[00:00:00] Stacey Richter: Episode 437, "The Most Powerful Committee No One Ever Heard of and Their Role in Primary Care and Mental Health Struggles", Plus a Sidebar on the “Free Market". Today I speak with Brian Klepper.

You can listen to the full episode here.

American Healthcare Entrepreneurs and Executives You Want to Know, Talking. Relentlessly Seeking Value. 

"Anyone who isn't confused really doesn't understand the situation.” That's a quote by Edward R. Murrow and very apropos. I started thinking about this conversation that I had had with Brian Klepper because so much going on right now.

So many discussions and dissections taking place about primary care financial struggles, about what is value in healthcare, and the RUC is, at a minimum, an underlying factor, but yet it doesn't come up. Almost ever. Merrill Goozner called the RUC the AMA's, in air quotes, dark secret, and I can see why.

Just one procedural note before I roll tape with Brian Klepper. We're going to go a little rogue today because you kind of got to understand what the RUC is before I can get into the two points I really want to make about it. So here's my outrageous plan, which will shake up our standard Relentless Health Value format.

Today, I'm going to make the points I want to make after the interview, not before, like usual. I will, however, just mention the two points so you can keep them in mind as I talk with Brian. Here's the first point and it's about the doomed financials of primary care. Why is it that primary care has no business model unless part of the business model includes driving profitable downstream utilization?

And when I say utilization, do I mean services with bigger RVUs? Why, yes, I think I do. We'll dig into this later. Here's my second point, and it's my view on the nature of any postulations that the in air quotes value of healthcare services is equivalent to the prices that we pay for said services. Again, more on that later, but here is my original conversation with Brian Klepper.

Brian Klepper is a longtime healthcare analyst and former CEO of the National Business Coalition on Health. 

My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. 

Brian Klepper, welcome back to Relentless Health Value. 

[00:02:27] Brian Klepper: I'm delighted. Let's talk about healthcare. 

Unpacking the RUC: The Power Behind Healthcare Economics

[00:02:29] Stacey Richter: Let's start out here talking about the RUC.

So before we get any further, what is the RUC? What does it stand for? Who are they a part of, etc? 

[00:02:40] Brian Klepper: The RUC, which rhymes with, you know, some of our favorite words. The RUC is a committee of the American Medical Association that, in the late 80s, got a sole source contract with, at that time, HCFA, now CMS, to identify relative value of every medical procedure.

And it's a committee made up of 31 physicians, 25 of them are specialists and 6 of them are primary care. 

[00:03:10] Stacey Richter: So the RUC, which stands for, again? 

[00:03:13] Brian Klepper: RBRVS Update committee. 

[00:03:15] Stacey Richter: Okay. So that's a mouthful. And are they part of the AMA? 

[00:03:19] Brian Klepper: Yes. So the AMA made this argument that they'll take this hassle of a job off the hands of the of CMS. And what has ended up happening is that it becomes a horse trading exercise. 

[00:03:31] Stacey Richter: Okay, so I'm just picturing the scene here. So we have the RUC committee, which as you said, consists of 25 specialists and 5 PCPs or 6 PCPs. You're right. That adds up to 31. As you said, they all sit in a room and their job is to calculate the relative value units, as you said, the RVUs for given procedures and things. 

[00:03:55] Brian Klepper: While everyone is campaigning to optimize the value of their own, of the procedures within their own specialty. 

[00:04:04] Stacey Richter: So if I'm the, you know, radiologist in the committee, then I want my radiology, things I do in radiology to be the highest RVUs possible. If I'm a cardiologist, I want my cardiology stuff.

As you said, it's, it's horse trading and everybody's job, really, you know, the reason why you get nominated to that committee is because you're good at that kind of thing, 

The Financial Impact of the RUC on Primary Care

[00:04:26] Brian Klepper: Right, and in the process you want to neutralize primary care because the more primary care is allowed to do the things that they have been taught to do then the fewer referrals are made the object of the mission is to get patients around primary care and directly to the specialist, which is where things are more lucrative.

