Oct 28

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Oct 28

• HSPM J712

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RBRVS

• Leftover issue from last time

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Resource-Based Relative Value System for
physician payment

• In the late 1980s, Medicare led a direct attack
  on how physicians set their prices. Medicare
  implemented the Resource-Based Relative Value
  System for paying doctors.
• It's now used, in various forms, by private as
  well as public payers.

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RBRVS DRGs for doctors?

• No
• DRG-based payment is prospective. It pays a
  certain amount per case, regardless of what
  resources the hospital puts in to the patients
  care.
• RBRVS is fee-for-service payment

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RBRVS DRGs for doctors?

• But Yes in the sense that
• Both came from the US government
• Both simplify payment-setting
• Both based on giving a weight to each unit of
  service
• Weight is proportional to the cost of the service
• Costs are determined by formula, not existing
  market prices
• Payment (Payment for a service with weight 1)
  (Weight of the service)

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Historical context

• Roe, B.B., "The UCR Boondoggle A Death Knell for
  Private Practice?" N Engl J Med, July 2, 1981,
  305(1), pp. 41-45.
• Medicare used Usual and Customary Rates as the
  basis for pricing doctor services.
• Invited abuse. In 1981, a heart surgeon could do
  three 2-4 hour coronary bypass surgeries per week
  at 2500 each and make 350,000 annually.

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RBRVS

• RBRVS was intended to set fees by simulating the
  fees the market would have set if the market
  functioned properly.
• With prices having a consistent relationship with
  cost.
• Hsiao, W.C., Braun, P., Dunn, D., Becker, E.R.,
  DeNicola, M., Ketcham, T.R., "Results and Policy
  Implications of the Resource-Based Relative-Value
  Study," N Engl J Med, September 29, 1988,
  319(13), pp. 881-888.
• This article, which is printed second in the
  original magazine, gives the general idea of
  RBRVS.

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Physician work measure for RBRVS

• Hsiao, W.C., Braun, P., Yntema, D., Becker, E.R.,
  "Estimating Physicians' Work for a Resource-Based
  Relative Value Scale," N Engl J Med, September
  29, 1988, 319(13), pp. 835-841.
• This article (printed first in the NEJM issue)
  looks specifically at how they measured the
  physician's work entailed in any particular
  procedure.

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The goal

• Hsiao, an actuary by training, was later a major
  consultant to the Taiwan government for the
  reform of its health insurance system.
• Here, he suspected that physician fees were out
  of proportion to cost, with some surgical
  specialties much more handsomely reimbursed than
  primary care.
• Making the fees proportional to cost would
  encourage physicians to pursue careers in
  "primary care, rural practice, and
  out-of-hospital services," rather than flocking
  to surgical specialties.

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RBRVS formula

• RBRV (TW)(1RPC)(1AST)
• Resource-Based Relative Value (Total Work)
  (Specialty Practice Cost Index)(Specialized
  Training Cost Index)
• Specialty practice cost is hired labor and
  capital
• Specialized training cost is the opportunity cost
  of spending time in residency.

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Total Work formula

• Total Work Time(Complexity Index)
• Complexity index sweat factor
• Includes Pre- Intra- Post-service work
• Based on surveys of physicians

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Compares actual Medicare payments with what
Medicare would pay if proportional to RBRV and
total-payment-neutral
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Potential RBRVS impact

• If Medicare fees were adjusted to the RBRVS but
  total spending unchanged ("budget-neutral"),
  thoracic surgery, ophthalmology fees would drop
  gt40. General surgery fees would drop about 15.
• Internal medicine fees would rise gt30. Family
  practice fees would rise gt60.
• Ontario's negotiated fee schedule more uniform
  relative to RBRV than mean Medicare payment.

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Limitations of RBRVS

• which Hsiao recognized
• The CPT-4 classification system for physician
  services, like any classification system, has
  variations within the classes. Some docs, such as
  those who treat poor people, may have more
  difficult patients within RBRV classes.
• No extra payment is allowed for better outcomes.
  RBRVS is based on resource inputs, not benefits.
  There's no financial incentive for higher
  quality.

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As implemented by SC Medicaid

• Naus, F., Medical Management Institute 1991
• Nose fracture CPT 21325

RVU category US SC adj SC RVU
Work RVU 174 0.971 169.1
Overhead RVU 120 0.874 105.1
Malpractice RVU 20 0.457 9.14
Total 314 283.3
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Future purchases?(The future is now!)

