How Is Physician Work Valued?

Abstract

Strategies to value physician work continue to evolve. The Society of Thoracic Surgeons and The Society of Thoracic Surgeons National Database have an increasingly important role in this evolution. An understanding of the Current Procedural Terminology (CPT) system (American Medical Association [AMA], Chicago, IL) and the Relative Value Scale Update Committee (RUC) is necessary to comprehend how physician work is valued. In 1965, with the dawn of increasingly complex medical care, immense innovation, and the rollout of Medicare, the need for a common language describing medical services and procedures was recognized as being of critical importance. In 1966, the AMA, in cooperation with multiple major medical specialty societies, developed the CPT system, which is a coding system for the description of medical procedures and medical services. The RUC was created by the AMA in response to the passage of the Omnibus Budget Reconciliation Act of 1989, legislation of the United States of America Federal government that mandated that the Centers for Medicare & Medicaid Services adopt a relative value methodology for Medicare physician payment. The role of the RUC is to develop relative value recommendations for the Centers for Medicare & Medicaid Services. These recommendations include relative value recommendations for new procedures or services and also updates to relative value recommendations for previously valued procedures or services. These recommendations pertain to all physician work delivered to Medicare beneficiaries and propose relative values for all physician services, including updates to those based on the original resource-based relative value scale developed by Hsaio and colleagues. In so doing, widely differing work and services provided can be reviewed and comparisons of their relative value (to each other) can be established. The resource-based relative value scale assigns value to physician services using relative value units (RVUs), which consist of three components: work RVU, practice expense RVU, and malpractice RVU, also known as professional liability insurance RVU. The Centers for Medicare & Medicaid Services retains the final decision-making authority on the RVUs associated with each procedure or service. The purpose of this article is to discuss the role that the CPT codes and the RUC play in the valuation of physician work and to provide an example of how the methodology for valuation of physician work continues to evolve.

Current Procedural Terminology Coding for Surgical Pathology: A Review and One Academic Center's Experience With Pathologist-Verified Coding

“…Category III codes are a temporary set of codes that do not yet meet criteria to be approved as Category I codes. 6 They allow for a procedure/service to be tracked in order to determine the extent of use nationally. After 5 years, either these codes are determined to meet criteria to be converted to Category I or they are retired.…”

“…After 5 years, either these codes are determined to meet criteria to be converted to Category I or they are retired. 6 Category II codes are optional supplemental tracking codes used for performance measurement, and they enable data collection regarding quality of care.…”

“…The amount paid by Medicare for a given service (ie, a specific CPT code) is determined by CMS, usually based on recommendations submitted by the Relative Value Scale Update Committee, which was created by the AMA. 6,9 The Relative Value Scale Update Committee, which includes 31 physicians and 300 medical advisors from multiple specialties, makes recommendations based on assessment of the resources required to provide each medical service. The resulting resourcebased relative value scale is used not only by CMS but also by most other payers.…”

“…On average, the physician work component accounts for 51% of the total relative value for a given service, the practice expense component for 45%, and the professional liability component for 4%. 6,10 Actual Medicare payments to physicians are based on the Physician Fee Schedule, which is established by a formula using the resource-based relative value scale, geographic practice cost indexes, and a conversion factor. 6,7,11 Other payers using the resourcebased relative value scale as a basis for payment may use different conversion factors or other methods to convert relative value units to payment.…”

“…6,10 Actual Medicare payments to physicians are based on the Physician Fee Schedule, which is established by a formula using the resource-based relative value scale, geographic practice cost indexes, and a conversion factor. 6,7,11 Other payers using the resourcebased relative value scale as a basis for payment may use different conversion factors or other methods to convert relative value units to payment. 6 Of note, the Physician Fee Schedule conversion factor was previously adjusted annually using the problematic Sustainable Growth Rate formula, which necessitated regular action by Congress to prevent unsustainable cuts but which will be eliminated under the Medicare Access and CHIP [Children's Health Insurance Program] Reauthorization Act of 2015 (MACRA), which creates a more performance-based system of incentives and penalties.…”