[00:04:48] Stacey Richter: Okay, so that's actually really interesting what you said there, because I had always been under the impression that the goal of the specialist in the RUC was to drive up basically the prices, but from what I'm understanding, you know, relative to primary care, that basically primary care just kind of got left out in the cold while you have 25 specialists on this committee, which four to one outnumbers the number of primary care people on the committee so that they just, could get their way and get the higher prices.

But what you're saying, and I'm just recalling the total revenue formula here, which is total revenue equals price times volume, it sounds like it's not only a matter of driving up prices, but it's also a matter of driving up volume. Because the more that you handicap primary care, you know, limit the number, the amount of time that can be spent, etc, the more visits there are, which equals volume. Right? So they're kind of handling both sides of the equation there, it sounds like. 

[00:05:50] Brian Klepper: It is not at all unusual to go into an independent primary care doctor's office and find out that he's making $120 grand and then go and talk to the primary care doc who is working for the hospital and he's making $240k or $260k. I mean, the incentives that have been at play have been very formidable. This is one of the key areas of the current healthcare regime that's been so painful for the country. If you don't understand this piece, you really don't get anything about how healthcare really works, in my opinion. 

[00:06:26] Stacey Richter: So if you were just going to summarize that piece, how would you summarize it?

[00:06:30] Brian Klepper: I would summarize it by saying that primary care has developed a reputation for being the easy specialty. Maybe inhabited by the docs who are the least bright of everybody who goes to med school, and it's just not so. The complexity of what a primary care doc has to do when faced with a new patient. I mean, a patient walks in, it can be anything.

It can be hormonal, it can be neurological, it can be viral, and in 10 or 15 minutes, That person has to go through a cognitive process where they figure out what it can't be and is left with what it might be and go from there and either decide that they can manage the problem on their own or they need to send the patient further downstream to a specialist who can look into it as well.

It's a critical function and it has been neutralized by the specialty community to get the patients directly there, and by the health plan community to make sure that the total spend is as much as possible because they're making money on it. And by the health systems who are trying to drive up every, who see every patient as a mine of potential financial opportunity.

[00:07:41] Stacey Richter: Thanks so much, Brian. 

Exploring the Value of Healthcare Services

[00:07:43] Stacey Richter: So, quick recap. The RUC stands for the RVU Update Committee. It is run by the AMA and has the sole source contract to determine how many RVUs per healthcare service. And let's not forget RVUs are a proxy for money. In 2024, each RVU is worth something like $33. So if the RUC figures out how many RVUs any given CPT code is worth, they are, in fact, determining how much money will get paid by CMS to perform any given CPT code. The RUC determines how much money physicians get paid for what they do, is the bottom line. Again, who is on the RUC? You heard Brian give the rundown. I think this changes slightly year over year, but 22 to 25 of its 31 members are appointed by major national medical specialty societies, so 22 or more specialists, only 5 or 6 are in primary care.

One thing to be clear about. No shade to the individuals on the RUC, their volunteers. Also no shade on any surgeon or physician who has dedicated their life to flawlessly performing a surgery or ridiculously difficult procedure or diagnosis that could change a patient's life. My deepest thanks and gratitude for you and your service.

My commentary here is on the entire construct of this RUC endeavor, and even why the AMA is in charge of this to begin with. If I had whiskers, they would be twitching. Just the whole rubric, or whatever it's called, feels like it would get us into exactly the pickle that we are in right now, actually, where the USA has the highest healthcare costs and patient outcomes that are somewhere on the embarrassing scale.

Someone should have asked ChatGPT what the likely outcome might be of getting a board comprised of mostly specialists to fight over the relative value of services based on how hard they think their own specialty is compared to other specialties. Honestly, now continuing my ChatGBT streak, I asked the bot for three very low value things as per the RUC.

Here's what chat GPT replied, "chronic disease prevention and management", low value. "behavioral health integration", low value, and "doing care coordination". Relatively, it seems, on the value scale, these three things are not worth much. Which makes sense, actually, because as per the RUC, RVU allocations are based on but three components.

Those three components are Physician Work, Practice Expenses, and Professional Liability. Call me Captain Obvious, but right, there's no mention in there about value to the patient. Holy crap, zero points awarded for patient value or even clinical value. At least from what I can glean from the very not transparent available information.

