The debate over fee-for-service physician payment often is misunderstood to be about the technicalities and relative merits of the RUC, relative value units, P4P and the SGR.  It isn’t—instead, it’s what the fee itself represents (and who decides), and what the service being provided actually is (and how it’s described).

Let me explain.  Analysts across the political spectrum agree that the health care system needs to move away from fee-for-service, although the reality is that FFS is likely to remain as a component  of new payment models, albeit in a very different form.  They say that we have to change the process for determining the fee itself, and how we define the service being provided to a patient—to one that reward “value” not “volume.”  But how a physician, or payer, or patient defines value may be very different.  Consider the following:

What fee?  From the standpoint of many practicing physicians, the “fee”—to their chagrin– is what the government allows them to charge, when what they really want is the ability to set their own fees.  Their mindset is that no one else is qualified to determine the value of their service.  No one else—not the government, not MedPAC, not the RUC, and certainly not a “relative value scale” originally developed by Harvard professors– knows how hard they work, what it costs to run their practice, or how  much value that their own patients place on their care.  They would like to scrap the price controls, scrap the RBRVS, scrap the RUC, scrap the SGR, scrap limits on balance billing, and let every doctor set his own fee and let patients decide if they are worth it.

But from a payer’s perspective, the fee is a very different thing—they want to get the best value for the dollar spent.   Since third party payers are responsible for paying most of the fee, the payer’s interest is getting the highest quality it can at the lowest possible fee.  They accordingly use their purchasing power to drive fees toward the level that gets them the best bang for the buck.  In the case of private payers, they exercise their purchasing power through contracts negotiated with physicians. In many cases, the private payer has such a big share of covered lives that physicians have little choice but to agree to their fee schedule and contractual limits on balance billing.  In the case of government, regulation and rate-setting are how it uses its purchasing power to get the best possible deal for taxpayers.

Government has other interests in deciding what the fee will be: trying to make sure that the payments are fair and don’t advantage some physicians or specialties or localities over others, protecting beneficiaries from excessive out-of-pocket costs, having some consistency in what the government pays, and using fee setting to achieve specific policy goals, like increasing Medicare and Medicaid payments to primary care physicians to get more to participate or adjusting payments based on performance.

From the patient’s point-of-view, the fee usually comes down to a simple calculation: how much do I have to pay out-of-pocket, can I afford it, is the cost predictable or am I going to be stuck with a huge bill?  Some of them may be able to pay more, but I don’t see a lot of patients telling their doctors please, please charge me more because I think you are worth it.  It’s not that they don’t think their doctors are great and worth every penny.   It’s just that it goes against human nature to pay more for something if you can get it for less—or have someone else pay for it!  Plus, most patients already are paying about as much as they can afford out-of-pocket, so they really aren’t interested in proposals (like getting rid of balance billing limits) that would allow doctors to charge them more.

What service?  From the physician’s point-of-view, the “service” is the expertise, skill, time and compassion she brings to a patient encounter. So the service rendered really isn’t an “office visit” or “colonoscopy” or a CPT code –it’s the physician herself!

But from the payers’ perspective, the service is something that can be described consistently across clinicians, be documented, audited, reported and coded properly.   They want to be sure that the service being billed by Dr. Smith is roughly equivalent to that by Dr. Jones, so that their subscribers are getting approximately the same service for the same premium.  They want to be sure that the actual service rendered is the same as the code descriptor says it is.  They want to be sure that the physician can provide documentation to support the service that was billed. They rely on tools like the RBRVS and the CPT coding system to try to establish such consistency and auditability.  And the government, in particular, has a statutory mandate to reduce fraud and abuse so that taxpayers don’t pay for a service that is different than the one billed to the government (that’s called program integrity).

From a patient’s point of view, the service isn’t an office visit per se.  It is the doctor’s expertise—but it is also much more than that.  It is how much time the doctor spends with them.    It is whether they have to wait 45 minutes “because the doctor is running late.”  It is whether their doctor clearly explains what is wrong with them and what can be done about it.   It is when and how well the doctor communicates about a worrisome test result.   It is whether they are herded or heard when they ask questions.  It is whether their doctor helps them get well.  Their values can’t be readily captured by CPT code or a so-called relative value unit.

The point is that each of these three perspectives—the physician’s, the payer’s, the patient’s—on what is the fee (and who should decide) and what is the service that is being provided (and how is it described, billed, documented, and validated) reflects their own particular place in the health care system. As such, their interests will inevitably clash.  This is really what the fight over relative values, the SGR, documentation requirements, and balance billing is all about—each one trying to align fee-for-service with their own interests, the physician’s in being able to control his or her own fees, the payer’s in getting the most bang for the buck, the patient in getting care that is centered on their needs at a fee they can afford.

Of the three, it is patient’s interests that ultimately must be paramount.  As policymakers drive physicians and the system to new payment models (including changes in fee-for-service), they need to ensure that the fee paid gets the patient the best value possible—great outcomes delivered efficiently, but at a rate that  ensures that there are enough skilled doctors to take care of them, not more, not less.  Policymakers need to recognize that from the patient’s point of view, the service being paid for isn’t an office visit, or procedures, or CPT code or RVU per se, it is high quality, patient-centered, compassionate care delivered by a highly skilled physician of their choice.  And policymakers need to recognize that a payment system that devalues a physician’s training, knowledge and skills, that forces them into delivering assembly-line care, and that drives the best out of medicine serves no one’s interest, but especially not patients’.

Bob Doherty is Senior Vice President of Governmental Affairs and Public Policy, American College of Physicians and blogs at The ACP Advocate Blog.