Medicare Physician Payment Rates: Better Data and Greater Transparency Could Improve Accuracy
Published: 2015-05-21T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Payments for Medicare physicians' services totaled about $70 billion in 2013. CMS sets payment rates for about 7,000 physicians' services primarily on the basis of the relative values assigned to each service. Relative values largely reflect estimates of the physician work and practice expenses needed to provide one service relative to other services.
The Protecting Access to Medicare Act of 2014 included a provision for GAO to study the RUC's process for developing relative value recommendations for CMS. GAO evaluated (1) the RUC's process for recommending relative values for CMS to consider when setting Medicare payment rates; and (2) CMS's process for establishing relative values, including how it uses RUC recommendations. GAO reviewed RUC and CMS documents and applicable statutes and internal control standards, analyzed RUC and CMS data for payment years 2011 through 2015, and interviewed RUC staff and CMS officials.
section_title: What GAO Found
paragraphs: The American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) has a process in place to regularly review Medicare physicians' services' work relative values (which reflect the time and intensity needed to perform a service). Its recommendations to the Centers for Medicare & Medicaid Services (CMS), the agency within the Department of Health and Human Services (HHS) that administers Medicare, though, may not be accurate due to process and data-related weaknesses. First, the RUC's process for developing relative value recommendations relies on the input of physicians who may have potential conflicts of interest with respect to the outcomes of CMS's process. While the RUC has taken steps to mitigate the impact of physicians' potential conflicts of interest, a member of the RUC told GAO that specialty societies' work relative value recommendations may still be inflated. RUC staff indicated that the RUC may recommend a work relative value to CMS that is less than the specialty societies' median survey result if the value seems accurate based on the RUC members' clinical expertise or by comparing the value to those of related services. Second, GAO found weaknesses with the RUC's survey data, including that some of the RUC's survey data had low response rates, low total number of responses, and large ranges in responses, all of which may undermine the accuracy of the RUC's recommendations. For example, while GAO found that the median number of responses to surveys for payment year 2015 was 52, the median response rate was only 2.2 percent, and 23 of the 231 surveys had under 30 respondents.
CMS's process for establishing relative values embodies several elements that cast doubt on whether it can ensure accurate Medicare payment rates and a transparent process. First, although CMS officials stated that CMS complies with the statutory requirement to review all Medicare services every 5 years, the agency does not maintain a database to track when a service was last valued or have a documented standardized process for prioritizing its reviews. Second, CMS's process is not fully transparent because the agency does not publish the potentially misvalued services identified by the RUC in its rulemaking or otherwise, and thus stakeholders are unaware that these services will be reviewed and payment rates for these services may change. Third, CMS provides some information about its process in its rulemaking, but does not document the methods used to review specific RUC recommendations. For example, CMS does not document what resources were considered during its review of the RUC's recommendations for specific services. Finally, the evidence suggests—and CMS officials acknowledge—that the agency relies heavily on RUC recommendations when establishing relative values. For example, GAO found that, in the majority of cases, CMS accepts the RUC's recommendations and participation by other stakeholders is limited. Given the process and data-related weaknesses associated with the RUC's recommendations, such heavy reliance on the RUC could result in inaccurate Medicare payment rates. CMS has begun to research ways to develop an approach for validating RUC recommendations, but does not yet have a specific plan for doing so. In addition, CMS does not yet have a plan for how it will use funds Congress appropriated for the collection and use of data on physicians' services or address the other data challenges GAO identified.
section_title: What GAO Recommends
paragraphs: CMS should better document its process for establishing relative values and develop a process to inform the public of potentially misvalued services identified by the RUC. CMS should also develop a plan for using funds appropriated for the collection and use of information on physicians' services in the determination of relative values. HHS agreed with two of GAO's recommendations, but disagreed with using rulemaking to inform the public of RUC-identified services. GAO clarified that the recommendation is not limited to rulemaking.

section_title: Letter
paragraphs: Medicare payments for physicians’ services totaled about $70 billion in  2013. Medicare sets payment rates for about 7,000 physicians’ services  primarily as the result of underlying relative values the Centers for  Medicare & Medicaid Services (CMS), the agency within the Department  of Health and Human Services (HHS) that administers Medicare, assigns  to each service. These relative values largely reflect estimates of the level  of physician work and practice expenses (PE) needed to provide one  service relative to other services. Because the relative resources needed  to provide an existing service can change over time—for example, due to  changes in practice patterns or technology—and because each year new  services are added, ensuring the accuracy of relative values requires  frequent review. Accurate relative values subsequently help ensure the  accuracy of Medicare payment rates for physicians’ services, which are  important for several reasons. For example, misvaluation of these  payment rates can create distorted incentives for physicians to pursue  certain specialties or to over- or underprovide services, which affects  patient care. Misvaluation can also lead to unwise spending of taxpayers’  and beneficiaries’ money as well as affect the accuracy of payment rates  used by other payers, such as Medicaid and private insurers, which are  often based at least in part on Medicare rates.
To help CMS establish accurate relative values (both to generate initial  relative values for new services and to maintain accurate relative values  for existing services), the American Medical Association (AMA) created a  special committee—the AMA/Specialty Society Relative Value Scale  Update Committee (RUC)—comprising representatives from different  specialties. Since 1991, the RUC has met three times per year to review  a subset of physicians’ services, identified in part by CMS and in part by  the RUC, and to develop recommendations to CMS on the resources  needed to provide those specific services.relationship between CMS and the RUC, CMS generally establishes  relative values for those services for which it receives RUC  recommendations once it has reviewed them.
While there is no formal  We, the Medicare Payment Advisory Commission (MedPAC), and  members of Congress have expressed concern about the effect that  CMS’s process to establish relative values based on CMS’s review of the  RUC’s recommendations could have on the accuracy of payment rates  for Medicare physicians’ services. For example, in prior work we found  that CMS did not always establish relative values based on sufficient data  or a documented and transparent rationale, and that CMS did not  systematically focus its efforts—or request that the RUC prioritize its  efforts—on reviewing the physicians’ services that have the greatest  impact on Medicare expenditures. concern about the accuracy of the data gathered by the RUC—which has  a financial stake in the payment rates CMS sets for Medicare physicians’  services—and has recommended that to establish more accurate relative  values and reduce its reliance on the RUC, CMS should create an  independent expert panel to review RUC recommendations and collect  data. Furthermore, some members of Congress have expressed concern  to CMS about the timing and lack of transparency of its process to  establish relative values, which deprives stakeholders of an opportunity to  contribute their expertise and voice any concerns.
See GAO, Medicare Physician Fee Schedule: CMS Needs a Plan for Updating Practice  Expense Component, GAO-05-60 (Washington, D.C.: Dec. 13, 2004). CMS responded  that the majority of its changes were based on RUC recommendations. See also GAO,  Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved When  Services Are Provided Together, GAO-09-647 (Washington, D.C.: July 31, 2009).
To help ensure accuracy in accounting for the relative resources used in  services furnished under the physician fee schedule, Congress recently  passed laws requiring CMS to take certain actions in establishing relative  values. Specifically, in addition to the requirement that CMS review the  relative values of all physicians’ services at least every 5 years, the  Patient Protection and Affordable Care Act (PPACA), the Protecting  Access to Medicare Act of 2014 (PAMA), and the Stephen Beck, Jr.  ABLE Act of 2014 (ABLE) require CMS to (1) periodically identify services  likely to be potentially misvalued using specified criteria; (2) establish a  process to validate the accuracy of relative values; and (3) collect certain  data to use to help establish more accurate relative values. Beginning in  2014, $2 million is appropriated annually for CMS to use to collect and  apply such data, and saving targets are established for adjustments  resulting from the revision of relative values as 1.0 percent of Medicare  physicians’ services payments in 2016 and 0.5 percent in 2017 and  2018.
PAMA also included a provision for GAO to study the process used by the  RUC to develop recommendations for CMS regarding relative values for  specific Medicare physicians’ services.  To respond to this provision, we evaluated  1.  the RUC’s process for recommending relative values for CMS to  consider when setting Medicare payment rates for physicians’  services, and  2.  CMS’s process for establishing relative values for physicians’ services  when setting Medicare payment rates, including how it uses RUC  recommendations.
To evaluate the RUC’s and CMS’s processes, we focused on the  processes used to recommend and establish, respectively, relative values  for 2015, as well as recent and planned changes. Additionally, because  the focus of our report is on how the RUC develops relative value  recommendations for CMS and how CMS uses these recommendations  when establishing relative values, we focused on the processes involving  Medicare physicians’ services specifically identified for full RUC review  and the components of relative values for which the RUC provides  recommendations to CMS.
As a first step in evaluating the RUC’s and CMS’s processes, we  reviewed RUC documents (including RUC documentation on its policies,  procedures, and criteria) and CMS rulemaking pertaining to the  establishment of relative values and we made direct observations of the  RUC’s process and CMS’s involvement by attending the RUC’s  September 2014 meeting. We also conducted numerous interviews with  RUC and CMS officials as well as interviewed selected stakeholders,  such as specialty societies and CMS contractors.
