Six years after the Medicare physician payment system known as the "resource-based relative value scale," or RBRVS, went into effect, the medical community can see a clear reapportionment of the Medicare revenue pie.
Medicare in 1992 stopped basing physicians' fees on their individual charges and began using the RBRVS to set uniform fees for all physician services and procedures.
"What (essentially has happened) is the RBRVS has resulted in the entire country being on the same fee schedule," says Michael Maves, executive vice president of the American Academy of Otolaryngology.
Because of RBRVS, physicians say, Medicare payment is much fairer than it used to be. Payments for primary-care office visits and complex surgical and procedural services alike are based on an objective analysis of the service offered.
The system has eliminated high payments for procedures considered to be overvalued and also payment discrepancies based on geography or specialty. And it has increased the incomes of primary-care physicians.
"It redistributed the Medicare payment pie in a way that was favorable to primary care," says Robert Doherty, vice president for governmental affairs and public policy with the American Society of Internal Medicine.
According to the 1997 report of the former Physician Payment Review Commission, payments per primary-care service grew an average of 6.9% a year between 1992 and 1995. By comparison, fees per surgical service grew just 2.8% a year and, per nonsurgical service, they decreased 0.2% a year.
Between 1992 and 1995, the RBRVS contributed to a total 14.8% increase in income for family practice physicians, according to American Medical Association data published in the PPRC's 1997 report. 1993, the year following the implementation of the system, marked the beginning of the upward trend in family physicians' real income, which had been flat since 1985.
During the same period -- 1985 to 1993 -- AMA data shows general surgeons' income grew 16%. But between 1993 and 1995, their income slid by 4.6%.
Doherty suggests, however, that the increase for primary-care physicians has been less than it might otherwise have been. Because budget legislation has kept payment rates from growing, physicians were barred from billing beneficiaries any more than 15% above Medicare's approved payment rate. Also, larger conversion factors for surgical procedures than primary-care services from 1993 through 1998 has kept Medicare from shifting more money to office visits, he says.
"Because of people's expectations, it (RBRVS) just hasn't been the bombshell it was supposed to be," says Robert Graham, M.D., executive vice president of the American Academy of Family Physicians.
But the new calculation has been more widely used than Medicare, which represented just 19.8% of expenditures for physicians' services in 1995. Because of the ease with which it can be used, many private payers also use the RBRVS to calculate their fees.
"It lends itself to a certain ease of management," says Grant Rodkey, M.D., the former chairman of a panel that advised HCFA on RBRVS issues.
The 1995 report of the PPRC, which was merged into the Medicare Payment Advisory Commission last year, said 30 of 108 health plans surveyed by the consulting firm Mathematica Policy Research and the Medical College of Virginia were using the RBRVS as a basis for fees.
And because private payers know exactly what Medicare is paying for every procedure, they can use Medicare rates as a negotiating benchmark, which may explain a narrowing of the gap between fees paid by Medicare and private insurers. The PPRC projected Medicare fees would rise to 68% of the average private insurers' rate in 1995, up from 61% in 1992.
"It used to be that Medicare was the floor of your reimbursement," Maves says. "In many areas now, it's the ceiling."
The Medicare rates give insurers an easy mechanism for controlling fees, he says. The conversion factor can be used to control physician expenditures much like a thermostat.
But the ability of insurers to use the RBRVS to manage costs has angered many physicians. Physicians say insurers use the RBRVS only when it yields a fee that costs them less.
For example, Medicare pays a physician performing endoscopic sinus surgery a "global" fee for the procedure and services rendered the same day, or sometimes up to 10 days after the surgery, Maves says. Plus, they are permitted to bill Medicare for follow-up office visits beyond the 10-day window.
Some insurers, however, require that the global payment cover office visits for 90 days after the surgery, which means physicians miss payments for as many as five follow-up visits, payments that would be allowed under Medicare rules.
"The private carriers take the parts of the RBRVS that they like and discard what they don't like," says William Gee, M.D., the American Urological Association's representative to the HCFA physician-payment advisory panel.
Primary-care physicians also are quick to note that, for now, the RBRVS covers only physicians' professional work, which is worth about 54% of Medicare payments. Practice expenses, such as office staff time, supplies and equipment, still are compensated on a historical-charge basis. Practice expenses account for roughly 41% of all Medicare physician expenditures.
Changing practice-expense compensation to an RBRVS-like system could shift about $4 billion from surgical and specialty procedures to primary-care office visits. Although such a change had been mandated to begin on Jan. 1, Congress delayed it after a political battle in the midst of last year's balanced-budget debate.
The current plan is that the change won't take effect until 2002, 10 years after the RBRVS was established.
Beyond these disappointments, however, the gradually increasing share of Medicare expenditures for primary-care services is one of many trends in healthcare that is serving to encourage medical students to pursue careers in primary-care specialties, Doherty says.
The much publicized oversupply of specialists has resulted in a shortage of jobs for many doctors. According to the 1997 PPRC report, more than one-fifth of physicians who graduated from a gastroenterology program in 1995 had difficulty finding full-time clinical positions, compared with less than 1% of family physicians who graduated at the same time.
Data from the Association of American Medical Colleges, published in the 1997 PPRC report, shows that nearly 32% of medical students wanted a career in primary-care in 1996, up from about 15% when the RBRVS was implemented.
For lawmakers, the RBRVS has given the federal government an easy mechanism to use to rein in the growth of Medicare, which has cost physicians. Simply by keeping the conversion factor low, lawmakers can ensure physician payments don't bust the budget.
Imposing the RBRVS and a system of growth restraints on Medicare has kept the lid on spending. Under a formula prescribed by law, Medicare sets a physician-spending target and then cuts fee increases in the years physician spending exceeds the target.
As a result, Medicare physician spending grew only 36.6% between 1990 and 1995, the time in which the RBRVS payment system went into effect. Physician spending growth was nearly twice that rate between 1985 and 1990.
In fact, physician payment growth has been so slow that it was not an issue in the debate over the balanced-budget law enacted last year.
The act trimmed physician payments just $5.3 billion between 1998 and 2002, about 3.1% of the projected $169.5 billion that Medicare would have paid physicians during those five years had the budget law not passed.
Jonathan Gardner is Washington correspondent for Modern Healthcare, sister publication of Modern Physician.