A Critical Analysis of the Resource-Based Relative Value Scale

Abstract

BACKGROUND--There is a general perception that procedural medical services are reimbursed at an inappropriately greater rate than cognitive services. By congressional mandate, the Health Care Financing Administration (HCFA) has been directed to establish a Medicare fee schedule to shift funding under a budget-neutral assumption from procedural to cognitive services. To provide a rational basis for this change, Hsiao et al (Harvard-Hsiao) developed a resource-based relative value scale (RBRVS) that equates the value of a service to the resources necessary to generate the service. METHODS--Instead of focusing on relative values and fee schedules ("price-per-unit-service"), the present study employs the standard commercial/industrial method of determining reimbursement rate (income divided by hours of labor) for 15 medical and surgical specialties. Data from independent sources are used to determine income and hours of professional effort for each of the specialties studied. Harvard-Hsiao and HCFA predicted the percent change in income for each of the specialties under the initial RBRVS and the HCFA fee schedule. The predicted income was then employed in this study to recompute reimbursement rates under the newly proposed payment systems. CURRENT PAYMENT SYSTEM--Average annual incomes for medical and surgical specialties are $124,500 and $176,600, respectively, a 42% difference (P = .03). Average weekly work hours (nominal hours, as adjusted for overtime) for medical and surgical specialties are 70.6 and 87.8, respectively (P = .005). Average hourly reimbursement rates for medical ($33.90) and surgical ($38.80) specialties are not substantially different (P, not significant). The difference in annual income is explained by the 17.2 hours per week of additional work hours by surgeons. The erroneous perception that procedurists are reimbursed at a higher rate than cognitive practitioners likely arises from differences in billing methods by which surgeons shift charges for cognitive work hours to the 18% of their time spent in the operating room. PROPOSED RBRVS AND HCFA PAYMENT SYSTEM--The income of all specialties is equalized about a mean of $132,500 (+/- $21,400 [1 SD]) by varying reimbursement rates in such a way that the effect of working hours is fully discounted. Reimbursement rates under the proposed payment system make no recognition of the hours of professional effort, postgraduate specialty training, or putative differences in the nature of the physician's work. --The RBRVS, and the HCFA fee schedule to the extent that it is based on that scale, are inappropriate bases for the reform of the physician reimbursement system.