How Medicare’s Physician Payment System Shaped Care Incentives — and Why It Still Affects Patients Today

For patients navigating complex, chronic conditions like endometriosis, the healthcare system often feels rushed, fragmented, and procedure-focused. That experience isn’t accidental — it’s shaped in part by how physicians are paid.

One of the most influential policy changes occurred in 1992, when Medicare adopted a new physician payment framework known as the Resource-Based Relative Value Scale (RBRVS). While this reform did not single-handedly make U.S. healthcare expensive, it fundamentally reshaped care incentives in ways that continue to affect patients today.

What Changed in 1992?

Beginning January 1, 1992, Medicare replaced its charge-based physician payment system with a standardized, resource-based fee schedule built on Relative Value Units (RVUs) (Grimaldi, Journal of Health Care Finance, 2002; PMID: 12079154).

Under the RBRVS system, physician payment is calculated based on:

• Physician work (time, skill, intensity)

• Practice expenses

• Professional liability costs

This shift successfully severed the link between what physicians billed and what Medicare paid, creating more uniform pricing across services (Grimaldi, 2002). However, the system values inputs, not outcomes — meaning it does not measure whether care improves patient health.

What RBRVS Was Not Designed to Do

Crucially, RBRVS was never intended to assess clinical value, quality, or patient outcomes. Instead, it prices services based on estimated resource use.

Health policy experts have long noted that this structure fails to reward:

• Time-intensive diagnostic work

• Longitudinal care for chronic illness

• Care coordination and listening

• Complex decision-making without procedures

As Ginsburg explains in The New England Journal of Medicine, the Medicare Physician Fee Schedule “prices services administratively rather than through market or outcome-based mechanisms,” limiting its ability to promote high-value care (Ginsburg, NEJM, 2007).

Why Procedural Care Is Often Valued More Than Cognitive Care

A major critique of RBRVS is its systematic overvaluation of procedural services relative to cognitive evaluation-and-management (E/M) care.

RVU values are heavily influenced by specialty input, and multiple analyses have shown that procedures — particularly surgical and interventional services — receive higher relative valuation than time-based, diagnostic, or coordination-focused care (Bodenheimer et al., Annals of Internal Medicine, 2007).

Berenson and Goodson further note that many services within the fee schedule are “misvalued,” with procedures often paid more generously than the actual time and intensity warrant (Berenson & Goodson, NEJM, 2016).

This imbalance contributes to:

• Higher specialist compensation relative to primary care

• Shorter visit times

• Incentives to favor procedures over conservative or diagnostic approaches

Did This Make U.S. Healthcare “Expensive”?

No — not on its own.

Rising U.S. healthcare costs are driven by multiple factors, including hospital consolidation, pharmaceutical pricing, administrative complexity, technology diffusion, and fee-for-service incentives across both public and private payers.

However, the RBRVS framework did influence how care is delivered by reinforcing financial incentives that prioritize procedures over time-intensive, patient-centered care (Ginsburg, 2007; Berenson & Goodson, 2016).

Why This Matters for Endometriosis Patients

For people with endometriosis — a complex, inflammatory disease that often requires careful listening, longitudinal care, and surgical expertise — these incentives matter deeply.

They help explain why:

• Patients experience rushed appointments

• Symptoms are dismissed or minimized

• Conservative management is prolonged despite poor outcomes

• Access to expert excision surgeons is limited

The system rewards doing more — not necessarily doing what’s right.

Medicare’s adoption of RBRVS in 1992 was a major reform that standardized physician payment. But by valuing procedures more highly than cognitive, diagnostic, and coordination-based care, it helped entrench incentives that continue to shape patient experiences today.

For endometriosis patients, understanding these systemic forces is part of advocating for earlier diagnosis, appropriate surgical care, and truly patient-centered treatment.