A critical analysis of the resource-based relative value scale

Area of Science:

• Health Economics
• Medical Policy
• Physician Reimbursement

Background:

• A perception exists that procedural medical services are reimbursed at a higher rate than cognitive services.
• Congress mandated the Health Care Financing Administration (HCFA) to establish a Medicare fee schedule to shift funding from procedural to cognitive services.
• A resource-based relative value scale (RBRVS) was developed to provide a rational basis for this shift by equating service value to necessary resources.

Purpose of the Study:

• To evaluate physician reimbursement rates using a standard commercial/industrial method (income divided by hours of labor).
• To recompute reimbursement rates under proposed payment systems, including the RBRVS and HCFA fee schedule.
• To assess the appropriateness of the RBRVS and HCFA fee schedule as bases for physician reimbursement reform.

Main Methods:

• Analyzed income and hours of professional effort for 15 medical and surgical specialties using independent data sources.
• Employed the standard commercial/industrial method of determining reimbursement rate (income/hours of labor).
• Utilized predicted income changes from the Harvard-Hsiao RBRVS and HCFA fee schedule to recompute reimbursement rates.

Main Results:

• Average hourly reimbursement rates for medical ($33.90) and surgical ($38.80) specialties were not substantially different.
• The difference in annual income between specialties was primarily explained by surgeons' additional weekly work hours (17.2 hours more).
• The proposed RBRVS and HCFA payment system equalized incomes but did not recognize hours of effort, training, or work differences.

Conclusions:

• The RBRVS and HCFA fee schedule are inappropriate bases for reforming the physician reimbursement system.
• The perception of higher reimbursement for procedural services likely stems from billing methods, not actual hourly rates.
• Reimbursement reform should consider factors beyond resource allocation, such as actual work effort and training.