Second, we identified key evaluative criteria to compare the current RUC  and CMS processes against by reviewing (1) applicable laws and  regulations; (2) goals, policies, and procedures established by the RUC  and CMS; (3) federal internal control standards;and publications on these processes. Based on these reviews, we  identified seven key criteria against which we evaluated the current RUC  and CMS processes.   and (4) relevant reports  Last, to provide additional context and summarize the outcomes of the  processes, we performed several data analyses, most of which were  based on publicly available CMS data on the work relative values it  established for payment years 2011 through 2015, and how those values  related to the RUC’s recommendations. For example, among other  analyses, we calculated the extent to which CMS agreed with the RUC’s  recommendations and how this varied by the type of recommendation the  RUC made. We also used data provided to us by the RUC to examine the  number of respondents and range of responses to the surveys the RUC  used to develop its 2015 work relative value recommendations. To  assess the reliability of all the data we used for our analyses, we  reviewed related documentation, interviewed RUC staff and CMS  officials, performed data checks for logic errors and out-of-bound values,  and compared data sources for consistency.determined the data were sufficiently reliable for our purposes.
We conducted this performance audit from July 2014 to May 2015 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Overview of Relative Values and Their Relationship to Medicare Payment Rates for Physicians’ Services
paragraphs: CMS changed the way it paid for Medicare physicians’ services starting in  1992 when it began transitioning from payment rates based on customary  charges to payment rates based on the relative resources needed to  provide each service. As part of this transition to a new relative value  scale system, three types of relative values were defined—one for relative  levels of physician work, one for PE, and one for malpractice (MP)  expense—and CMS subsequently transitioned each type of relative value  from the existing charge-based system to new resource-based relative  values.
In response to this transition, the AMA created the RUC in 1991 to  provide recommendations to CMS for it to consider when establishing  resource-based relative values. The RUC currently has 31 members, 21  of whom represent specialty societies with permanent seats on the RUC  (including for cardiology, family medicine, and internal medicine) and 4 of  whom represent specialty societies with rotating seats on the RUC  (including primary care and other specialties not always represented,  such as pediatric surgery). These members are supported by the  Advisory Committee of over 100 appointed physician representatives who  are responsible for coordinating with their respective specialty societies to  develop relative value recommendations to present to the RUC.  According to the AMA, RUC members and the Advisory Committee  donate over $8 million in direct expenses each year, such as travel,  meeting, and consulting costs. In addition, hundreds of physicians provide  volunteer time to support the RUC’s process.
Under the current relative value scale system, CMS determines the  Medicare payment rate in a given year for most physicians’ services by  summing a service’s three relative values—after adjusting for geographic  differences in resource costs—and then multiplying the resulting sum by a  conversion factor. Work relative values are based on the estimate of two  main inputs: (1) the time the physician needs to perform the service  (including pre- and postservice activities, or work performed before and  after the service), and (2) the intensity of the service (including the  physician’s mental effort and judgment, technical skill and physical effort,  and psychological stress). In 2015, work relative values ranged from 0, for  services that do not have any physician work, such as the technical  component of imaging services, to 108.91, for the repair of a neonate  diaphragmatic hernia. PE relative values are based primarily on estimates  of (1) direct PE inputs (DPEI), which reflect the clinical labor, medical  equipment, and disposable supplies needed to provide a specific service  as well as the amount of time for which labor is required and equipment is  used, and (2) indirect PE, which generally reflect overhead expenses not  associated with a specific service. In 2015, DPEI costs ranged from $0,  for services that do not have any direct practice expenses, to over  $14,000, for a type of angioplasty. MP relative values are based on  malpractice insurance premiums of the specialties that perform the  service, weighted geographically and by specialty. The geographic- adjusted sum of the three relative values is then multiplied by a dollar  value, called a conversion factor, which converts the service’s relative  value to a payment rate; in 2015, the conversion factor was $35.80.  (See fig. 1.) Thus, while relative values determine the payment rate of  one service relative to another, they do not directly determine services’  Medicare payment rates.
CMS establishes relative values annually, and the effect of any changes  on CMS’s payment rates generally must be budget neutral. In particular, if  any changes to relative values result in changes to annual estimated  expenditures of more than $20 million, CMS is required to make  adjustments to ensure that overall expenditures do not increase or  decrease by more than this amount. However, certain adjustments may  also be made to Medicare payment rates that are not subject to the  budget neutrality limitation. For example, if the annual net reduction in  expenditures resulting from the revision of relative values does not meet  the savings target for that year (1.0 percent of Medicare physicians’  services payments in 2016 and 0.5 percent in 2017 and 2018),  adjustments to reduce overall Medicare expenditures to achieve that  target are not subject to the budget neutrality limitation.
section_title: Overview of the RUC’s Process for Developing Relative Value Recommendations and How CMS Uses These Recommendations when Establishing Relative Values for Medicare Physicians’ Services
paragraphs: The process to develop and establish relative values involves three main  steps: (1) CMS, the RUC, and AMA’s Current Procedural Terminology  (CPT) Editorial Panel identify services for RUC review, (2) the RUC  works with specialty societies to use surveys and other methods to  develop work relative value and DPEI recommendations for CMS for  identified services, and (3) CMS reviews each RUC recommendation it  receives to determine whether to use it when establishing relative values  for physicians’ services. (See fig. 2.) Because this process involves  substantial time and effort from multiple entities, it can often take several  years from when a service is initially identified for RUC review to when  CMS establishes a relative value for it based on the RUC’s  recommendation. (See app. I for a case study describing the current  process and timeline for establishing relative values for a specific  service.) In total, for payment years 2011 through 2015, CMS reviewed  1,278 RUC work relative value recommendations for about 1,200 unique  (new and existing) services.
Step 1: Services Identified for RUC Review  Each year, the CPT Editorial Panel, the RUC, and CMS each identify  services for the RUC to review.
The CPT Editorial Panel identifies new services and existing services  that it has recently revised for RUC review and sends a list of these   (This list includes services identified as being  services to the RUC.in the same family as a new or revised service that the CPT Editorial  Panel determines warrants concurrent review in order to help ensure  relativity across the family of services.) The CPT Editorial Panel holds  three meetings to decide on new or revised services for a given  payment year (generally in the spring, fall, and winter preceding the  payment year when the CPT change would take effect), and sends  the list of services to the RUC after each meeting.
The RUC identifies potentially misvalued services for RUC review by  applying a set of criteria, called “screens,” to Medicare physicians’  services. Like the CPT Editorial Panel, the RUC also has three  meetings for a given payment year, and during these meetings a RUC  workgroup determines which screens the RUC should use; generally,  the RUC submits its recommendations for potentially misvalued  services to CMS within a year or two of these services being  identified.
CMS, too, identifies potentially misvalued services for RUC review by  choosing to implement screens from among criteria identified in  statute and from public nomination. CMS then publishes a proposed  list of potentially misvalued services in its annual proposed rule in the  Federal Register (generally in July), and finalizes the list for RUC  review in the final rule (which is generally published in November).
Step 2: RUC Develops Recommendations  After the RUC and specialty societies have determined which of the  identified services they will develop recommendations on for the  upcoming payment year, specialty societies use RUC-approved methods  to develop recommendations for the RUC on work relative values and the  set of DPEI and associated times and quantities, which the RUC then   The  considers before submitting the final recommendations to CMS.RUC has documented instructions for specialty societies to follow when  developing their proposed recommendations.
To develop work relative value recommendations, specialty societies  use the RUC’s work survey instrument to survey a random sample of  their members about, among other things, (1) the time required to  perform a service, (2) the complexity and intensity of performing a  service relative to a reference service, and (3) a total work relative value. Specialty societies then finalize their recommendations by  applying a concept known as magnitude estimation to evaluate the  survey data to determine whether the results for a service are  consistent with the relative values of related services that were  recently valued, and may make a recommendation that is different  from the survey results if they are not.
To develop DPEI recommendations, specialty societies primarily use  PE expert panels composed of members of their societies who use  their clinical knowledge, along with comparisons to other services, to  develop recommendations on the clinical labor, medical equipment,  and disposable supplies required for a service. For some services, the  recommended amounts of time for DPEI are determined, in part, from  the responses provided in the work survey instrument. Specialty  societies do not make formal recommendations on other aspects of  PE relative values, such as indirect PE or DPEI prices, though they  may periodically provide the RUC with invoices to submit for CMS’s  consideration, and the RUC may also periodically make  recommendations on the overall methodology CMS uses to calculate  PE relative values.
The RUC recommends that specialty societies work together to develop  recommendations if more than one society has an interest in the  particular service identified for review. Specialty societies develop new  work relative value and DPEI recommendations for new services; for  revised and potentially misvalued services, specialty societies may  recommend to increase, decrease, or maintain the existing values.
