RBRVS: old concepts, bad press.

Providers are rebelling against the concept of resource-based relative value scales (RBRVS) without understanding the importance of this form of reimbursement. The systematic approach to placing values on physician services is not new and is an improvement on payment schemes in recent use. Some of the increases in surgical charges over past years have been the result of the usual and customary approach to third-party payment. New physicians and surgeons were left to set fees in locker room talk, increasing each procedure fee until insurers finally rejected it as being too high. The only attempt by payers at cost containment in the meantime was to reduce payment to outliers, but this was done without encouraging an honest appraisal of the fees being charged. And, unfortunately, providers have not historically been allowed to participate in the process of payment mechanism review.

Blue Cross and Blue Shield (BCBS) companies originally paid on a fee schedule and then adopted the usual and customary payment approach. Other payers developed mechanisms to pay the claim essentially in full, as they do not have contracts with physicians. In addition, payers are like grocery stores or banks--"bigger is better." Profit of major insurers average 1-2 percent of gross premiums and, although insurers professed adherence to cost containment strategies, 'bigger was better." Federal antitrust laws prevented reproduction of the California Medical Society's 1969 and 1974 relative value publications. Pressure to prevent general use of the CPT coding system of the American Medical Association was finally overcome, and universal adoption of the coding system has made it possible to collect meaningful data at minimal cost.

Usual and customary charges were based on claims data, if the claim was coded and the codes were entered into the system. The cost of data entry and "key strokes" limited the amount of data captured. BCBS often entered only the first 2 or 3 digits of the CPT codes. Data were often purposefully not collected, because the payer wanted the employer to be in the dark about the causes of increased premiums. Full payment of physician charges ensured that the patient would not be "balanced billed," leading to patient dissatisfaction and complaints.

Medicare also required payment on the usual and customary protocol, and so payments for new procedures usually reflected the average of the first five claims. For a given geographic area, a usual and customary fee was developed if four providers submitted at least three claims for each code. In rural areas, particularly for specialty procedures, payments defaulted to a minimal conversion factor times a relative value developed independently by each intermediary carrier. After costs accelerated from 1965 to 1974, the federal programs limited payments by requiting that the fiscal intermediary, one in each state, pay claims based on the basis of 1974 usual and customary fees times the Economic Index Limiter (EIL), an artificial multiplier assigned by the government each year. In 1988, for example, the index was 2.32 (232 percent of the 1974 base-year average charge.)

Payment for any procedure coded without the base-year data continued to climb to 75 percent of the usual and customary charge. Because physician fees in a location are usually comparable, the 75th percentile often was equal to the fee charged by all physicians. Unfortunately, payments for new procedures--for example, CABG surgeries-continued to increase and those for older procedures--office visits and cholecystectomy--were severely limited by the artificial EIL, not even reflecting the inflation rate. Charges for limited office visits were less than those for extended visits, simple surgeries were paid less than extensive or complicated surgeries.

Although the California relative value system was based on experience and reported charges, it only came in two editions, 1969 and 1974. The conversion factor computations were different for the two versions. Every insurance company and intermediary for Medicare and Medicaid had copies, but they could not be officially used. Relative values for new procedures have not been available with any systematic study since 1974. The Health Insurance Association of America produces data on the average payment by region for the most common procedures. Each payer then assigned relative values with a hit or miss methodology. The averages were often tainted because of variability among the reporting companies.

In the 1980s, Relative Values for Physician Services was published by McGraw-Hill. It was based on the CPT coding system and on the California relative value system. Exact CPT evaluation could not be done, because the CPT codes are copyrighted by the American Medical Association. The individual conversion factors were left to be implemented by the various payers. The best applications of this system have come from a conversion factor for medical care and a conversion factor for all surgeries. The limitation of the system is that it is for physician services only and does not include the technical component.

In the continuing effort to bring equity to payment mechanisms, Medicare introduced the RBRVS system, which was to be "budget neutral." Unfortunately, implementation of RBRVS included conversion factors to reduce payment for surgical and "overpriced payments" and to compensate for the expected increase in utilization. Individual physicians and organized medicine have taken a negative attitude about the RBRVS concept without also taking the time to understand concepts and its implementation. It makes sense to reimburse for physician services on the basis of economic determinations.

National health care policy and the behavior of providers will depend on the payment mechanisms that are developed. Everyone knows that standardization will reduce administrative costs. Whether "surgical fees" are reduced or reimbursement for "cognitive" services is increased are decisions that will be based on supply and demand and not an artificial policy decision. We have spent too much time arguing about individual fees, looking at the trees rather than forest.

John J. Saalwaechter, MD, MBA, FACPE, is Corporate Medical Director, Koala Hospitals, Lebanon. Ind. He is Chair of the College's Society on Insurance. He is also Executive Director of the American College of Medical Quality Foundation.