Primary Care Payment Quick Fix

by David M. Gimlett, M.D.

There is a quick fix to the inequity of Medicare and Medicaid payments to primary care physicians.  It is hidden in the Conversion Factor. So bear with me.

It is generally conceded that medical care reform in our country depends on redeveloping a strong primary care base. (1)  At the present time payments for primary care physicians services are not competitive with those of specialties that perform procedures. Not only does that reward doing procedures whether they are indicated or not but it overvalues the time spent doing procedures as compared with time spent in personal, comprehensive and coordinated care. Further, it has driven downward the interest of medical students to choose the primary care specialties for their careers, a decrease of 50% in the last16 years. The result is the expectation that we are going to have to add 52,000 to the expected number of primary care physicians over the next 12 years. (2)

The Affordable Care Act does little to address this problem. Recent rules by the Centers for Medicare and Medicaid Services (CMS) to provide separate payment for transitional care (care from facility back to community) are pitiful and loaded with extra paperwork and bureaucracy. The same is true of the three proposed Complex Chronic Care Management payments to begin in 2015 and the Primary Care Incentive Payment  which started in 2011. (3)

Medicare’s formula for calculating the physician payment schedule is complex. It starts with the hundreds of CPT codes that describe all reimbursable doctor-patient encounters (office visits, surgeries, etc.) Then each code is given a composite RVU (Relative Value Unit) made up of three basic RVUs, (1) the Physician Work RVU, (2) the Practice Expense RVU, and (3) the Malpractice RVU. Additionally, each of the basic RVU’s is assigned a modifier based on the geographic area (the GPCI) where the service is billed. Each RVU is then multiplied by its GPCI. The three results of these three actions are then added together. This result is then multiplied by a conversion factor (CF) to convert the composite RVU into a dollar amount. This conversion factor is updated annually by a formula prescribed by Congress and it is the key. However, before CMS can use this conversion factor it has to apply a “budget neutrality” to it in order to insure that it does not exceed its annual budget by more than $20 million. Now we come to the Sustainable Growth Rate (SGR). This was enacted by Congress in1997 and is designed to add a final revision of the Conversion Factor for the next year’s payments. Since 2003 Congress has voted annually to postpone the calculated fee cuts.

Much attention is being paid to the whole fee-for-service problem and there are many ideas about what to do. They range everywhere from abandoning fee-for-service to totally revising the codes, definitions, and values in the present system.  Any and all of these could take years to accomplish if Congress could ever agree on what to do. The only bright spot is the present House Bill to eliminate the SGR. This originated and was passed out of the House Energy and Commerce Committee. As noted above, the formula for the Conversion Factor is a statutory prescription. Only Congress can change it. Now that Congress is moving this along it would only take a simple amendment to the bill to direct CMS to use two different conversion factors, one for primary codes and one for procedural codes. The calculations could remain the same as for the single code but at the end the code could be split in two and the primary care Conversion Factor increased to a level to provide a 25% increase in primary care payments. The procedural codes could be reduced proportionally to maintain budget neutrality. 

Admittedly, this quick fix would not solve the cost and quality problems of our present system but at least it would help put the brakes on the loss of our primary care infrastructure. It would have the secondary benefit of improving accessibility and thereby enjoying the documented decrease in medical spending created by a stronger primary care base. As stated in a 2010 report of the Macy Foundation, 

 “In sum, the evidence of the earlier studies and the updated analyses paints a relatively consistent picture: within the U.S. healthcare system, regions or academic medical centers that have a relatively strong emphasis on primary care are able to provide care of equal or better quality at substantially lower costs than regions that emphasize specialist care.”(4)

Suggested Reading: 

(1) Leiyu Shi, “The Impact of Primary Care: A Focused Review,” Scientifica, vol. 2012, 

Article ID 432892, 22 pages, 2012. doi:10.6064/2012/432892>

(2) Projecting US Primary Care Physician Workforce Needs 2010-2025

Stephen M. Petterson, PhD, Winston R. Liaw, MD, MPH, Robert L. Phillips, Jr, MD, MSPH, David L. Rabin, MD, MPH, David S. Meyers, MD, Andrew W. Bazemore, MD, MPH

Ann Fam Med. 2012;10(6):503-509. 

(3) See: Primary Care Incentive Program

(4) Primary Care And How Will They Be Trained?

Proceedings of a conference chaired by Linda Cronenwett, Ph.D., R.N., FAAN  and Victor J. Dzau, M.D. 

Edited by  Barbara J. Culliton and Sue Russell

Published by the Josiah Macy, Jr. Foundation 44 East 64th Street New York, NY 10065

April 2010

Tag lines: Primary care; physician payments; Affordable Care Act; Medicare; Medicaid; primary care shortage; sustainable growth rate (SGR); CMS; conversion factor