Specialty societies submit the recommendations they develop and  supporting documentation to RUC staff for discussion during one of the  three RUC meetings each year. RUC members are assigned to prereview  each recommendation before each meeting and provide feedback as  needed; specialty societies may revise their recommendations on the  basis of this feedback before presenting them to the RUC during the  meeting. The RUC has documented criteria for reviewing specialty  societies’ proposed recommendations, including a series of questions  RUC members should use to guide their deliberations on services during  RUC meetings.
In general, members of the public may attend RUC meetings and observe  RUC deliberations firsthand. Everyone who attends RUC meetings,  including RUC members, must sign a confidentiality agreement. At  these meetings, specialty societies present their work relative value  recommendations to the entire RUC and their DPEI recommendations to  the RUC’s PE Subcommittee, which, after its own review, makes  recommendations to the entire RUC. During these discussions, RUC  members may ask questions about the specialty societies’ proposed  recommendations, such as the level of work required to perform the  service, and the recommendations may be modified as a result. As part of  these discussions, RUC members apply magnitude estimation to  determine whether a recommendation for a service is consistent with the  relative value for related services. CMS officials are invited to attend and  participate in RUC meetings. CMS officials stated that they often make  comments, ask questions, or remind the committees of established policy,  but do not generally make suggestions regarding specialty societies’  recommendations. After the discussion period, each recommendation is  voted on by RUC members. Proposed recommendations must reach a  two-thirds majority vote of the RUC members to be accepted; approved  recommendations are forwarded to CMS. RUC officials told us that,  starting with its September 2014 meeting, the RUC sends CMS its  recommendations after each RUC meeting. Prior to September 2014,  CMS did not receive all of the RUC’s recommendations for a given  payment year until the preceding spring.
For payment years 2011 through 2015, CMS reviewed 1,278 RUC work  relative value recommendations, of which 65 percent were for existing  services (including potentially misvalued and revised services) and   35 percent were for new services. The number of work relative value  recommendations reviewed each year varied from 187 to 337 with no  consistent trend over time. Among the 833 RUC recommendations  reviewed by CMS for existing services across the 5 payment years, over  half of them were to maintain the current work relative value, and this was  the most common type of recommendation made each year. (See   fig. 3.) In instances when the RUC recommended an increase or a  decrease to the current work relative value, the magnitude of the  recommendation was typically large, especially among increases. For  example, across the 5 payment years, 76 percent of the recommended  increases and 65 percent of the recommended decreases were at least  10 percent of the current value, and almost a quarter of the  recommended increases and 6 percent of the recommended decreases  were at least 50 percent of the current value.
Step 3: CMS Reviews RUC Recommendations and Establishes Relative  Values  CMS reviews and considers each of the RUC’s recommendations when  valuing particular services and then publishes its relative value  decisions—including whether it agrees with the RUC or decides an  alternative value more accurately reflects the resources needed to  provide that service—through rulemaking in the Federal Register.  Because, until recently, CMS did not receive all of the RUC’s  recommendations until the spring preceding the payment year, CMS did  not have time to include a discussion of the RUC’s recommendations in  its proposed rule addressing changes to the physician fee schedule each  year, generally each July. Instead, CMS responds to the RUC’s  recommendations, referring to them as interim final values, in the final  rule it publishes, generally each November preceding the payment year  for which the values would go into effect. However, CMS recently  revised its timeline for reviewing RUC recommendations to give  stakeholders more time to respond to RUC recommendations before  CMS considers them and to give notice of the possible changes to  payment rates for identified services. Beginning with payment year 2017,  CMS will include the results of its review of RUC recommendations in the  proposed rule, thus generally eliminating the need for interim final  values.
In rulemaking establishing payment values, CMS indicated it has  reviewed RUC recommendations through multiple methods, including assessing the results of surveys and other supporting data submitted  by the RUC, including assessing the methodology and data used to  develop the recommendations;  conducting a clinical review, which includes comparison with other  physicians’ services to ensure relativity across services and to avoid  anomalies, and review of relevant medical literature; analyzing other data sources with related information, such as claims  considering information provided by other stakeholders.
CMS also is authorized to use other methods to determine the relative  values for services for which specific data are not available.
After the publication of CMS’s decisions in the final rule, the RUC and  other stakeholders have 60 days to provide comments. In the subsequent  year’s final rule, CMS may choose to refine (revise) the values it initially  established in response to these comments or other new information or to  finalize the previously published interim final values. CMS refined, on  average, 11 percent of the work relative values that the agency  established between 2011 and 2014. During this period there was no  consistent trend in the percentage of services refined over time, with the  percentage of annual refinements ranging from 5 to 21 percent.
section_title: Criteria Developed by GAO for Evaluating the RUC’s and CMS’s Current Processes
paragraphs: In order to evaluate the RUC’s and CMS’s current processes for  developing recommendations for and establishing relative values,  respectively, we reviewed (1) applicable laws and regulations; (2) goals,  policies, and procedures established by the RUC and CMS; (3) federal  internal control standards; and (4) relevant reports and publications on  these processes. Examples of these include legislation such as PAMA  and PPACA; RUC documents describing its process for developing  relative value recommendations and descriptions of CMS’s process for  establishing relative values described in rulemaking; federal internal  control standards pertaining to, for example, control activities and  information and communications; and previous MedPAC and GAO  reports. Based on our reviews of these documents, we then developed  the following seven criteria included in table 1 to evaluate the current  RUC and CMS processes against.
section_title: Weaknesses in the RUC’s Data and in Its Relative Value Recommendation Process Present Challenges for Ensuring Accurate Medicare Payment Rates The RUC Process Prioritizes Review of Services It or CMS Identifies as Potentially Misvalued and Regularly Reviews Services the CPT Editorial Panel Identifies as New or Revised
paragraphs: The RUC identifies potentially misvalued services by applying screens it  has independently developed and by identifying additional services for  review in response to requests from CMS. In addition, the RUC has a  process to review services regularly—the timing of which could have  implications for when CMS establishes relative values for those services.  To ensure the accuracy of its recommendations for CMS, the RUC takes  steps during its process to mitigate any possible bias from affecting its  work relative value and DPEI recommendations. Despite these steps,  weaknesses in the RUC’s relative value recommendation process and in  its survey data present challenges for ensuring accurate Medicare  payment rates for physicians’ services.
The RUC’s process is consistent with statutory criteria specified for CMS  consideration in identifying services because the RUC prioritizes its  reviews by identifying potentially misvalued services for review based on  risk assessment. The RUC does this by applying screens it has  independently developed on the basis of risk assessment criteria. These  screens are different from those used by CMS to review services,  although CMS officials said that many of the RUC’s screens overlap with  the screens used by CMS. For example, both CMS and the RUC have  used screens to identify for review potentially misvalued services that had  the fastest growth in Medicare utilization. According to the RUC,   80 percent of the potentially misvalued services it has reviewed were  identified using the RUC’s screens.
The RUC also identifies additional services for review in response to  requests from CMS. For example, the RUC may create screens to identify  services in response to CMS requests to review categories of services  the agency has determined are potentially misvalued. In one instance, for  payment year 2009, CMS requested that the RUC review “Harvard- valued” services (a category of services that would later be designated in  statute as a screen) and prioritize reviewing those services with high  utilization. Based on this request, the RUC created screens to identify  Harvard-valued services—for services performed more than 1 million  times in a year and then for services performed over 100,000 times in a  year followed by services performed over 30,000 times in a year—and  subsequently submitted relative value recommendations to CMS for a  subset of the identified services for payment years 2011 through 2014.  Furthermore, the RUC may identify additional services for review while  developing recommendations for potentially misvalued services identified  by CMS screens. For example, for payment year 2011 CMS requested  that the RUC develop recommendations for services CMS had identified  using a screen for services with low work relative values and high  utilization. The RUC then modified CMS’s screening criteria to identify  additional services for review using a broader range of work relative  values, and developed recommendations for the services for payment  years 2012 and 2013.
