Early this month, a group of 29 doctors gathered in a modern conference room at the Hyatt Regency Chicago, a few blocks from Lake Shore Drive. Over the course of four days, the little-known group of mostly specialists made a series of decisions crucial to the massive government entitlement program known as Medicare – issuing recommendations for precisely how Medicare should value more than 200 different medical procedures.

As the members of the organization waded through technical discussions ranking procedures by how much time, skill, and mental effort they required, more than 100 invitation-only consultants, lawyers, and medical society representatives hunched over their laptops taking notes.

If history is any indication, the Chicago group’s decisions will weigh heavily on how much Medicare pays doctors. But the members of this powerful panel are not employed by the federal government. Instead, the group is comprised almost exclusively of physicians themselves, the very people who have the most to win or lose based on how Medicare values the work they perform.

Known as the American Medical Association/Specialty Society Relative Value Scale Update Committee, or RUC, the group is unknown to much of the medical profession. Yet for almost two decades, the committee has had a powerful influence on Medicare payment rates. Since 1991, the RUC has submitted more than 7,000 recommendations to the Centers for Medicare and Medicaid Services (CMS) on the value of physician work. CMS has overwhelmingly rubber-stamped RUC recommendations, accepting more than 94 percent, according to AMA numbers.

That record, critics say, means CMS is handing over some of its payment policy decisions to a physician organization with a massive and obvious conflict of interest. The arrangement has been criticized by bodies like the Government Accountability Office and MedPAC, the independent agency that advises Congress on Medicare issues. But no group has cried out louder than family doctors, who say CMS reliance on the secretive group has undervalued face-to-face consultation between doctors and patients while overvaluing expensive high-tech medical procedures and imaging.

In response to proposed federal rules for verifying medical procedure values, The American Academy of Family Physicians suggested in July that CMS find experts outside of the RUC to collect and analyze evidence for validating values. It suggested looking for experts who are “less invested financially in the outcome. In medicine, we call this ‘getting a second opinion.’ ”

The AMA, which says the RUC costs more than $7 million a year to run (including volunteer physicians’ lost wages), argues that the committee is nothing more than an independent group practicing its First Amendment right to petition the federal government. But the AMA does not try to downplay the RUC’s goal. An AMA physicans’ guide puts it this way: “From the AMA’s perspective, the RUC provides a vital opportunity for the medical profession to continue to shape its own payment environment.”

Shaping its Own Payment Environment

The story of how the RUC took a lead role in influencing Medicare payments to physicians began in the early 1990s, with the adoption of Medicare’s Resource-Based Relative Value Scale (RBRVS), a reimbursement system that pays doctors for medical procedures, imaging, and tests based on the relative costs of providing them.

Under that reimbursement system, CMS defines physician labor in “work units,” and ranks procedures relative to each other. For example, a doctor who performs a detailed office examination on a patient with moderate health issues is awarded 1.5 work units. Brain surgery to remove a tumor is awarded 57.09 units . Physician work units account for 52 percent, on average, of a procedure’s total value. Practice expenses and malpractice insurance costs make up the rest.

Each year, CMS, through the federal rules-making process, sets values for new and revised medical procedures within the system. It performs a comprehensive review of values every five years.

The AMA has been involved in the reimbursement system since the beginning, serving as a contract liaison between practicing physicians and the Harvard researchers who initially ranked physician services. The role ensured medical societies were “involved in important aspects of the development of relative values for their specialties,” according to an AMA handbook.

Since 1991, the AMA process to influence CMS payment rates has relied on two affiliated groups: The RUC’s 29 members, and the RUC advisory committee, which includes representatives from 109 AMA-recognized specialty societies representing cardiologists, surgeons, family physicians, and others.

To develop the suggested work values for the new and revised services it passes on to CMS, the RUC directs specialty societies first distribute physician surveys that rank procedures based on time, difficulty, skills required, and other criteria. Members of the RUC advisory committee review the surveys, then propose a work value to the RUC committee. In most cases, members of the advisory committee representing specialists who perform that procedure make presentations to the RUC. For example, if the procedure is a heart surgery, a representative of the American College of Cardiology would likely help present the proposed work value.

Dr. Barbara Levy, who has served on the RUC since 2000 and is the current chair, said that since specialty societies have a vested interest in the procedures, the RUC assumes their suggestions are inflated. It’s the work of the RUC process, Levy said, to reach a correct relative value.

“We assume that everyone is inflating everything when they come in,” Levy said. “They are wanting to fight for the best possible values for their specialties.” During the next part of the RUC process, however, Levy said the inflated values are revised.

