WASHINGTON - -- As Democrats tout the American Medical Association's endorsement of their health care overhaul, critics are pointing to their studious sidestepping of a little-known monopoly that sends millions into the trade group's coffers each year, saying it's no surprise the Democrats were able to gain the AMA's support.
The AMA, which this year reversed its long-standing opposition to such changes, holds the exclusive rights to the medical billing codes that doctors are required to use when they submit bills to insurance plans. They are the equivalent of a bar code for nearly every medical procedure, from transplanting hearts to tucking tummies and scoping colons.
It is a monopoly that critics say gets in the way of making health care less expensive and potentially more effective.
The arrangement is the product of a once-secret deal, struck in the early 1980s, that allowed the government to streamline billing procedures for its insurance programs by setting a single code set as the standard. Under that deal, the AMA maintains and updates the codes at no cost to the government, but generates millions each year selling the code books and software licenses to doctors and insurers.
Sen. Tom Coburn, R-Okla., an obstetrician, said doctors are "adamantly opposed" to the health care bills, and pointed to the code monopoly to explain the AMA's support.
"The [code] revenue's protected," Coburn said during debate on the Senate floor. "That's the revenue the AMA gathers from the payment system that continues to be fostered in this bill, which is their main source of revenue."
The original deal related only to Medicare and other government insurance programs. Since then, Congress has expanded the regulation to require the codes to be used in electronic billing transactions with private insurers. Some interpret the agreement to be revocable at any time through a simple rule-making process. Critics question whether the AMA can represent the interests of doctors while it relies on revenue that comes from a government-sanctioned monopoly.
AMA President Dr. James Rohack would not disclose how much the group raises from the codes each year, but he said that it is a portion of the $70 million claimed from sales of "books and products" in 2008. Membership dues raised $44 million for the AMA that year.
"There's an inherent conflict of interest," said Kathryn Serkes, director of policy at the Association of American Physicians and Surgeons, a competing doctors' group that has been challenging the code monopoly for years. "The AMA has a vested interest in keeping those codes going and keeping that system going because they're making money from those, tens of millions of dollars every single year."
Daniel Palestrant, a doctor who heads Sermo.com, polled the physician networking Web site's more than 110,000 members about their views on the code monopoly.
"The physician community's position on this is that it is, at the very least, concerning that you have this conflict," Palestrant said. Of the more than 2,200 respondents, 88 percent said they did not believe the AMA should make more money from code sales than from membership dues. Ninety-three percent said they did not believe the government should continue to support the monopoly.
Palestrant and others say the code system encourages waste in the health care system by rewarding high-volume, high-cost care. They also argue that the AMA's control over who gets what codes forces specialty groups to maintain ties with an organization that has otherwise failed to represent their interests.
If it weren't for the code monopoly, they say, the AMA, whose membership has been in steep decline, would lose its claim as the voice of America's doctors.
The AMA's recent endorsement of the House and Senate health care bills has caused disgruntled doctors to speak out and sparked dissent within its own ranks. At a recent meeting of the AMA's House of Delegates, a resolution was offered to separate the group's publishing operations from its advocacy programs. The resolution was dismissed for procedural reasons.
Many question why the traditionally conservative group was willing to lend its support to a Democratic agenda that failed to meet its No. 1 demand -- a permanent fix to the looming annual cuts in Medicare payment rates to physicians, which was put off until next year.
Rohack said there has been no mention of the codes in AMA discussions with Congress or the White House.
"We would hope that our Congress not look for hidden agendas," Rohack said. "Our agenda, as the AMA fighting for health system reform, is to make a broken health care system for millions of Americans more secure and stable."
Rohack insisted the AMA is acting in the best interest of both doctors and patients.
"Revenue earned from [the codes] helps AMA work on behalf of America's patients and physicians on issues such as health insurance coverage for all Americans, Medicare payment reform, relief from unfair managed care and insurance business practices and important public health initiatives," Rohack said.
As the owner and publisher of the codes, the AMA is represented in 11 of 17 seats on an advisory panel that creates codes for new procedures and sets values for each code. Insurers, a government official and other providers fill the remaining seats on the board, which is lobbied heavily by those in medical specialties who seek the highest reimbursements for new treatments.
Critics say this is a case of the "fox guarding the henhouse" because it allows doctors to determine what they can charge the government for their services, and gives them the power to exclude competing providers, like alternative medicine practitioners, from the system.
In the mid-1990s, one company created supplemental codes to fill the gaps in the AMA code set and allow alternative practitioners into the billing system. Those codes were tested in Alaska and New Mexico and were found to save $2 million per year. The company has estimated that adding the code set -- a transition that would have high one-time costs for providers and insurers -- could save the federal government as much as $51 billion a year.
Serkes likens the code system to IRS tax forms and questions why doctors and practitioners should have to lobby a trade group for regulatory favors, then purchase required materials from that same group.