Entities should also have processes in place to review services regularly,  according to relevant statutory criteria and federal internal control  standards, which the RUC accomplishes by annually developing work  relative value and DPEI recommendations for CMS to consider. The  RUC develops recommendations for almost all services that the CPT  Editorial Panel identifies as new or revised in time for the upcoming  payment year, although it can often be several years between when the  RUC or CMS identifies a service as potentially misvalued and when the  RUC develops recommendations for that service. Sometimes this is  because the RUC determines, as part of its process, to postpone  developing recommendations for the service until more information, such  as data about how new technology affects the service, becomes  available. Other times, the RUC may suggest to the CPT Editorial Panel  and CMS that identified services be deleted or bundled into another  service, which means these services would not be valued by CMS at all  or would be valued as part of the new bundled service. RUC staff also  told us that they spend time discussing with CMS officials whether some  services requested by CMS for RUC review need to be reviewed; for  example, if specialty societies recently developed recommendations for a  service, then the specialty societies may determine that another review is  unnecessary. The timing of the RUC’s process for reviewing services can  have implications for when CMS establishes relative values for those  services, since CMS officials told us they rarely establish work relative  values and DPEI for individual services without first receiving RUC  recommendations.
section_title: Although the RUC Takes Steps to Mitigate Possible Bias in Its Process, Potential Conflicts of Interest and Data-Related Weaknesses Present Challenges for Ensuring Accurate Medicare Payment Rates
paragraphs: We and others have concluded that physicians who serve Medicare  beneficiaries may have conflicts of interest when making relative value  recommendations. The RUC has taken steps, though, to mitigate any  possible biases that RUC members or specialty societies involved in the  recommendation process may have from affecting the RUC’s work  relative value and DPEI recommendations. As previously mentioned,  entities should have processes in place to address conflicts of interest.  While changes to Medicare payment rates for physician services are  generally required to be budget neutral—that is, increases in the payment  rate for specific services will lead to a decrease in the collective payments  for all other services—each individual physician who serves Medicare  beneficiaries would nonetheless benefit from an increase in the relative  values for the services they perform. Given this potential conflict of  interest and other potential conflicts that individual physicians involved in  the recommendation process may have, the RUC takes steps to mitigate  any possible bias from affecting its recommendations to CMS. For  example, the RUC does not assign members to prereview  recommendations developed by their own specialty societies. The RUC  also prohibits its members from participating in deliberations and voting  on services in which they or a family member have a direct financial  interest, and may preclude members of specialty societies who disclose  financial conflicts from presenting at RUC meetings.deliberation process is also intended to mitigate the effects of possible  biases. Through the deliberation process RUC members have the  opportunity to question the different specialty societies’ proposed  recommendations. RUC staff said that it is in members’ best interests to  question specialty societies’ proposed recommendations since Medicare  payment rates are based on the relativity of services to each other in a  budget neutral system. To lower the possibility for bias in survey data  specialty societies obtain from their physician members, the RUC  designed its survey instrument to ask respondents to disclose any direct  financial interests they or a family member have in the surveyed service.  Additionally, the RUC may discard all survey responses for a service  when it believes the survey process was biased.
Nevertheless, the reliability of work relative value recommendations may  be undermined by survey respondents’ potential conflicts of interest.  According to a member of the RUC, specialty societies’ work relative  value recommendations are most likely inflated due to physician bias.  RUC staff stated that, while the survey data are the beginning of the  process to establish work relative value recommendations, the RUC relies  on magnitude estimation and the clinical expertise of its members to  develop the RUC’s final recommendations. According to RUC staff, this  process often resulted in the RUC recommending a work relative value  that was at the 25th percentile or lower of the specialty societies’ survey  data between 2011 and 2015.
While magnitude estimation and the clinical expertise of the RUC’s  members may allow the RUC to partially compensate for inflation in  specialty societies’ work relative value recommendations, it may not  completely eliminate bias. Specifically, the accuracy of the results of  magnitude estimation depends both on the accuracy of previously  established relative values, which may also suffer from the same  reliability issues, and physicians’ abilities to accurately determine the  relativity between services, which may be difficult to do for services as  disparate as primary care visits and complex surgeries. It is therefore  unclear the extent to which magnitude estimation—without other reliable  data about the work it takes to perform a service—is sufficient to generate  accurate work relative value recommendations.
We also identified other issues with some of specialty societies’ surveys,  including low response rates, low total number of respondents, and large  ranges in responses that suggest shortcomings with the data. In  accordance with federal internal control standards, entities should  develop their relative value recommendations based on the most  accurate, timely, and reliable data possible, and these shortcomings may  further undermine the reliability of RUC’s relative value recommendations.  For example, of the 231 active Medicare physicians’ services that  specialty societies surveyed for payment year 2015, the median response  rate was 2.2 percent and while the median number of respondents was  52, for 23 of these services, the number of respondents failed the  minimum survey response thresholds that the RUC implemented in  2014. Of these 23 services, there were only 2 services for which the  RUC submitted temporary work relative value recommendations to CMS  and required the specialty society to resurvey for a subsequent RUC   Among the respondents for all 231 services, the range of  meeting.estimated work relative values was broad. For example, surveys’   25th percentile work relative value responses were at least 16 percent  lower than the median value for half of specialty societies’ surveys in  2015.
Finally, survey results may be undermined by the individuals who  complete the survey, but the RUC has made efforts to address these  issues. Survey respondents are asked to complete surveys for services  that apply to them and to indicate how many times they have performed  the services in the past year. In our review of the survey data, we found  most surveys had at least one respondent who reported that they had not  performed the service being surveyed within the past year. told us that they try to overcome the challenge of low response rates by  allowing specialty societies to survey nonrandom samples of their  members, survey those who are familiar with but do not perform certain  services, or both; or allowing specialty societies to collect fewer than the  required number of responses for their surveys. While these  approaches may help the RUC to obtain additional survey responses,  they also may further lower the reliability of the RUC’s data. CMS officials  have acknowledged that the RUC can experience difficulties collecting  sufficient numbers of survey responses if, for example, the services being  surveyed have relatively low Medicare utilization. In other words, it is  difficult to obtain reliable data about a Medicare service if the service is  rarely performed. The RUC provides CMS with its survey data when it  submits its recommendations, which may help CMS to draw independent  conclusions about the reliability of the RUC’s recommendations and thus  how services should be valued. According to the criteria we identified,  CMS should establish relative values using the most accurate and reliable  data possible.
The median number of times respondents reported performing the service in the past  year was 10. undermined by data weaknesses and weaknesses in its process due to  potential conflicts of interest. Thus, the extent to which CMS does not  draw independent conclusions, and instead relies on RUC  recommendations for service valuations, presents a challenge for  ensuring the accuracy of Medicare payment rates for physicians’  services.
Since the RUC’s DPEI recommendations are generally based on input  from specialty societies’ PE expert panels rather than on survey data, the  reliability of these recommendations is in part dependent upon the  expertise of the contributors to these panels. The RUC encourages  specialty societies to include in their PE expert panels both subspecialists  and generalists from within the specialty to represent different practice  settings, as well as to seek input from practice managers and/or clinical  staff familiar with DPEI. If these expert panels do not include a mix of  physician and nonphysician experts as encouraged by the RUC, it may  affect the reliability of the RUC’s DPEI recommendations. Currently, the  extent to which specialty societies’ PE expert panels include a mix of  physician and nonphysician experts is unclear. One specialty society told  us that specialty societies’ PE expert panels may not have the ideal  expertise to make DPEI recommendations. We reviewed some of  specialty societies’ 2015 DPEI recommendation forms, which are to  include a description of the composition of specialties’ PE expert panels,  to determine whether specialty societies formed PE expert panels with  the RUC’s recommended broad composition. We found that, while some  expert panels did have a broad composition, detailed information on  composition was frequently missing.
section_title: The RUC Has Improved the Transparency and Representativeness of Its Recommendation Process, but Stakeholders Still Have Some Concerns about These Areas
paragraphs: In recent years, the RUC has taken steps to improve both the  transparency and representativeness of its recommendation process.  According to relevant statutory criteria and federal internal control  standards, entities should maintain transparent processes for establishing  relative values. To improve its transparency, the RUC increased the  amount of information publicly available online, thus enhancing the  public’s access to information about its process. For example, in 2012,  the RUC began posting the results of its votes on individual services on  its website following CMS’s publication of the final rule establishing the  physician fee schedule each year. In 2013, the RUC began posting its  meeting minutes online. Additionally, the RUC makes an online product,  RBRVS DataManager Online, available for purchase that includes  information on services’ current DPEI and the RUC’s most recent work  relative value recommendations. As a result of these efforts, the public  can have a better understanding of the RUC’s process and knowledge of  the recommendations submitted to CMS. The RUC also has taken steps  to improve its representativeness by adding new specialty societies to its  membership, which is important because stakeholders (such as different  physician specialties) should have opportunities to comment and provide  input on the RUC’s process per federal internal control standards. Based  on feedback from stakeholders and changing trends in patient  demographics, in 2012 the RUC added a permanent seat for the  American Geriatric Society, a specialty society that did not meet the  criteria for having a permanent seat on the RUC but that had expertise in  caring for a large, discrete patient population. The RUC also added a  rotating seat for a primary care representative—in addition to the  permanent seats currently held by various specialty societies that provide  primary care services—to increase representation of the specialty on the  RUC in response to stakeholders’ concerns that primary care was  underrepresented. As a result of these changes, the RUC may be able to  consider an increasing variety of stakeholder perspectives.
Nevertheless, some stakeholders have continued to express concerns  about both the RUC’s transparency and representativeness. With respect  to the RUC’s transparency, some stakeholders have said that they cannot  determine whether the RUC’s recommendations are biased in favor of  certain specialty societies because the RUC does not publish how  individual members vote on services. In response to these concerns,  RUC staff stated that they do not disclose how individual members vote  so as to protect members’ independence throughout the deliberation  process from, for example, outside lobbying and potential negative  feedback from colleagues. Additionally, the RUC’s public total vote counts  show that its votes on services are typically unanimous. RUC staff said  this unanimity typically results from members resolving disagreements  about services during deliberations (before voting occurs) and that voting  does not usually align based on specialty. With respect to the RUC’s  representativeness, stakeholders such as the American Academy of  Family Physicians have expressed concerns that primary care physicians  are underrepresented on the RUC, which biases the RUC’s  recommendations against primary care services. According to the RUC,  however, the mix of specialties represented in its membership does not  affect the types of services for which it makes recommendations to CMS.  The RUC also reported that it has recommended substantial increases to  primary care services each time these services have been identified for  review.