After sometimes heated discussions of each value, RUC members vote by secret electronic ballot. If the value passes the RUC, it is sent to CMS. If CMS accepts the value, it is included in the Medicare physician fee schedule. New values are open for public comment and are considered final after one year.

Dr. Neil Brooks, a family physician from Connecticut, was a RUC member for four years, ending in 2005. During his tenure, Brooks said RUC committee discussions ran eight to ten hours a day for three or four days. Brooks called the process “beyond tedious” as well as, initially, “opaque.” It takes “a year of doing it before you get a good idea of what is going on,” he added.

The process is also highly political, with battle lines and alliances drawn between specialties, Brooks said.

“Certainly there were alliances,” Brooks said. “People were protective of their turf. If radiology presented a new set of codes that had to do with imaging procedures, there was a feeling that some people would go along with that if radiology would go along with other things.” Mostly, he said, it was primary care physicians against everybody else.

The AMA disputes reports of alliances within the RUC. Although it declined to make voting results public (the AMA said it does not keep records of votes ), it said voting does not usually align in blocs, and is often contrary to the apparent self-interest of individual RUC members.

Despite paychecks that are influenced by positions taken during the RUC, and the fact that members are sponsored by medical societies who advocate for higher Medicare payments, Levy, the RUC chair, said RUC members don’t vote to enrich themselves. “Each member votes as a member of the RUC and not a member of their specialty society,” Levy said, although AMA staff acknowledged she does not see how individual members vote.

What truly happens in the RUC is secret. Votes are typically taken by electronic ballot, and RUC members are not informed of how other members voted. Meeting minutes are not released to the public. And all RUC members and observers agree to a confidentiality pledge that they will not disseminate documents or discussions from the meetings.

“These are the most important incentives that influence medical decisions in the country,” said Dr. Roy Poses, a general internist and clinical associate professor at Brown University.

In 2007, Poses, who has blogged about the RUC, asked the AMA for a list of RUC members. The AMA declined, saying it does not give out the information to shield the RUC from industry lobbying. “Why isn’t this a public process of some sort? That is a huge question, and I have no idea the answer,” Poses said. The AMA did provide the current membership list to the Center, and the list is available in a book the AMA sells for $91.95, or $20 less to association members.

The Primary Care Gap

Primary care physicians, the non-specialist doctors that patients usually visit first with a health problem, have long complained of getting pummeled by the RUC process.

Although primary care physicians provide about half of Medicare physician visits, primary care physicians say they are outgunned by the surgeons and other specialists among the 26 RUC members who have voting privileges. Since the specialties are all fighting over slices of the Medicare physician payment pie, and many specialists make the bulk of their profits on procedures, primary care doctors say those specialists avoid increasing the value of the procedure codes that are primary care’s bread and butter.

“They think what we do can be done by a robot,” said Brooks, the Connecticut family physician. “Everyone thinks what they do is harder than what everyone else does.”

The AMA says the RUC has not damaged primary care interests. It disputes that primary care physicians are at a voting disadvantage, saying 14 of the 26 voting members on the RUC are from specialties whose Medicare charges are primarily derived from billing codes associated with patient evaluation and disease management. It points to 1997 and 2007, when the RUC suggested significant across the board increases for primary care codes, which were accepted by CMS, despite strong disapproval by some other medical specialties.

Levy, the RUC chair, said there has been strong support for primary care within the organization. “We recommended higher increases in 1997 than CMS accepted,” Levy said.

Health policy researchers and government investigators, however, have criticized the RUC process.

In a 2010 report to Congress, MedPAC said the RUC has improved its value review process but problems remain. “Categories of services without new procedures – such as primary care – become undervalued over time and thus risk being underprovided,” the report said. “The converse – that overvalued services may be overprovided – is also a concern.”

Some of the harshest RUC critics have tied the organization to the decline in medical students studying primary care.

In a 2010 commentary in the Journal of the American Medical Association, Dr. John Goodson, a primary care physician and associate professor at Harvard Medical School, wrote that the RUC helped foster a payment system that creates a disincentive for students to choose primary care. With primary care physicians paid half or less than half than many specialists , the incentive to go into the field has dried up, Goodson said in an interview. Although CMS is ultimately responsible for payment inequity, Goodson said the RUC hasn’t done what it should do to fix it. “That’s where the RUC has failed in its self-appointed mission,” he said.

Defying Gravity

Critics of the RUC’s track record say CMS reliance on the committee has led to procedure values that defy gravity. Among the 2,739 procedure codes for which the RUC made recommendations during the first three five-year-reviews, only 400 led to work values that decreased, a number that critics say is unconscionable.

