The Medicare Payment Advisory Commission plans to make formal recommendations in its March report to Congress that will target overvalued services in the physician fee schedule.

During a Jan. 10 meeting in Washington, D.C., the commission voted to move forward with a proposal that would initiate a five-year review of services that have experienced substantial changes in length of stay, site of service, volume, practice expense and other factors that may indicate changes in physician work, according to Medicare data.

The recommendation stems from MedPAC's findings that previous five-year reviews have resulted in substantially more increases than decreases in work relative value units, which are assigned to services in the physician fee schedule to determine how payment rates should vary between services.

MedPAC staffer Dana Kelley asserted that the current review process often fails to identify overvalued services because "CMS relies too heavily on physician specialty societies for identifying services that merit review and to provide evidence in support of increasing or decreasing relative values of services under review."

As a result, most services reviewed by the Relative Value Update Committee (RUC) are likely to be perceived as undervalued rather than overvalued. Therefore, Medicare data could be used to support agency claims that services are overvalued.

MedPAC also supported a recommendation that would establish a standing panel of experts to help CMS identify overvalued services and to review recommendations from the RUC. Since the implementation of the physician fee schedule in 1992, CMS has reviewed and modified the relative value units for selected services based on the RUC's recommendations.

However, if Congress chooses to act on the recommendation, the panel would become an intermediary, particularly at the beginning, to assist the agency in determining which services warrant additional consideration by the RUC.

Kelley explained that the panel would review codes that CMS' data analyses flag as potentially valued incorrectly and determine which services should be forwarded to the RUC for additional consideration. The panel would also develop additional evidence to support correcting the value.

"The commission's recommendations are not an attempt to supplant the RUC, but instead are intended to augment it," she stressed. Nevertheless, "the review process would benefit if CMS received guidance from experts who are less financially invested in the outcome," she said.

Commission Chairman Glenn Hackbarth reiterated Kelley's support for the RUC. However, he stated that "we can't expect the RUC process as currently designed to go after overvalued" services.

He explained that review process is inherently skewed towards the discovery of undervalued service because the members of the RUC are financially invested in the outcome.

In order to achieve a greater balance in the review process, the panel should be comprised of representatives from CMS' network of carrier medical directors, experts in medical economics and technology diffusion, private payor plan reps and a mix of physicians.

The commission also plans to recommend that HHS, in consultation with the expert panel, should identify new services likely to experience reductions in value. Those services should be referred to the RUC and reviewed in a time period as specified by HHS.

The proposal is based upon the notion that the expected work value in certain new services will change over time. Hackbarth noted that the decision enables an exercise of judgment to determine which codes are likely to experience a downward cost curve. "A counseling code isn't likely to experience that whereas another procedure code might," he noted.

The final recommendation by the commission is intended to ensure that all codes are reviewed periodically. Approximately one-sixth of the services volume has yet to be reviewed by the RUC, Kelley reported.

Therefore, MedPAC suggested that each year CMS could select a sample of codes that have not yet been reviewed to undergo consideration.

The recommendations build on MedPAC's work in 2005 to curtail imaging overuse by physicians (¹ Also see "MedPAC’s March Report To Feature Recommendations To Curtail Imaging Use" - Medtech Insight, 24 January, 2005., p. 30).

MedPAC Recommends Measures To Identify Overvalued Physician Services

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