Statement of John E. Mayer, Jr., M.D., Professor of Surgery, Harvard Medical School,
Boston, Massachusetts;
Pediatric Heart Surgeon, Children's Hospital Boston, Boston, Massachusetts;
Chairman, Council on Health Policy, Society of Thoracic Surgeons, Chicago,
Illinois; on behalf of
the American Association for Thoracic Surgery, Manchester, Massachusetts
Testimony Before the Subcommittee on Health
of the House Committee on Ways and Means
Hearing on Physician Payments
February 28, 2002
Madam Chairwoman, I am John Mayer, M.D., chairman of the Council on Health Policy of the Society of Thoracic Surgeons. In practice I am a pediatric heart surgeon at Children’s Hospital in Boston and Professor of Surgery at Harvard Medical School. I am here to represent both the Society of Thoracic Surgeons and the American Association for Thoracic Surgery; together these organizations represent essentially all of the surgeons providing heart, lung, esophageal, and other thoracic surgery in the United States. These two organizations are among the charter members of the Coalition for Fair Medicare Payment, formed last year in response to the crisis created by the across the board reduction of 5.4 percent in the Medicare conversion factor. The effects of this across the board reduction are compounded for our specialty and many others by continued reductions in the practice expense component of the Medicare fee schedule.
We support, as does the coalition, H.R. 3351, which would moderate these 2002 reductions. It is essential that this bill, which has over 300 co-sponsors, be brought to the House floor in time to limit the damage that is being done.
In announcing these hearings, Chairwoman Johnson said that “Medicare’s formula for paying physicians is completely irrational and must be reformed this year.” We fully agree. The “Resource-Based Relative Value System (RBRVS)” and the related “Sustainable Growth Rate” formula amount to a very complicated administered price
control system. Administered price control systems sometimes work in the short run, but the lesson of history is that they end by breaking down. The RBRVS is now breaking down, and this will have an inevitable impact on the quality of care that Medicare beneficiaries receive.
The first sentence of the Institute of Medicine’s 2001 report, “Crossing the Quality Chasm: A New Health System for the 21st Century,” reads: “The American health care delivery system is in need of fundamental change.” One of the IOM’s principle recommendations is:
“Private and public purchasers should examine their current payment methods to remove barriers that currently impede quality improvement, and to build in stronger incentives for quality enhancement.”
Our discussions of a rational reimbursement system should bear this closely in mind.
Let me explain why a surgeon from a children’s hospital is here to talk about Medicare. For the last six years, I have represented the Society of Thoracic Surgeons on the Relative Value Update Committee of the American Medical Association. This committee has been charged by CMS to advise it on changes in the fee schedule – originally, the work values, more recently on some aspects of the practice expense values. I do need to emphasize that all of the basic payment policy decisions on practice expense reimbursement were made by the CMS (formerly HCFA) staff. The Practice Expense Advisory Committee has only been asked to advise on some details, but the entire process for determining the components of practice expense is fundamentally flawed.
Let me give you an example The PEAC was asked to give its opinion on the amount of clinical staff time (nurses, nurse assistants) involved in a typical mid-level office visit (99213). The committee considered 21 vs. 23 minutes of clinical staff time, and we were told that this two-minute difference would shift over $100 million in the Medicare fee schedule. This is over half as much as Medicare paid for the most common open heart procedure. I have no confidence that the committee could make any reliable distinction between 21 and 23 minutes, yet this is the process that is being used to determine the practice expense component of the Medicare Fee Schedule.
This is not the way to set fee schedules that are either 1) equitable to physicians or 2) in the best interests of patients. One fact this story illustrates is this: the “relative value” system is not about value – certainly not about value to the nation or to the patient. There is no attempt to base reimbursement on benefit – value – to the patient. The name RBRVS is a misnomer. It is a relative cost system, not a relative value system. It does not reward experience, it does not reward quality, and it does not even (despite the original recommendation of Professor Hsiao) recognize the “opportunity cost” of extended training (seven to eight years after medical school for cardiothoracic surgeons).
You have heard in detail about how the SGR system has evolved and the relationship between the fee schedule and the conversion factor. A system tied to gross domestic product is inherently unstable; even more important, the need for physician services is not dependent on the rate of growth of the economy. An economic downturn may even increase the need for some services. The issue of growth in volume and intensity of physician services is more complex, but I am uncomfortable with the proposition that there must be an absolute cap on growth. Any arbitrary formula will fail to recognize the growth of medical technology and our ability to offer life saving interventions to a greater proportion of the population. As a consequence, there is the potential for denying Medicare patients treatments that will prolong life and reduce disability.
The steadily lengthening American life spans and the clear evidence that rates of disability in old age are diminishing should show that we should encourage, not penalize growth in medical services – so long as these services are indeed contributing to the health of our citizens. I suggest that the Administration and Congress look closely at where the growth in medical services has occurred in recent years. It is not in heart surgery. The recent report of John Wennberg and his associates from Dartmouth on “supply-sensitive services” is relevant. His suggestions for creation of centers of health care that will encourage necessary but discourage unnecessary services deserve consideration.