To try to determine whether the RUC’s reviews of services  underrepresented primary care services, we reviewed the categories of  services for which the RUC made work relative value recommendations  to CMS between 2011 and 2015. We found that over these years, the  number of recommendations the RUC made to CMS for evaluation and  management services (a proxy for primary care services) was  proportional to the total number of Medicare services in the evaluation  and management category. Specifically, during this period, the 16  evaluation and management services reviewed by the RUC comprised,  on average, 1 percent of the RUC’s recommendations, which was equal  to the percentage of all Medicare services in this category.the RUC was more likely to recommend increases for the work relative  values of existing evaluation and management services than for existing  services of any other category. However, evaluation and management  services for which the RUC made work relative value recommendations  represented only 2 percent of Medicare spending on all services with   Additionally,  RUC recommendations, which was significantly lower than the  percentage of Medicare spending on all services in this category   (43 percent). Although these results do not indicate whether primary  care services are being undervalued by the RUC, they do indicate that for  payment years 2011 through 2015 the RUC reviewed these services in  proportion to their numbers, but did not review these services in  proportion to their impact on overall Medicare spending.
section_title: CMS’s Process for Establishing Relative Values May Not Ensure Accurate Medicare Payment Rates and Lacks Transparency
paragraphs: CMS’s process for establishing relative values embodies several  elements that cast doubt on whether it provides assurance of accurate  Medicare payment rates. While CMS stated that it complies with a  statutory requirement governing how often physicians’ services are to be  reviewed, CMS does not track when a service was last valued or have a  documented standardized process for prioritizing its review of services.  The agency also has limited documentation about its process, and does  not have any documentation with specific information about the selected  method used to review a specific RUC recommendation. Lack of  transparency in its process and lack of data sources to validate RUC  recommendations, combined with evidence that CMS relies heavily on  the RUC for relative value recommendations despite weaknesses with the  RUC’s data, may undermine payment rate accuracy.
subsections: section_title: CMS Does Not Track a Service’s Last Valuation or Have a Documented Standardized Process for Prioritizing Reviews
paragraphs: CMS officials told us they comply with the statutory requirement to review  relative values for all Medicare physicians’ services at least every 5 years  by annually identifying new, revised, and potentially misvalued services  for review. Officials explained that they are not required to revalue all  services every 5 years through a full revaluation process involving the  RUC. Rather, CMS officials said they meet the statutory requirement to  review relative values every 5 years by applying screens that are  designated in statute to all services and determining whether the resulting  services need to be revalued. This indicates that CMS has a process in  place to ensure that relative values are reviewed regularly and revalued if  necessary. The officials said they also annually identify services for  review through other mechanisms as well, including conversations with  stakeholders and receiving nominations from the public. Officials told us  they review the results of these actions to determine which services need  to be revalued.
However, we found that CMS does not have a standard process for  identifying services for review each year, nor does it track when a service  was last valued. To effectively apply the statutory criteria for identifying  potentially misvalued services, CMS should prioritize reviews of services  based on results of risk assessment and ongoing monitoring, but CMS  does not have a standard process for determining which of these screens  to apply in a given year. When asked how they select a screen, CMS  officials said they decide in part on the basis of what they learn from   (1) RUC meetings, (2) stakeholders, and (3) other sources such as the  news and the internet. Officials could not provide any supporting documentation to indicate how they select which screens to apply in a  given year. Furthermore, CMS officials told us that they do not maintain a  database to track when services were last valued; rather, they rely on the  final rules addressing changes to the Medicare Physician Fee Schedule  to determine when services were last valued to assist in prioritizing the  review of services and then determine whether a service needs to be  valued again. Officials said that tracking when a service was last valued  was challenging because, for example, if CMS identifies a service as  potentially misvalued, the CPT Editorial Panel may then revise the service  by separating it into multiple services or even deleting it. Thus, under the  current process CMS officials said it was more efficient to determine  when a service was last valued once it had been identified as potentially  misvalued, rather than to track thousands of Medicare services  individually. Although officials said they use the final rules to approximate  when identified services were last valued and then determine whether a  service needs to be valued again, this approach does not allow CMS to  proactively flag services for review that had not been revalued over an  extended period of time.
The most recent Medicare physician services expenditure data available at the time of  our analyses were from 2013, so we used 2013 expenditure data as a proxy for 2014  expenditure data when calculating the 2014 spending quintile of 2015 services. for a large share of Medicare spending. However, due to the small  number of services reviewed each year, the existing services reviewed  between 2011 and 2015 represented under one-third of all Medicare  expenditures on physicians’ services.
section_title: CMS Process for Establishing Relative Values Lacks Transparency, and Heavy Reliance on RUC Recommendations May Undermine Payment Rate Accuracy
paragraphs: CMS makes some information about its process for establishing relative  values available to the public, but some information on the services under  review is not included, which limits stakeholders’ knowledge about  whether payment rates are likely to change for these services. Through  rulemaking published in the Federal Register, CMS describes how it  identifies services for review and the methods it may use to review RUC  recommendations. In addition, CMS has increased the amount of  information it discloses through rulemaking in recent years. For example,  for payment year 2009 CMS began listing services it identified as  potentially misvalued in the proposed rule. Additionally, CMS began  including information in the final rule for payment year 2011 about  whether it had refined the RUC’s DPEI recommendations. However,  although CMS rulemaking currently lists services for public comment that  it or the public identified as potentially misvalued, CMS does not include  information on services identified by the RUC as potentially misvalued  prior to addressing the RUC’s recommendations. Stakeholders should  have opportunities to comment and provide input on CMS’s process per  federal internal control standards. However, unless stakeholders monitor  the RUC’s activities, they are unaware that these services are under  review and that payment rates for them may change until CMS publishes  its responses to the RUC’s recommendations for these services. Thus,  stakeholder participation in CMS’s process is limited because of  incomplete information regarding which services are undergoing RUC— and eventually CMS—review.
Moreover, while CMS provides general information on how it reviews  RUC recommendations, it does not document a process for reviewing  recommendations that would identify the resources considered during its  review of specific RUC recommendations. Entities should maintain a  transparent process for establishing relative values, including having  documentation about their processes and disclosing information upon  which decisions were based to the extent possible. In the case of CMS,  information provided in the proposed and final rules addressing changes  to the physician fee schedule published in the Federal Register each year  are the only sources of documentation about CMS’s process. While past  rules indicate that the agency uses multiple methods for reviewing RUC  recommendations, they do not provide specific information on the  selected method used to review a particular recommendation, and thus  CMS does not fully disclose information upon which its decisions were  based. To try to better understand what a CMS review includes, we  requested supporting documentation for two services CMS recently  reviewed. However, CMS was unable to produce supporting  documentation for its reviews of these services. CMS officials told us they  do not have additional documentation, including internal or external  policies or guidance documents, to assist them with their review of RUC  recommendations. Without such documentation, there is no assurance  that CMS followed a standardized process to ensure consistent reviews  and accurate relative values. A standardized process is necessary to  ensure that established relative values reflect differences in work relative  values and DPEI rather than inconsistencies in CMS’s process. Such  inconsistencies may affect the relativity of services to each other and  undermine the overall accuracy of Medicare payment rates for physicians’  services.
While information on the process CMS uses to review specific RUC  recommendations is limited, we have identified two factors that suggest  CMS relies heavily on RUC recommendations when establishing relative  values. First, according to CMS officials, the agency does not have its  own data sources to validate RUC recommendations because such data  sources do not exist, so officials generally rely on the RUC’s  recommendations as their primary data source for work relative value and  DPEI recommendations. The RUC is currently the only source of  comprehensive information available regarding the physician work,  clinical staff, medical supplies, and equipment required to provide  Medicare physicians’ services—no alternative sources currently exist for  CMS to consider that can provide information on these components for all  Medicare services. Second, participation from other stakeholders in the  process for establishing relative values is limited. Specifically, while CMS  has provided opportunities for stakeholders to participate in the evaluation  process, few stakeholders have taken advantage of them. For instance,  for payment year 2012, CMS introduced a public nomination process  through which anyone may nominate a potentially misvalued service for  review on an annual basis.stakeholders have an additional opportunity to provide input into CMS’s  process. However, CMS received no public nominations for payment year  2014, and received only two nominations for payment year 2015. CMS  officials also told us that, in instances when stakeholders submit  additional information for CMS to consider when reviewing a service, the  submitted information often duplicates what officials had already  considered. As a result, in the majority of cases, CMS has accepted the  RUC’s work relative value recommendation. For example, our analysis  shows that between payment years 2011 and 2015, CMS agreed with the  RUC’s recommended work relative value on average 69 percent of the  time, with its acceptance rate ranging from 60 to 77 percent. (See fig. 5.)  The extent to which it agreed varied by the type of recommendation the  RUC made. Specifically, CMS most often agreed with RUC  recommendations to maintain the current work value (85 percent  agreement rate on average, ranging from 69 to 98 percent), followed by  agreement with RUC recommendations of decreases (77 percent on  average, ranging from 64 to 93 percent), and RUC recommendations of  work relative values for new services (64 percent on average, ranging  from 46 to 77 percent).