The Real-World Consequences of RUC Decisions

[00:10:29] Stacey Richter: Now, relating all of this back to current events, here's my first point. Consider the conversation with Elizabeth Mitchell from PBGH last week. She said the jumbo employers in PBGH actually want to pay more. To PCPs and mental health professionals and for integrated behavioral health. But, they keep finding themselves hamstrung by health plans.

Because health plans pay FFS rates, fee for service rates, which are based on Medicare rates a lot of times. And those Medicare rates are based on RVUs determined by the RUC. We have a root cause in the building is my point. Consider also now the latest wave of retail primary care destruction. Lots to unpack with that one, for sure that has nothing to do with underlying FFS rates, but it is still a factor of some consequence here.

So CMS's use of the RUC and the subsequent destruction of primary care is my first point, which was also Brian Klepper's main point. As Charlie Munger, Warren Buffett's partner said, "show me an incentive and I will show you an outcome". I mean, does CMS really have to take 90 percent of the RUC's recommendations, which is the percentage that they are currently taking?

I know we're all hell bent on paying for value and not FFS, but if jumbo employers and pretty much anyone you ask knows that PCPs and others with clear patient value and clear clinical value are getting screwed, and we know that the majority of payer contracts are in fact still FFS or have at a minimum an FFS chassis, I'm rooting for CMS to do their own math for primary care CPT code RVU values.

Here's my point two, but for sure the primary care impact is the most important. This second point I'm making is mainly to underscore that if you don't understand how our industry actually, for real, works, you can't hope to fix it. So many great ideas have fallen prey to the real world of American healthcare.

And look, I'm saying this to offer some hope here, that there is a measure of control to be had, an ability to plan, or to think really crisply about strategy. But it does take an effort to dig deeper than what you read in the marketing spin. And it may also take a couple of tries, because the real world right now contains textbook conflicts of interest. And those are not frequently mentioned on anybody's website. Anyway, let's get back to point two here. 

Debunking the Equivalence of Value and Money in Healthcare

[00:12:50] Stacey Richter: I read the following on LinkedIn and literally cringed so hard. I think I sprained something internally. You'll see why. Here's what I read. It was written by a private equity leader in a fairly august, actually private equity outfit.

And he wrote, "value in a capitalist system is the same as money. The only way we actually express value is by allocating money". So if the frontline deliverers of care aren't getting their fair share of money, then society is saying that is the amount of value they provide. It is as simple as that. The concept of value-based care is moronic.

If you value it, you spend money on it, hmm. So, he wrote, "society is saying that is the amount of value they provide". 

Except, that's actually wrong, because it's often the RUC that's saying that is the value they provide, or relative value, as it were. Looking for the wisdom of the crowd now? Is this a capitalist system, in air quotes, having a committee determine the price of a service?

I don't know. To me, it sounds more like a Soviet Union ghost plan circa 1930. And look, I have an undergrad in economics, so I am highly qualified to tell you that the Soviets did not maintain a capitalist system. Also, their ghost plan was a complete failure and led to a genocide level famine. So, there's that.

But this point of view is maybe more widespread than I would have thought, so who knows? Maybe I'm the ill informed one. But I hear fairly often a story about how a physician practice was trying to get paid fairly to coordinate care or do some high value, value-based, as per evidence based clinical medicine thing, and that physician practice is told by the payer, network, relationship manager or somebody. Something like, all FFS is high value care. So why would I pay more for you to do stuff you get paid fee for service to do? I'm gonna link in the show notes to that article about the RUC by Merrill Goozner. It has lots of references if you want to read more about this. Or for sure, go directly to the source, the AMA website, link in the show notes. Just please read between the lines is my only advice. 

Final Thoughts and How to Stay Informed

[00:15:09] Stacey Richter: So let's talk about going over to our website and typing your email address in the box to get the weekly email about the show that has come out. Sometimes people don't do that because they have subscribed on iTunes or Spotify and or we're friends on LinkedIn.

What you get in that email is the whole introduction of the show transcribed. There's also show notes with timestamps. Thanks so much for listening.