Government overly reliant on AMA for determining Medicare reimbursement, investigation finds

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A recent federal investigation has determined the government relies too heavily on counsel from the American Medical Association when deciding how much to compensate physicians under Medicare, and furthermore, these decisions may be biased because of potential conflicts of interest, according to a recent report from the Government Accountability Office.

The report sheds light on the vague process that issues more than $70 billion per year to physicians treating Medicare patients. Specifically, it finds inaccurate Medicare payment rates could result from the federal government's dependency on advice from the AMA, combined with flaws in the AMA's data collection, according to the GAO's report.

Medicare's fee schedule

Medicare uses a fee schedule and determines pay rates based on estimates of the relative value for each service provided to Medicare patients. The relative value includes the amount of time, mental and physical effort and technical skill a physician must exert to provide the service compared to other services.

Many private insurers use the Medicare fee schedule as a foundation in creating their own reimbursement rates for physicians. Potentially, if Medicare overvalues a particular service, physicians may see an incentive to provide it more, and vice versa, according to the report.

Possible conflicts of interest

Critics have long voiced the argument that conflicts of interest of the physicians in the AMA could too strongly influence Medicare's rates, and the GAO's report confirms some of these suspicions. According to the report, Medicare officials usually enacted the recommendations of a 31-physician committee formed by the AMA and other medical specialty societies.

The AMA's Relative Value Scale Update Committee meetings are open to the public, but attendees must sign a confidentiality agreement which prohibits them from disclosing information about the discussions.

The GAO's report said, "physicians who serve Medicare beneficiaries may have conflicts of interest" when giving their recommendations for reimbursement, as they stand to benefit if the government issues higher relative values — and therefore higher payments — for the services they provide.  

Although changes in the value of certain services are not supposed to affect the amount of money Medicare spends, these changes can put some providers at an advantage by increasing reimbursement rates for some services at the expense of others, according to the report.

Barbara S. Levy, MD, chairwoman of the AMA's update committee for the last six years, defended the committee and maintained there were no conflicts of interest. "We are not talking about dollars or money," Dr. Levy told the New York Times. "We are talking about the time and resources that are necessary to perform a procedure, including: How many sutures does it take? And what sort of equipment? And how many minutes of my nurse's time? And do I need a nurse versus a medical assistant for the safety of my patient? I can't imagine how anyone other than a group of physicians could provide that kind of expertise."

By law, Medicare fees are required to reflect the time and intensity required to perform services, as well as additional built in costs, such as the cost of office space, wages, supplies, equipment and malpractice insurance. Medical societies collect data on these costs and physicians' work through surveys, but most surveys have low response rates, calling their accuracy into question as Medicare officials have no way to verify the data.

Inflated Medicare reimbursement rates

The low volume of survey responses combined with other weaknesses in the data "could lead to inflated Medicare payment rates" for some services, according to the report. Auditors criticized the AMA and Medicare officials, as CMS "does not fully disclose information upon which its decisions were based" and does not adhere to "a standardized process" to establish the relative value of doctors' services, the report said.

The Obama administration said it is seeking additional data to establish more accurate payment rates. As part of the Patient Protection and Affordable Care Act's requirement that Medicare officials reevaluate the time and resources needed for various services, Congress provided $2 million in 2014 so the government could collect its own data to inform relative value. However, the GAO's report found CMS "does not have a specific timeline or plan for using these funds."

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