section_title: CMS Is Developing an Approach for Validating Relative Values, but Does Not Yet Have a Specific Plan for Doing So or for Addressing Other Data Challenges
paragraphs: CMS does not yet have a formal process for validating RUC  recommendations, but is developing an approach as required by  PPACA.as part of its process for establishing relative values and agrees with or  refines them based on, for example, the agency’s assessment of the  RUC’s data or completion of a clinical review. As previously mentioned,  CMS does not currently have a way to systematically (1) validate that the  RUC’s proposed work relative values—and the underlying time and  intensity assumptions or DPEI recommendations—are correct, or   (2) determine what they should be. However, PAMA specifically  authorized CMS to collect and use information on physicians’ services in  the determination of relative values and appropriates $2 million each year   Currently, CMS reviews the RUC’s recommendations and data   Although CMS  beginning with fiscal year 2014 to carry out this authority.officials told us it is too soon to say how they will spend these funds, CMS  has used other funds to contract with two external entities—the Urban  Institute and the RAND Corporation—to develop validation models for  relative values. These contracts focus on validating work relative values  for which recommendations are developed by the RUC.
The Urban Institute contract focuses on collecting time data for a  selection of services from different health care entities, given that  there have been concerns about the accuracy of the times used to  estimate work relative values. The Urban Institute’s goal is to collect  data from administrative sources, such as electronic health records,  and direct observations in order to, among other things, compare new  time data against the current times used for the selected services and  to develop alternative work models of work values. As of November  2014, the Urban Institute had issued an interim report that included a  discussion about the challenges it had encountered when collecting  objective time data. We spoke with the researchers, who told us that  their biggest challenge was trying to use the RUC’s descriptions of the  services when collecting data through direct observations; specifically,  the RUC’s descriptions differed from what was observed, such as the  tasks actually performed and by whom (e.g., a physician versus  clinical staff).
The RAND Corporation contract focused on using existing time data  to develop validation models to predict work relative values and the  individual components of work relative values (time and intensity),  based on a subset of surgical services. RAND issued its final report in November 2014. RAND researchers told us they deconstructed  the total work relative values for the selected services into, for  example, the different times and intensities required to complete the  work depending on whether it was the beginning, middle, or end of the  service, such as the time required for scrubbing up before a service or  evaluating a patient afterward. They used these deconstructed times  and intensities to help develop models that could predict new values  for these subcomponents and, when summed together, estimate new  total work relative values. In developing its models, RAND found that  its estimates of intraservice time estimates, which were based on data  from existing databases, were typically shorter than the current CMS  estimates (which consider the RUC’s estimates). RAND developed  several models for predicting total work relative values, each of which  accounts for different modeling choices.
CMS officials were unable to tell us how they intend to use the results of  the Urban Institute’s and RAND Corporation’s studies, but both  contractors have highlighted areas where further work is needed before  CMS will be able to fully validate relative values. For example, the RAND  Corporation reported that additional research is needed in determining  how to quantify and validate the intensity component of work relative  values. Additionally, the Urban Institute reported that the accuracy of the  RUC’s descriptions of services needs further review. Further review is  important because if physicians are no longer performing certain tasks  associated with a service, then including these tasks in an estimate of a  physician’s work relative value could lead to inflated Medicare payment  rates for that physician service.
CMS’s validation approach will also require determining whether it is  appropriate to validate relative values at the service level or physician  level and the extent to which some other mechanism—such as an  independent panel of experts—would be useful. The Urban Institute and  RAND both adopted a “bottom-up” approach to validating work relative  values, meaning that the collection and analysis of data would be focused  on specific services. However, in 2014 MedPAC expressed some  concerns about a “bottom-up” approach, including that, among other  things, analyses conducted on a service-by-service level are costly,  burdensome, and subject to bias. In light of these concerns, MedPAC  suggested a “top-down” approach, which, in contrast, involves the  physician as the unit of analysis and examines the mix of services  provided by the physician and the total time worked on the services. In  addition to a top-down or bottom-up approach, another mechanism for  validating work relative values could come from an independent technical  panel. MedPAC has previously recommended that CMS create such a  panel—which may include individuals with expertise in health economics  and physician payments, along with clinical expertise—to help CMS  establish more accurate relative values and to reduce its reliance on the   When we asked whether they had considered convening such a  RUC.panel, CMS officials told us they had not because determining the right  balance of expertise among panelists would be challenging and that, if  the panel were to include physicians, it would likely duplicate the current  RUC process. However, until CMS determines what process it can use to  validate the RUC’s recommendations against other sources, it will not be  able to address the shortcomings with the RUC’s data.
CMS also has limited pricing information for DPEI, but the agency is  exploring options for obtaining more accurate, reliable pricing data. CMS  has repeatedly stated in rulemaking that it is difficult for the agency to  obtain reliable pricing data for DPEI; that its pricing information is almost  exclusively anecdotal; and that officials sometimes price items on the  basis of a single or small number of invoices. While the RUC submits paid  invoices for new medical supplies and equipment to CMS, RUC staff told  us that providing pricing information for other medical supplies and  equipment is outside of the scope of their expertise and that CMS should  obtain this information directly from manufacturers or other sources. CMS  encourages other stakeholders to provide CMS with updated pricing as  well, and has pursued other options for obtaining reliable pricing data in  the past. For example, CMS has contracted with consultants to obtain  pricing data and has considered using data from the General Services  Administration medical supply schedule. When asked about revisiting  these approaches, CMS officials told us that there were advantages and  disadvantages to them and that they continue to consider ways to obtain  reliable pricing data and that any plans for doing so will be proposed  through rulemaking. PPACA requires CMS to develop a plan to validate  the data used to establish relative values and specifically authorized CMS  to employ a range of specific activities to conduct the analysis, including  the use of contractors to collect data for validating relative values.  These activities may then generate additional data sources against which  CMS could validate the data used to establish relative values. CMS  officials told us they are considering using the funds appropriated by  PAMA to obtain more accurate, reliable pricing data, but they did not  share whether they would use contractors to obtain these data. Because  CMS does not have a specific timeline or plan for using these funds,  including how these funds may be used to assist CMS with developing its  validation approach, it continues to delay establishing a process to  validate the accuracy of payment rates under the fee schedule, as  required by statute.
section_title: Conclusions
paragraphs: Given the amount of Medicare spending on physicians’ services— approximately $70 billion in 2013—and that other payers base their  payment rates at least in part on Medicare payment rates for physicians’  services, the accuracy of Medicare payment rates has major implications  for the health care system. For example, financial incentives could induce  some physicians to oversupply overvalued services and undersupply  undervalued services. Moreover, if categories of services are  systematically overvalued, the accompanying financial incentives could  affect individuals’ decisions to become trained in certain specialties. Thus,  it is important for CMS to establish accurate Medicare payment rates for  physicians’ services to promote prudent spending of taxpayers’ and  beneficiaries’ money and to promote a workforce that provides  appropriate care for patients.
Weaknesses in the RUC’s relative value recommendation process and in  its data present challenges for ensuring accurate Medicare payment  rates. First, physicians who serve Medicare beneficiaries—including  members of the RUC and specialty societies—may have potential  conflicts of interest with respect to the outcomes of CMS’s process for  setting payment rates for Medicare physicians’ services. Second, we  found some of the RUC’s survey data to have low response rates, low  total number of responses, and large ranges in responses. While we  acknowledge it is difficult to collect sufficient and reliable data, especially  for low-volume Medicare services, these challenges nonetheless  undermine the reliability of the RUC’s recommendations to CMS.  Furthermore, because CMS relies on the RUC’s recommendations when  establishing relative values, these challenges may also result in CMS  setting inaccurate Medicare payment rates for physicians’ services.
In addition, CMS’s process lacks transparency. In particular, because  CMS does not document the data sources it considered during its review  of specific RUC recommendations, it cannot demonstrate what other  resources it relied on to make its decisions and cannot assure that it is  following a consistent process. Furthermore, although CMS rulemaking  currently lists services that CMS or the public identified as potentially  misvalued, it does not include services identified by the RUC in this list.  Without advance notice of all potentially misvalued services identified for  review, the extent to which stakeholders can participate is limited, and  CMS may be missing opportunities to enhance stakeholder involvement  and improve the accuracy of relative values, and thus, payment rates.