Dr. Robert Berenson, a physician, health policy expert, and fellow at the Urban Institute, said the time it takes doctors to perform medical procedures usually falls over time. Years after tackling what was once an innovative surgery, for example, a surgeon can often perform the same procedure in a fraction of the time. But that efficiency rarely leads to a cut in Medicare value.

Berenson represented the American College of Physicians on the RUC from 1992 to 1994. He left in frustration. “Every specialty society requested up values and never came in requesting down values,” Berenson said. “I became the protagonist saying this system does not work. I made a motion to seek medical directors of managed care plans to help us identify overvalued services. I was roundly jeered.”

Since leaving the RUC, Berenson has become a proponent of using objective measures to value physician procedures. “If we are spending $70 billion on physician payments, surely we can find a way to rely on real data to inform the values rather than relying on self-interested estimates,” Berenson said.

A 2006 study by the research institute RTI International suggested that using surgery logs may be one way to find misvalued procedures. The study compared RUC physician-reported times for 60 surgery-related codes to data gathered from 148 hospitals’ operating room logs. The RUC-reported times were longer by up to almost two hours.

But perhaps the most stinging criticism of CMS reliance on the RUC came in a 2006 MedPAC report to Congress on misvalued procedures. MedPAC said CMS relies too heavily on physician specialty societies and suggested the agency should “establish its own group of experts, separate from the RUC.” So far, CMS has not taken Medpac’s advice.

In response to the 2006 MedPAC criticism, the RUC formed an internal workgroup to indentify potentially misvalued services. It now screens for procedures that fit a list of criteria that might indicate misvalued services, including high volume growth.

Among 7,000 individual services paid for by Medicare, the RUC workgroup since 2006 has indentified 853 physician services for review. Among those services, the work value fell for 221, rose for 34, and stayed the same for 177. Codes for 231 procedures are still under review and 76 were deleted.

The RUC also recommended revisions to direct practice expenses (the additional costs for providing care including nursing labor and medical supplies) for 114 procedures. The AMA said the reviews led to redistribution of procedure values worth more than $100 million since 2009. It expects a larger redistribution in 2011 if CMS adopts pending RUC recommendations.

The GAO, however, has had less praise for the effort.

In a 2009 report , the investigative arm of Congress said one of the methods the RUC five-year review group uses to identify codes will likely result in limited savings because the committee “has not focused on services that account for the largest share of Medicare spending.” The GAO also said the process is “resource intensive because it depends on input and consensus from specialty societies.”

Levy said the GAO criticism misunderstood the RUC. The RUC is not looking for savings, she said, but is redistributing dollars among the codes. “To get it right is time consuming,” she said. “If you want to slash and gash and wholesale change the distribution of dollars from one specialty to another, no, our process will not do that immediately.”

Levy also said the RUC’s high success rate in getting CMS to adopt its recommendations should not be a surprise. CMS medical officers and staff attend all RUC meetings and provide input during discussions, which often influences how members vote. “It’s not really a surprise to me then that once the recommendation is presented to CMS that there are not a lot of changes,” Levy said.

A Second Opinion

Among RUC critics, a common refrain is dissatisfaction with CMS’s reliance on a medical special interest group to patrol procedure payments. “Why does CMS depend so exclusively on a group that is not even representative of the physician workforce?” asked Goodson, the Harvard professor.

Jonathan Blum, director of CMS’s Center for Medicare Management, said the committee provides a highly-technical service that CMS would have a hard time replicating through other means. A 2009 political appointee of President Obama’s , Blum said he is aware of the RUC’s history of recommending value increases and CMS’s astronomical approval rate. “The impression is that the past was a much more passive relationship. That is not the case anymore,” Blum said. “We will be setting priorities for the RUC, making sure they understand that CMS is not a rubber stamp.”

RUC critics see hope in the Obama administration and the new health care law, which requires the Secretary of Health and Human Services to periodically review and adjust potentially misvalued codes, and to establish a formal process to validate physician work values.

In proposed rules issued in July, CMS showed no sign of upending the RUC process, but said the agency does “intend to establish a more extensive validation process.” The agency asked for public comments on possible methods for validating physicians work, including using time and motion studies.

In comments to CMS over the proposed rules, the AMA pushed against using objective data from time and motion studies, which it called neither feasible nor affordable. Instead, it suggested the status quo.

“The use of physician surveys has provided a consistent, fair, and relative source of data for nearly twenty years,” the association wrote, “and the AMA finds no justification to abandon this approach. ”

CMS is expected to post its final rules by Nov. 1. Three months later, in February, the RUC will meet again to consider codes, this time for three days at the Naples Grand Beach Resort in Naples, Florida.