The Occupy Movement against social and economic inequality popularized the slogan, “We are the 99%”—a phrase highlighting the enormous income disparity in the United States between the top 1% of earners and the other 99%. The 1% of highest income earners, defined in 2011 as an adjusted income of more than $389 000, includes many physicians, but it also turns out that physicians have their own version of “payment inequality.” And this payment inequality, particularly when it is done with public dollars, has important social implications.
Medicare’s first-ever public release of physician payments in April revealed that 2% of physicians accounted for approximately a quarter (23.6%) of the $63.9 billion total Medicare payments to physicians in 2012. The largest portion ($3.3 billion) was paid to the 2995 ophthalmologists who received average Medicare payments of more than $1.1 million dollars each that year. Several other specialties were disproportionately represented among the 2% highest earners, including hematologists-oncologists, cardiologists, radiation oncologists, and dermatologists.
Medicare comprises about 20% of most physicians’ revenue, which varies by specialty and individual practice. Medicare payments are not equivalent to net income, as some portion would typically be used to cover office expenses. Some cases of high payments, for example, may involve physicians who specialize in procedures that require expensive drugs or medical devices, and a substantial portion of Medicare payments for those procedures may ultimately end in the pockets of drug companies or device makers. But it is reasonable to assume there’s often a strong correlation between payment and net income.
The extraordinary size of the Medicare payments to a small number of physicians raises questions about the legitimacy of this reimbursement and whether all the care that was provided was appropriate. One also has to wonder whether the Medicare population is best served by investing 23.6% of its physician resources in 2% of the physicians and whether concentrating so much of Medicare’s physician payments in specialty areas such as ophthalmology and dermatology is the best way to derive value in this publicly financed program.
Primary care might offer a better return on investment, but the payment differential between primary care and specialty care prevents many students from choosing this career path. The more than $15 billion paid to the 16 485 of highest-paid physicians in Medicare would have entirely erased Medicare’s portion of the pay differential with specialists for the more than 160 000 primary care physicians participating in the program.
Some physicians might wonder if it is their place to question the amount Medicare pays their colleagues, but they need to realize that they have a shared interest in how Medicare’s payments are distributed. Because Medicare’s Sustainable Growth Rate (SGR) formula used to set physician payments establishes a fixed pool of resources for this purpose, the disproportionately high payments to 2% of physicians come at a cost to the other 98%. A payment amount beyond the fixed pool established by the SGR formula triggers an across-the-board payment cut. Congress has always passed legislation to prevent payment cuts from occurring, but it is a source of recurring tension in the physician community.
Physician organizations frustrated by the uncertainty in Medicare payment have lobbied Congress to replace the SGR with a more dependable revenue stream. Congress seemed poised to do this prior to the end of March this year, but it failed when Republicans and Democrats could not agree on a source of savings in the budget to offset the increased amount it would require to pay physicians.
After seeing the distribution of Medicare payments to physicians, one has to wonder whether the recurrent showdowns between physicians and Congress regarding the SGR is mainly for the benefit of the highest paid 2% of physicians. It’s not possible to examine trends in physician payments based on the data released by Medicare, but if payments to physicians parallel what is observed in our society at large, the largest growth in Medicare spending over time is most likely among those who are also among the highest paid. Perhaps the SGR problem could have been fixed some time ago had the medical community overseen the distribution of payments by Medicare and recognized that the amount paid to the 2% in 2012 was 50% greater than the amount needed to patch the SGR shortfall for that year.
The medical profession should have an interest in ensuring that physician resources are used to maximize benefits for the population. But when the American Medical Association (AMA) spent 35 years in court fighting the release of Medicare physician payment records, it may have put the interests of the highly paid 2% ahead of the other 98%.
Before releasing the information on physician payments, the Centers for Medicare and Medicaid Services requested public input about taking this action. Among the dozens of public comments from professional organizations, there was a mix of opinions among physician organizations that were concerned about physicians’ privacy, the data’s accuracy, and the public’s ability to understand it. But none stated an interest to work with Medicare to help identify physicians whose billing practices might be threatening the reputation of the profession and undermining the capacity of the overwhelming majority of physicians to meet the health challenges of the Medicare population.
Collective Actions Needed
Although lawyers inside and outside of the government line up to identify whether the information contained in the Medicare physician payment database reflects fraudulent billing by those who are several standard deviations beyond the average provider, physicians who are committed to their patients, to upholding the integrity of the profession, and to restoring the public’s trust in our ability to self-regulate and behave in a socially responsible manner might pursue a series of collective actions through their professional organizations in response to these data.
First, the physician community should establish standards and methods for regularly reviewing physician practice patterns. A high level of payment by itself is not proof that a physician has done anything wrong. But there needs to be a means to identify physicians who derive excessive payments for care of questionable value so that corrective action can be taken to conserve resources and protect patients from unnecessary care.
Second, the profession should encourage payers aside from Medicare to be similarly transparent with their physician payment data. This would eliminate the secrecy that can allow a minority of physicians to abuse different payment systems.
Third, the profession should examine the role that the American Medical Association /Specialty Society Relative Value Scale Update Committee (RUC) in setting the prices Medicare pays physicians. The RUC wields enormous power, and it has been criticized for its part in creating an imbalance in payments among different specialties. Given the physicians who are among the highest earners in Medicare are so disproportionately concentrated in just a few specialties, it is reasonable to question whether the RUC is serving the broad interests of all physicians or only a select minority.
Finally, the profession should reflect on whether the fee-for-service system continues to be the best way to meet the interests of both physicians and patients. It should do all it can to support the development of payment models that reward physicians for their hard work and for using health care’s limited resources in the most effective and efficient ways.
About the author: Andrew Bindman, MD, is Professor of Medicine, Health Policy, Epidemiology and Biostatistics at University of California San Francisco (UCSF). He is the founder and Director of the University of California Medicaid Research Institute, a multicampus research program that supports the translation of research into policy.
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