In the short run, pending major system reforms, we basically support the draft recommendations of the Medicare Payment Advisory Committee. This would eliminate the SGR and base updates primarily on a revised Medical Economic Index. The productivity factor used in setting the MEI should be examined carefully; it probably does not realistically measure changes in physician productivity (for example, the learning curve in adopting new technologies) and certainly does not accommodate the current escalation in malpractice insurance costs. MedPAC also suggests that it be asked to make annual recommendations on the update formula, so that the system would not be on automatic pilot; Congress therefore would have the option of adopting higher or lower updates. There should be a default formula, to set the update if Congress does not act; for example, the default update could be the revised MEI with a productivity adjustment of –0.5 percent.
Let’s turn back to the RBRVS. The reductions in allowed charges for cardiac surgery this year are not 5.4 percent but, on average, ten percent. For some procedures it’s as high as 15 percent. Since 1994, for cardiac surgery, the reductions in the practice expense component of the fee schedule alone have been 47 percent (see attached chart). How this has happened, and the consequences, will illustrate the problems with this administrative pricing system.
Congress in 1997, under the leadership of this committee, instructed HCFA, in revising practice expense RVUs, “to recognize all staff, equipment, supplies, and expenses.” Congress said all expenses, not “some expenses.” Two years later, under Section 212 of the Balanced Budget Revisions Act, Congress instructed HHS, in computing practice expense, to utilize statistically valid data from outside organizations in addition to data from HHS itself.
In recognition of the need for better data, the Society of Thoracic Surgeons contracted with the American Medical Association to conduct an enlarged sample of thoracic surgeons in its annual socioeconomic survey. The work was done by the AMA, through its own subcontractor, not by the STS. HCFA agreed that the survey met its very rigid standards for statistical validity and used some of this data in its 1999 revisions of the practice expense RVUs. But that same year, despite the clear evidence in this survey that cardiac surgeons are incurring major costs for staff who assist in both operative and post-operative care in the hospital, HCFA deleted from its practice expense equation all costs our members incur for clinical staff who help them in the hospital. This payment policy decision deleted more than 80 percent of our clinical staff costs from the practice expense equation.
We have subsequently done yet another survey, which showed that 74 percent of cardiothoracic surgeons incur these costs for staff who assist in the hospital. In some states, these costs may be partially – but only partially – compensated for by limited billing for some—but not all-- of these staff when they assist at surgery. There is no reimbursement for any of the clinical staff on our members’ payrolls for their services in the ICU or the wards post-surgery, and reimbursement even for assistance at surgery is inconsistent.
Why do cardiothoracic surgeons employ this staff? Very simply, the cardiothoracic surgeons working at the grassroots level have made decisions that these staff are essential to quality outcomes. Only in the largest, mostly academic hospitals, is the hospital staff adequately specialized and trained to assist at heart surgery and care properly for these patients in the hospital post-surgery. Heart surgery is very complex. As the IOM has noted in regard to complicated procedures, quality outcomes require a team that works together consistently, both in the operating room and in post-operative care. Cardiothoracic surgeons have stepped up and incurred these costs as the practice of heart surgery has evolved over the last ten years. Risk-adjusted mortality has dropped 40 percent in the last ten years. The team approach is one of the reasons for this quality improvement. That is what cardiac surgeons have done by incurring these costs themselves. I gave a talk to a statewide meeting of cardiothoracic surgeons in Florida last weekend, and I asked for a show of hands for how many of them employed clinical staff that helped them to care for patients in the hospital. Every one of them raised their hand.
We do not want to go backwards. But if the RBRVS ignores these costs, cardiothoracic surgeons are no longer going to be able to maintain staff of the same quality.
Also at the direction of Congress, the General Accounting Office is studying HCFA/CMS implementation of practice expense and its effects on all specialties. A preliminary report was submitted last year, entitled “Practice Expense Payments to Oncologists Indicate Need for Overall Refinements.” The GAO in this study concluded that on average, practice expense reimbursement under the RBRVS meets only 70 percent of average physician costs. For cardiothoracic surgery, reimbursement was only 53 percent. That was under the 2001 fee schedule; adjusting the GAO study to 2002, the PE reimbursement for cardiac surgery would be less than 50 percent of costs.
I noted at the beginning that the reimbursement system is broken. Physician morale is poor. In our own specialty, applications from graduates of U.S. medical schools for the 144 residency training positions offered annually in cardiothoracic surgery have dropped well below the positions available: this year, there were only 112 applications from graduates of U.S. medical schools for these 144 positions (chart attached). The total training period for a cardiothoracic surgeon, post medical school, is seven years. Most are in their mid-thirties before they begin practice. This drop off in applications does not bode well for the medical care the baby boomer generation will need as this large group enters the age in which cardiac disease is prevalent. If major shortages of cardiothoracic surgeons, or a decline in quality appears five or ten years from now, there will be no way to turn the situation around on a dime. The decisions Congress and CMS make this year will have their impact, and the impact will be felt much more in the future than the day after tomorrow. I hope we are looking ahead.
Cumulative Reductions in Medicare “Allowed Charges”
for
Coronary Artery Bypass Surgery, 1986-2001 (with & without CPI
adjustment)
Current
Dollars
Adjusted
to 1986 Dollars to reflect changes in the Consumer Price Index (buying
power)
Positions Filled and Applications To Thoracic Surgery Resident Programs 1993-2002