"The government requires us to use IRS forms," Serkes said. "Imagine the outcry if people charged for these pieces of paper that the government requires you to use."
kgeiger@tribune.com
The AMA, which this year reversed its long-standing opposition to such changes, holds the exclusive rights to the medical billing codes that doctors are required to use when they submit bills to insurance plans. They are the equivalent of a bar code for nearly every medical procedure, from transplanting hearts to tucking tummies and scoping colons.
It is a monopoly that critics say gets in the way of making health care less expensive and potentially more effective.
The arrangement is the product of a once-secret deal, struck in the early 1980s, that allowed the government to streamline billing procedures for its insurance programs by setting a single code set as the standard. Under that deal, the AMA maintains and updates the codes at no cost to the government, but generates millions each year selling the code books and software licenses to doctors and insurers.
Sen. Tom Coburn, R-Okla., an obstetrician, said doctors are "adamantly opposed" to the health care bills, and pointed to the code monopoly to explain the AMA's support.
"The [code] revenue's protected," Coburn said during debate on the Senate floor. "That's the revenue the AMA gathers from the payment system that continues to be fostered in this bill, which is their main source of revenue."
The original deal related only to Medicare and other government insurance programs. Since then, Congress has expanded the regulation to require the codes to be used in electronic billing transactions with private insurers. Some interpret the agreement to be revocable at any time through a simple rule-making process. Critics question whether the AMA can represent the interests of doctors while it relies on revenue that comes from a government-sanctioned monopoly.
AMA President Dr. James Rohack would not disclose how much the group raises from the codes each year, but he said that it is a portion of the $70 million claimed from sales of "books and products" in 2008. Membership dues raised $44 million for the AMA that year.
"There's an inherent conflict of interest," said Kathryn Serkes, director of policy at the Association of American Physicians and Surgeons, a competing doctors' group that has been challenging the code monopoly for years. "The AMA has a vested interest in keeping those codes going and keeping that system going because they're making money from those, tens of millions of dollars every single year."
Daniel Palestrant, a doctor who heads Sermo.com, polled the physician networking Web site's more than 110,000 members about their views on the code monopoly.
"The physician community's position on this is that it is, at the very least, concerning that you have this conflict," Palestrant said. Of the more than 2,200 respondents, 88 percent said they did not believe the AMA should make more money from code sales than from membership dues. Ninety-three percent said they did not believe the government should continue to support the monopoly.
Palestrant and others say the code system encourages waste in the health care system by rewarding high-volume, high-cost care. They also argue that the AMA's control over who gets what codes forces specialty groups to maintain ties with an organization that has otherwise failed to represent their interests.
If it weren't for the code monopoly, they say, the AMA, whose membership has been in steep decline, would lose its claim as the voice of America's doctors.
The AMA's recent endorsement of the House and Senate health care bills has caused disgruntled doctors to speak out and sparked dissent within its own ranks. At a recent meeting of the AMA's House of Delegates, a resolution was offered to separate the group's publishing operations from its advocacy programs. The resolution was dismissed for procedural reasons.
Many question why the traditionally conservative group was willing to lend its support to a Democratic agenda that failed to meet its No. 1 demand -- a permanent fix to the looming annual cuts in Medicare payment rates to physicians, which was put off until next year.
Rohack said there has been no mention of the codes in AMA discussions with Congress or the White House.
"We would hope that our Congress not look for hidden agendas," Rohack said. "Our agenda, as the AMA fighting for health system reform, is to make a broken health care system for millions of Americans more secure and stable."
Rohack insisted the AMA is acting in the best interest of both doctors and patients.
"Revenue earned from [the codes] helps AMA work on behalf of America's patients and physicians on issues such as health insurance coverage for all Americans, Medicare payment reform, relief from unfair managed care and insurance business practices and important public health initiatives," Rohack said.
As the owner and publisher of the codes, the AMA is represented in 11 of 17 seats on an advisory panel that creates codes for new procedures and sets values for each code. Insurers, a government official and other providers fill the remaining seats on the board, which is lobbied heavily by those in medical specialties who seek the highest reimbursements for new treatments.
Critics say this is a case of the "fox guarding the henhouse" because it allows doctors to determine what they can charge the government for their services, and gives them the power to exclude competing providers, like alternative medicine practitioners, from the system.
In the mid-1990s, one company created supplemental codes to fill the gaps in the AMA code set and allow alternative practitioners into the billing system. Those codes were tested in Alaska and New Mexico and were found to save $2 million per year. The company has estimated that adding the code set -- a transition that would have high one-time costs for providers and insurers -- could save the federal government as much as $51 billion a year.
Serkes likens the code system to IRS tax forms and questions why doctors and practitioners should have to lobby a trade group for regulatory favors, then purchase required materials from that same group.
"The government requires us to use IRS forms," Serkes said. "Imagine the outcry if people charged for these pieces of paper that the government requires you to use."
kgeiger@tribune.com
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