A little-known but powerful American Medical Association committee that strongly influences how much Medicare pays doctors is catching heat both from lawmakers and family physicians who believe the panel is not representing their interests.  

In late March, Rep. Jim McDermott, D-Wash., introduced legislation targeting the American Medical Association/Specialty Society Relative Value Scale Update Committee, or RUC, a group of doctors that the Centers for Medicare and Medicaid Services (CMS) has relied on since 1991 for information it uses to price Medicare payments to physicians.

Critics of the close industry-government partnership have said that since CMS accepts more than 90 percent of the RUC’s medical procedure value recommendations, the arrangement represents a conflict of interest that essentially allows a physician interest group to set the prices its members receive from Medicare. The workings of the RUC and the controversy over its practices were detailed in a Center for Public Integrity piece last November.

McDermott’s bill, H.R. 1256, the Medicare Physician Payment Transparency and Assessment Act of 2011, would reduce the AMA committee’s influence by requiring CMS to use independent contractors to identify physician services that are believed to be incorrectly valued. The bill would also require an annual review of medical procedures that are potentially over or undervalued.

Speaking in March at a House Ways and Means health subcommittee hearing,  McDermott,  a psychiatrist himself, slammed the RUC , calling it  the “least known committee in the medical industrial complex,” and questioning why a group of doctors should be “setting their own fees.”  

“How are you ever going to get control of cost if you let the fox decide what the keys to the hen house are going to be used for?” McDermott asked.

In an interview, McDermott said he only learned of the role of RUC after reading the Center’s piece.  “I read it on a plane and thought, ‘We need to do something about this,’ ” McDermott said. “I have practiced medicine for 20 years and have been in Congress for 20 years, and I have never heard of the RUC. I never realized how central the RUC is to how doctors are paid.”

Indeed, the role of the RUC has been little known.  Medicare administrators price procedures based on three criteria: the “work value” of a procedure, the physician expenses, and the specialty’s malpractice costs. Together, the three criteria make up what Medicare calls a “relative value unit” or RVU. The larger the RVU, the more Medicare ultimately pays doctors for the procedure.

Each year, CMS, through the federal rules-making process, sets relative values for new and revised medical procedures. It reviews values every five years.  To determine work value, CMS turns to recommendations from the RUC. The RUC also submits recommendations on physician expenses.

The findings section of McDermott’s bill, which has been referred to both the House Committee on Energy and Commerce and the Committee on Ways and Means, details a litany of criticism against the RUC and the CMS process of valuing procedures. The bill states that primary care physicians, who provide 44 percent of Medicare visits, constitute a small fraction (between one-sixth and one-thirteenth, according to the bill) of RUC membership. It also notes the high success rate of RUC’s recommendations with CMS, and says the committee, which is currently composed of 29 doctors, lacks voting transparency and relies on self-reported medical specialty society survey data, which “presents serious conflict-of-interest concerns.”

Family physicians have long argued that they are under-represented in the RUC, which they claim is dominated by specialists. As a result, say the family doctors, the RUC has overvalued high-tech medical procedures and imaging while undervaluing doctor-patient consultation and disease management, which they say has driven the rapid expansion of health program costs.

The McDermott bill has brought to a head the conflict between primary care advocacy groups and the RUC. In May, the board of the American Academy of Family Physicians, which holds one seat on the RUC, will discuss in Kansas City whether or not to drop out of the committee, which it has long criticized.

Dr. Roland Goertz, the president of the academy, said the group was heartened by the McDermott legislation, and has received pressure to leave the RUC from some members and state chapters, including the New Jersey Academy of Family Physicians.

Ray Saputelli, executive vice president of the New Jersey group said, “our leadership would be happy to see the AAFP make a bold statement and leave the RUC. Our message is pretty clear. The system is broken.”

If the family physicians vote to leave the RUC, Brian Klepper, a health care consultant and commentator who has advocated against the RUC, said CMS would have to take it seriously. An AAFP vote to leave, Klepper said, would be a “firm statement from primary care physicians that they have no confidence in the system’s willingness or ability to appreciate the challenges and value of what they do.”

A spokeswoman for the Centers for Medicare and Medicaid Services, however, said the agency has not taken a position on McDermott’s bill, and declined to speculate on how the agency would react if primary care organizations left the RUC.

Since introducing his anti-RUC bill, McDermott said, the AMA has embarked on a “scorched-earth campaign” in Congress against the legislation. “If anybody wants to change the RUC, the AMA is up here with both feet to make sure nothing changes,” he said.  McDermott said he is scheduling a meeting with the AMA, which has sent letters to Congressional leaders, including House Speaker John Boehner, claiming that the bill paints a “seriously flawed picture” of the RUC.

The association has worked to make powerful friends in Congress, and spends big to make its desires known.  During 2010, the AMA spent more than $22.5 million to lobby Congress and government agencies, according to the Center for Responsive Politics.  During the 2010 election cycle, the AMA political action committee and individuals affiliated with the association donated $1.4 million to federal political campaigns.

In response to calls for comment, the AMA forwarded a letter from association executive vice president Dr. Michael Maves to McDermott. In the letter, Maves writes that the bill’s linking of the RUC to low primary care payments is “simply not supported by the evidence.”  Maves said that every time primary care specialties brought evaluation and management codes (the bread and butter billing codes used by family doctors) to the RUC for review, the committee recommended payment increases, resulting in total gains of 22.5 percent.