICD, but the AMA reportedly got that killed by agreeing to support the 2003 Medicare Modernization Act, which added privatized Medicare drug coverage.

Studies have found that the AMA domination of the Medicare payment system inflates costs, not just by promoting overreliance on specialists, but by inflating how procedures are compensated. In many cases, a new procedure is simpler and less time-consuming than the one it replaced, but research shows that the RUC often sets fees based on older, more costly procedures.

The right likes to go after the administrative state as if it had a left-wing mind of its own. But the AMA capture of the fee-setting process is yet another case of the state being the instrument of private special interests at public expense.

In a normal country, especially one with national health insurance, payments to specialists and general practitioners (GPs) are determined by government, not by an interest group. In Britain, where there is a shortage of GPs, the British Medical Association has been a force for improved pay and working conditions of GPs. Their American cousins at the AMA play the opposite role.

In the U.S., possible counterweights to overreliance on specialists are either bought off or part of the systemic corruption. You might think the big hospitals would want to economize by reducing what they spend on specialists and relying more on primary care doctors. But specialists are a far more lucrative source of hospital income, so hospitals are another force for maintaining the imbalance.

For instance, there was a time when a patient seeking removal of a small wart, a cryogenic procedure that takes less than a minute, would get it done by a primary care doctor. Today, that takes a referral to a dermatologist, who can bill at a much higher rate. From the perspective of profit maximization, generalists are useful mainly as a source of referrals to specialists.

For at least 40 years, the federal government has tried various gimmicks to contain costs in the health care system. The private players have responded with ever more convoluted inventions to complicate the system and increase their profits. Costs keep inflating. As long as health care is dominated by private interests, trying to contain costs by tweaking payment systems is a fool’s errand.