• Frontline Sick Around the World (2008)
• or
• The Healing of America A Global Quest for
  Better, Cheaper, and Fairer Health Care
• and
• Sicko
• Optional Marcia Angell, The Truth About the
  Drug Companies How They Deceive Us and What to
  Do About It

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Managed care
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Old system

• Independent self-employed doctors
• Paid fee-for-service
• Not hospital employees
• Hospitals
• Before aseptic surgery, hospitals were places for
  poor people to go to die.
• Or get free care (dispensaries)
• Then became doctors workshops
• Built by philanthropic organizations (non-profit)
• Or doctors as owners (for-profit)

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Old system

• Insurance
• Blue Cross trademark owned by American Hospital
  Association
• Essentially a pre-payment collection agency
• Blue Shield added for doctors
• Buick was the doctors car

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Old system
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Prepaid group practice system
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HMO history

• Mayer, T.R., and Mayer, G.G., "HMOs Origins and
  Development" N Engl J Med, February 28, 1985,
  312, pp. 590-594.

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Early HMO differences from fee-for-service

• Ware, J.E., et al, "Comparison of Health Outcomes
  at a Health Maintenance Organisation with Those
  of Fee-for-Service Care," Lancet, May 3, 1986,
  pp. 1017-1022.
• Siu, A.L., Leibowitz, L., Brook, R.H., Goldman,
  N.S., Lurie, N., Newhouse, J.P., "Use of the
  Hospital in a Randomized Trial of Prepaid Care,"
  JAMA, March 4, 1988, 259, pp. 1343-1346.
• Ware, J.E., Bayliss, M.S., Rogers, W.H.,
  Kosinski, M., Tarlov, A.R., "Differences in
  4-Year Health Outcomes for elderly and Poor,
  Chronically Ill Patients treated in HMO and
  Fee-for-Service Systems," JAMA, October 2, 1996,
  276(13), pp. 1037-1047.

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Forms of HMOHealth Maintenance Organization

• Legal relationship between HMO and docs may be
• Docs own the HMO as, e.g., stockholders or
  partners.
• Prepaid group practice, also called "staff
  model."
• Docs can be salaried and also be partners.
• The Permanente medical group (the doctor half of
  Kaiser Plan) does this
• or
• HMO contracts with docs, who maintain private
  practices
• Independent Practice Association (IPA)

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Forms of HMOHealth Maintenance Organization

• Will HMO pay for visits to docs not in plan?
  (Doctors who are in the HMO constitute the
  "panel.")
• No -- "closed panel."  Closed panel HMOs do pay
  for services of outside doctors for patients who
  have exotic conditions that the HMO panel cannot
  handle, if specifically authorized by the HMO.
• Yes -- "open panel." A fully open panel HMO would
  be a contradiction in terms. Compare PPOs.
• "Gatekeeper" method each subscriber gets a
  primary care doc who must approve in advance any
  visits to specialists. The HMO will pay for any
  service that the "Gatekeeper" approves, even if
  provided by a physician who is not a member of
  the panel. This intermediate form is common, used
  locally by Companion Care of S.C.

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Other forms of managed care

• PPO -- Preferred Provider Organization
• Has a panel, but the PPO pays a share of costs
  for services rendered by providers not on the
  panel. 
• Providers in the panel are "preferred" by the
  PPO it pays a higher percentage of the cost for
  their services.
• POS -- Point of Service -- plans seem the same as
  PPOs to me.

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Following diagrams from

• Bodenheimer and Grumbach, Capitation or
  Decapitation

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Incentive

• HMO

• Fee-for-service

• Doctors have incentive to give less care.
• Is prevention encouraged?

• Doctors have incentive to give more care.
• Is prevention encouraged?

Which is worse for patient trust in the doctor?
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Next slide from

• THE MEDICARE-HMO REVOLVING DOOR THE HEALTHY GO
  IN AND THE SICK GO OUT
• ROBERT O. MORGAN, PH.D., BETH A. VIRNIG, PH.D.,
  M.P.H., CAROLEE A. DEVITO, PH.D., M.P.H., AND
  NANCY A. PERSILY, M.P.H.
• NEJM 1997

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How health insurance competition is working

• http//articles.latimes.com/2006/sep/17/business/f
  i-revoke17
• http//www.calnurses.org/media-center/press-releas
  es/2009/september/california-s-real-death-panels-i
  nsurers-deny-21-of-claims.html
• http//www.consumerreports.org/health/insurance/he
  alth-insurance/overview/health-insurance-ov.htm

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Who Killed Health Care?

• Regina Herzlinga