The RUC is currently the only source of comprehensive information  available regarding the physician work, clinical staff, medical supplies,  and equipment required to provide Medicare physicians’ services—no  alternative sources currently exist for CMS to consider that can provide  information on these components for all Medicare services. CMS has  begun taking steps to improve its process by beginning research on how  to develop an approach for validating relative values; however, it does not  yet have a specific plan for how it will do so, nor how it will use funds  appropriated for the collection and use of data on physicians’ services or  how it will address other data challenges. Without a timeline and a plan  for determining its approach, including how it will use the funds  appropriated by PAMA to assist it with validation, CMS risks continuing to  use payment rates that may be inaccurate.
section_title: Recommendations for Executive Action
paragraphs: The Administrator of CMS should take the following three actions to help  improve CMS’s process for establishing relative values for Medicare  physicians’ services:  1.  Better document the process for establishing relative values for  Medicare physicians’ services, including the methods used to review  RUC recommendations and the rationale for final relative value  decisions.  2.  Develop a process for informing the public of potentially misvalued  services identified by the RUC, as CMS already does for potentially  misvalued services identified by CMS or other stakeholders.  3.  Incorporate data and expertise from physicians and other relevant  stakeholders into the process as well as develop a timeline and plan  for using the funds appropriated by PAMA.
section_title: Agency and Third Party Comments and Our Evaluation
paragraphs: We provided a draft of this report for review to HHS and received written  comments that are reprinted in appendix II. Because of the focus on the  RUC in this report, we also provided the AMA an opportunity to review a  draft of this report. We received written comments from the AMA, which  we have summarized below. Following is our summary of and response  to comments from HHS and the AMA.
subsections: section_title: HHS Comments
paragraphs: In its comments, HHS concurred with two of our three recommendations,  and summarized the steps the agency has already taken to increase  transparency of its process and stakeholder involvement. Specifically,  HHS concurred with our recommendation that CMS better document its  process for establishing relative values, including the methods it used to  review RUC recommendations. HHS stated that CMS establishes work  relative values for new, revised, and potentially misvalued services based  on its review of a variety of sources of information, including the RUC.  HHS also stated that CMS assesses the methodology, data, and  underlying rationale the RUC uses to develop its recommendations, and  that CMS continues to improve the transparency of its process by  including more detail on its process in its rulemaking. As an example,  HHS noted that CMS has provided more details in its rulemaking  regarding its review of the RUC’s DPEI recommendations. While we  acknowledge that CMS has increased documentation of its process in  rulemaking, we believe that documentation is lacking for other aspects of  CMS’s process. For example, as we stated in the report, CMS officials  told us they do not have additional documentation, including internal or  external policies or guidance documents, to assist them with their review  of RUC recommendations. Without such documentation, stakeholders  have no assurance that CMS followed a standardized process to ensure  consistent reviews and accurate relative values.
HHS also concurred with our recommendation that CMS incorporate data  and expertise from relevant stakeholders into its process and develop a  timeline and plan for using the funds appropriated by PAMA. HHS stated  that CMS’s process allows stakeholders to annually nominate potentially  misvalued services for review, and that members of the public may attend  RUC meetings. HHS also stated that CMS is assessing the outcomes of  the Urban Institute’s and RAND’s research to determine the most  effective and fiscally responsible way to use the funds appropriated by  PAMA. HHS indicated that CMS is using the outcomes of this research to  help inform the development of a timeline for use of the funds  appropriated by PAMA, but since this work is ongoing, HHS did not  provide an estimate of when CMS might finalize such a timeline. We  acknowledge that CMS has taken steps to incorporate additional data and  expertise into its process, and we describe these steps in our report.  However, we believe that CMS needs to do more in both of these areas  to increase the accuracy of Medicare physician payment rates. For  example, CMS could take specific actions to determine how to  incorporate more accurate and reliable sources of pricing data into its  process. In addition, CMS could incorporate input from stakeholders apart  from the RUC into its process—such as from salaried physicians or those  who serve non-Medicare beneficiaries, or from individuals with expertise  in physicians’ payments—through methods not limited to public comment  on rulemaking.
HHS did not concur with our recommendation to include the services  identified as potentially misvalued by the RUC in its rulemaking to allow  for public comment, prior to finalizing its list of potentially misvalued  services for the RUC to review. While HHS acknowledged that some  stakeholders may not be aware of all potentially misvalued services being  reviewed by CMS prior to the establishment of interim final values for  those services in a final rule, HHS expressed concern that implementing  the recommendation would require CMS to identify all potentially  misvalued services through notice and comment rulemaking before the  RUC begins its review process. It was not our intention to recommend  CMS establish a new rulemaking process or delay the timing of its  reviews of services. Therefore, we reworded our recommendation to  clarify that CMS may determine how best to inform stakeholders of  services identified as potentially misvalued by the RUC and for which  payment rates may subsequently change. HHS also described the steps  it had already announced it would take to improve the transparency of its  process, beginning for payment year 2017, such as including proposed  changes in the relative values for almost all services in the proposed rule,  and finalizing changes only after CMS considers and responds to public  comments in the final rule. The elimination of most interim final relative  values will allow stakeholders to comment on values before they become  effective, which is not the case under the current process. However,  under the new process CMS does not plan to inform the public of services  identified by the RUC as potentially misvalued. We believe it is important  for CMS to inform stakeholders of those services identified by the RUC as  potentially misvalued before CMS receives RUC recommendations for  these services and subsequently publishes values in the proposed rule  each year, as CMS does for services the agency or the public has  identified as potentially misvalued. Informing stakeholders about all  potentially misvalued services identified for review—including those  identified by the RUC—would facilitate greater transparency of CMS’s  process and give stakeholders more time to provide input on values for  these services if they so choose.
section_title: AMA Comments
paragraphs: Overall, the AMA agreed with our recommendations, though the AMA  also stated that it is important for CMS to implement our recommendation  regarding publishing the services the RUC identified as potentially  misvalued in a way that does not delay the RUC’s process. The AMA also  stated that the draft report did not sufficiently acknowledge the challenges  in collecting reliable survey data—especially for low-volume services— and that the RUC’s survey methodology, followed by rigorous cross- specialty review, is the best available approach to collecting this data.
In particular, the AMA stated that the report’s principle criticism of the  RUC process of developing work relative value recommendations is that  the RUC’s reliance on survey data is insufficient to ensure accurate work  relative value recommendations. The RUC requires a random sample  from specialty societies, and the AMA pointed out that many specialty  societies email their entire membership or a large sample of their  membership to obtain survey responses. The AMA also noted that a low  response rate is “understandable” given that 80 percent of services paid  under the Medicare Physician Fee Schedule with physician work relative  values assigned to them are performed under 10,000 times per year. The  AMA stated that it is a testament to the RUC’s efforts that we found  specialty societies collected an average of 52 physician responses.  Furthermore, in response to our finding that most of the surveys we  reviewed for payment year 2015 had at least one response in which the  respondent reported not performing the surveyed service within the past  year, the AMA asserted that the opinion and experience of physicians  who have performed the service (even if not very recently) are still valid  contributions. We recognize it is difficult to obtain reliable survey data,  especially if a service is rarely performed, and that physicians can still  provide clinical expertise for a service even if they did not perform the  service within the past year. However, these issues still call into question  the reliability of the RUC’s recommendations, which underscores the  importance of our recommendations that CMS seek additional sources of  reliable data to incorporate into its process, as well as develop a timeline  and plan for using the funds appropriated by PAMA to develop its  approach for validating relative values, including the RUC’s  recommendations.
The AMA also described how the RUC relies on magnitude estimation as  the methodology to develop physician work relative values, and noted  that the RUC’s use of physician survey data is only the beginning of the  process to establish work relative value recommendations. However, we  have some concerns with relying on the RUC’s review of services through  magnitude estimation to supplement the absence of reliable data on  specific services. As we stated in the report, the accuracy of the results of  magnitude estimation depends both on the accuracy of previously  established relative values, which may also suffer from the same  reliability issues, and physicians’ abilities to accurately determine the  relativity between services, which is very difficult to do for services as  disparate as primary care visits and complex surgeries. It is therefore  unclear the extent to which magnitude estimation—without other reliable  data about the work it takes to perform a service—is sufficient to generate  accurate work relative value recommendations.
Finally, the AMA noted that the RUC would welcome the identification of  other reliable data that would provide a representative and consistent  source of information to be considered in addition to survey data. To date,  the AMA has found only one reliable set of extant physician time data, the  Society of Thoracic Surgeons Database, which the RUC has used in its  valuation process. We agree that the RUC is currently the only source of  comprehensive information available regarding the physician work,  clinical staff, medical supplies, and equipment required to provide  Medicare physicians’ services, and have clarified this point in our report.  The AMA also stated that the report suggested the Urban Institute was  unable to obtain accurate time data based on the RUC’s definition of time  or services, and commented that the RUC’s definitions of physician time  were established by Harvard and CMS, not the RUC. While it is true that  Harvard and CMS were responsible for determining the initial definitions  for the physician work required to provide Medicare physicians’ services,  the AMA was also involved in that effort. For example, when Harvard  researchers surveyed physicians about the work required to perform  services, the descriptions of the services were based on AMA’s CPT  descriptions or on descriptions provided by small groups of physicians  representing different specialties that were identified through a process  coordinated by the AMA. With respect to RAND’s research, the AMA  commented that we failed to mention that RAND generally found that  CMS’s current work valuations of services were consistent with RAND’s  predicted work valuations. As we stated in the report, RAND’s estimates  of intraservice time were typically shorter than the current CMS estimates.  As a result, RAND developed several models for predicting work relative  values, because the implications of these shorter times on intensity and  hence overall work relative values are currently unknown.
