Bill aims to reshape medical pricing

A bipartisan group of legislators has drafted a bill that would reshape the way the nation pays doctors, responding to criticism that the nation’s method of valuing medical procedures misprices payments.

The pricing system, used by Medicare and most private insurers, depends upon assessments made by the American Medical Association, the chief lobbying group for physicians. In confidential meetings held every year, the AMA assigns values to thousands of services doctors provide.

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But some of those values are based on exaggerated assumptions for how long a procedure takes and helps unnecessarily raise the doctors’ fees for those services, a Washington Post investigation found. The Post reported its findings this past weekend.

The values are based “on a one-sided negotiation — doctors negotiating with themselves,” said Rep. Jim McDermott (D-Wash.), a critic of the process who has introduced a separate bill on the issue. “There’s a lot of you scratch my back, I’ll scratch yours.”

The legislation, partly based on proposals from Congress’s Medicare watchdog, would require Medicare officials to collect data such as how much time doctors spend doing procedures. It would reduce the doctor payment for overvalued services. A House subcommittee approved a draft of the bill Tuesday.

The bipartisan group’s focus on mispriced services is part of a much larger bill that also seeks to rescind the complex annual adjustments made to Medicare payments for physicians. Instead, the lawmakers proposed adding regular annual increases to doctor payments and add further incentives based on performance.

A complex set of formulas based on inflation, economic growth and other factors determines the physician payment rate. But each year since 2003, Congress has overridden those formulas, which this year called for a 25 percent cut.

“The old method was a cost-control mechanism that didn’t work," said Miriam Laugesen, a professor at Columbia University’s school of public health who has studied the intricacies of physician pay. “Congress kept choosing to step in. This is a significant break from the past.”

The draft bill would replace the formulas with annual increases of 0.5 percent for the next 10 years and provides further financial incentives for doctors to adhere to best practices. It is, in other words, a version of pay for performance.

The AMA has long sought to undo the current method because the annual changes instituted by Congress are unpredictable and create uncertainty for doctors.

The old method of calculating the payment rate “threatened Medicare annually, sometimes monthly, with large pay cuts that have hobbled physicians’ ability to run their practices and, more importantly, distracted them from their top priority of caring for patients,” said Rep. Fred Upton (R-Mich.), one of the bill’s sponsors. The others were: Rep. Joe Pitts (R-Pa.), Michael C. Burgess (R-Tex.), Frank Pallone Jr. (D-N.J.), Henry A. Waxman (D-Calif.) and John D. Dingell (D-Mich.).

AMA President Ardis D. Hoven issued a statement saying the legislation “represents continued progress, though work remains to be done.”

The AMA has also been contacting legislators trying to defend its valuations after The Post’s investigation found that many of the values placed on procedures are based on flawed assumptions regarding how long those procedures take.

By federal law, the values are supposed to be based on the time and intensity of the procedures. The values, in turn, determine what Medicare and most private insurers pay doctors.

But The Post found that the AMA’s estimates of the time involved in many procedures are exaggerated, sometimes by as much as 100 percent, and that if the time estimates are to be believed, some doctors would have to be averaging more than 24 hours a day to perform all the procedures they are reporting.

Many of the doctors achieving this seemingly miraculous proficiency were gastroenterologists.

In their response to members of Congress and the public, the AMA offered statistics indicating that gastroenterologists perform only six to eight procedures per day on average.

The AMA figure, however, appears to be a daily average. As the data reviewed by The Post show, many doctors primarily schedule their procedures for certain weekdays. It is on those days, not reflected in a daily average, that doctors rack up the high volumes that make the AMA time estimates improbable.

The legislators are clearly concerned about the problem of how doctor services are priced.

“A lack of accurate and meaningful data on costs has hampered the ability of Medicare to review the accuracy of payments for services and identify which services are improperly valued,” according to a fact sheet issued Monday by the House Energy and Commerce Committee.

But McDermott, a physician and longtime critic of the AMA process for setting values, would like to go further in overhauling the system than the current bill.

He has introduced separate legislation that would create a federal advisory committee that would weigh in on the values that determine physician pay — essentially giving the government an alternative to the recommendations of the AMA.

“I’m not anti-doctor,” said McDermott, who once was a practicing psychiatrist. “But there has to be some reality here.”

 
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