AMA also provided technical comments on a draft of this report, which we  have incorporated as appropriate.
We are sending copies of this report to appropriate congressional  committees, the Administrator of CMS, and other interested parties. In  addition, the report is available at no charge on GAO’s website at  http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or at cosgrovej@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Establishing Relative Values for a Medicare Physician Service through the RUC and CMS Processes
paragraphs: The process to develop and establish relative values involves three main  steps: (1) the Centers for Medicare & Medicaid Services (CMS), the  American Medical Association’s (AMA) Relative Value Scale Update  Committee (RUC), and the AMA’s Current Procedural Terminology (CPT)  Editorial Panel identify services for the RUC to review; (2) the RUC  works with specialty societies to use surveys and other methods to  develop work relative value and direct practice expense input (DPEI)  recommendations for CMS for identified services; and (3) CMS considers  each RUC recommendation it receives to determine whether to use it  when establishing relative values for physicians’ services. To describe  how a service is reviewed through the RUC’s and CMS’s processes and  the timeline for establishing relative values, we selected an active  Medicare physician service that had recently been valued through these  processes for a case study. The service we selected was CPT code  31647, which is used to report the insertion of bronchial valve(s).staff told us that this service was reviewed through its standard process.
Step 1: Services identified for RUC review (October 2011 – February  2012)
At its October 2011 meeting, the CPT Editorial Panel identified CPT code  31647—a new service—for the RUC to review. This service was one of  three new services created to report the sizing and insertion or removal of  bronchial valves. CPT code 31647 and the other two new services were  previously reported using temporary CPT codes that are reserved for  tracking new and emerging technologies and were assigned final CPT  codes once the CPT Editorial Panel determined that the services had  become more widespread; in other words, that the services were  generally performed by many physicians in clinical practice in multiple  locations.
Once the CPT Editorial Panel identified CPT code 31647 for review, it  forwarded the service—along with the other additions and revisions to  services it was proposing for payment year 2013—to RUC staff, who then  worked with RUC specialty societies to determine what action the RUC  would take regarding the service. For example, the RUC may decide to  develop work relative value and DPEI recommendations to submit to  CMS for a service, or may decide to refer a service to the CPT Editorial  Panel for further review. In the case of CPT code 31647, the American  College of Chest Physicians and the American Thoracic Society both  indicated an interest in developing work relative value and DPEI  recommendations for this service. Given their shared interest, these two  specialty societies agreed to survey physicians about CPT code 31647  and develop joint recommendations for the RUC to consider during its  January 2012 meeting.
RUC staff told us that CPT code 31647 was originally established as an “add-on code” to  describe the insertion of bronchial valves in lungs; that is, it could only be reported in  conjunction with codes that described the primary procedure of which it was a part, a  bronchoscopy. Conversely, CPT code 31648 was established as a code that could be  reported separately (a “stand-alone code”) to describe bronchoscopies that include the  removal of valves from one lobe of the lung, and 31649 was established as an  accompanying add-on code to describe the removal of valves from additional lobes of the  lung. In January 2012, the American College of Chest Physicians and the American  Thoracic Society recommended that 31647 be revised as a stand-alone code with its own  add-on code, to parallel the structure of 31648 and 31649. In February 2012, the CPT  Editorial Panel revised 31647 and created add-on code 31651. after which the American College of Chest Physicians and the American  Thoracic Society reaffirmed their decision to survey the service and to  develop joint recommendations for the April 2012 RUC meeting.
Step 2: RUC develops recommendations (February 2012 – May 2012)
Specialty societies develop work relative value recommendations based  on surveys  In preparation for the April 2012 RUC meeting, the American College of  Chest Physicians and the American Thoracic Society distributed the  RUC’s standard work survey to a random sample of their members but  did not receive a sufficient number of responses; the specialty societies  then distributed the survey to a targeted sample of 85 physicians who  were trained to perform the service and/or who owned the equipment  required to perform the service based on a list of physicians provided by a  medical device vendor. The specialty societies obtained responses from  30 out of 85 physicians for a response rate of 35.2 percent, which met the  RUC’s required minimum number of survey responses. The specialty  societies used 16 out of 30 responses (53.3 percent) for the intensity  portion of the survey.
The American College of Chest Physicians and the American Thoracic  Society’s joint relative value committee analyzed the survey data  collected for CPT code 31647 and determined that the median work  relative value of 4.40 (survey responses ranged from 1.50 to 6.00) and  median intraservice time of 60 minutes were appropriate. The joint  relative value committee also determined that 30 minutes of postservice  time was appropriate. Although the median survey results for preservice  time were 42.5 minutes, the committee determined that the RUC’s  standardized preservice package of 25 minutes was appropriate for CPT  code 31647.survey respondents’ median preservice time estimates, they usually  recommend using the RUC’s standardized time packages.
RUC staff told us that if specialty societies cannot justify  Specialty societies develop DPEI recommendations based on PE expert  panels  The American College of Chest Physicians and the American Thoracic  Society’s joint practice expense (PE) committee met via conference call  to review the set of direct practice expense inputs—and the associated  times and quantities—necessary to perform the service. The joint PE  committee consisted of 2 private practice physicians, 2 academic-based  physicians, 2 medical practice administrators, 1 registered nurse  consultant, and 1 certified public accountant. The committee determined  that 13 minutes of preservice clinical labor time divided among completing  patient referral forms (5 minutes), coordinating presurgery services   (3 minutes), scheduling space and equipment (3 minutes) and allowing  for follow-up phone calls and prescriptions (2 minutes) was required to  perform CPT code 31647.
Specialty societies present work relative value and DPEI  recommendations at RUC meeting; RUC then decides on  recommendations to send to CMS  At the April 2012 RUC meeting, three members of the American College  of Chest Physicians and the American Thoracic Society presented their  joint committee’s work relative value and DPEI recommendations for CPT  code 31647 to the RUC and the RUC’s PE Subcommittee, respectively.  RUC staff told us that prior to the meeting, a fourth member disclosed a  financial interest in 31647 because he worked as a consultant and  researcher for a relevant medical device manufacturer. The RUC’s  Financial Disclosure Workgroup determined that this member could  provide a brief (less than 5 minutes) presentation describing how the  service was performed, and then had to leave the RUC deliberation  table.RUC to prereview each recommendation and lead the RUC’s  deliberations on the service.
Also prior to the meeting, RUC staff assigned members of the  During the meeting, the RUC PE Subcommittee reviewed the specialty  societies’ DPEI recommendation for CPT code 31647 and forwarded it to  the full RUC committee for consideration without modification. The RUC  reviewed the work relative value and DPEI recommendations for CPT  code 31647 and achieved a two-thirds majority vote to accept both  recommendations without modification. code 31647 as a new technology service, to be rereviewed in 2016 after  additional years of Medicare utilization data would be available. In May  2012, the RUC sent its work relative value and DPEI recommendations  for CPT code 31647—as well as for other services deliberated during the  April 2012 meeting—to CMS to be considered for the upcoming 2013  payment year.
The RUC also flagged CPT  Step 3: CMS establishes relative values (May 2012 – December 2013)
RUC staff told us that they did not record total vote counts in 2012 and so could only  report whether the recommendations achieved the two-thirds majority vote required to be  accepted by the RUC. the RUC. CMS was unable to provide additional supporting  documentation on its review of the service when asked, and RUC staff  told us they did not have any information about CMS’s clinical review of  its recommendations for the service apart from what was included in the  Federal Register.
RUC and others have 60 days to comment  In December 2012, the RUC commented in writing on CMS’s final rule,  including CMS’s decisions regarding the RUC’s recommendations for  CPT code 31647. According to the comment letter, the American  Thoracic Society agreed with CMS’s refinements to its clinical labor DPEI  recommendations for CPT code 31647; RUC staff told us that the  American College of Chest Physicians did not comment on CMS’s  refinements to the service. CMS’s interim final values included in the  November 2012 final rule went into effect for the 2013 payment year  beginning January 1, 2013.
CMS may refine previously established relative values  In the final rule establishing the physician fee schedule for payment year  2014, which was published in December 2013, CMS finalized the interim  final work relative value and DPEI for CPT code 31647 without further  refinement.
section_title: Appendix II: Comments from the Department of Health and Human Services
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contact:
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Gregory Giusto, Assistant  Director; Marissa D. Barrera; Alison Binkowski; George Bogart;   Kaitlin Coffey; Elizabeth T. Morrison; Vikki Porter; and Daniel Ries   made key contributions to this report.