Payment and reimbursement 101

The Academy advocates with the Centers for Medicare and Medicaid Services (CMS), federal legislators, and the private sector to ensure the definition, development, and implementation of coverage and payment policies facilitate the delivery of quality dermatologic care. The Academy advocates for fair valuation of dermatologic services under Medicare and Medicaid programs. Additionally, the Academy works to strengthen dermatology’s presence and influence within the private sector by fostering positive working relationships with the health insurance industry — including individual health plans, integrated health care systems, employers, and other relevant entities.

Overview of RUC process

Prior to the release of the Medicare Physician fee schedule, CMS may identify certain codes as being potentially “misvalued” when a code is Harvard-valued with annual allowed charges equal to, or greater than, $10 million. A Harvard valued code is one that has never been surveyed or looked at critically under the current rules.

When a code is identified as potentially misvalued, CMS will ask that the code is surveyed, as well as the code’s entire family. Specialty societies ― such as the American Academy of Dermatology Association (AADA) ― survey a randomly selected group of members and present the survey results to the American Medical Association’s Relative Value Scale Update Committee (AMA RUC). The surveys and comparisons to other codes may or may not indicate that some of the codes need refinement in their value, and the RUC suggests any necessary changes to CMS. CMS has the option of accepting those changes or modifying them. The AADA advocates to CMS that it upholds the RUC recommendations. The changes are then reflected in the annual Medicare Physician Fee schedule.  

If you receive a request from the AAD to complete a survey for the Relative Value Scale Update Committee (RUC), please be sure to complete and return it by the identified deadline. These surveys are used to estimate the time and complexity of performing a procedure and obtain an estimate of a professional work value. A timely response is critical because the data will need to be analyzed before the data can be submitted to the RUC. For questions about the RUC process or these surveys, please contact James Scroggs at or (202) 712-2617, or Helen Olkaba at or (202) 712-2612.

                Medicare infographic rv small This chart explains the difference between the Medicare Physician Fee Schedule versus Medicare Payment Reform. Click on the chart for a larger version.

How are codes/payments established

The development of the Medicare payment system is overseen by Congress. Currently the Medicare payment system is determined by a formula which includes the Sustainable Growth Rate (SGR) formula. Congress has long recognized the inadequacies of the Medicare physician payment system that result in part from the flawed SGR formula. Since 2002, Congress has intervened 16 times to avoid catastrophic cuts to Medicare physician payment rates.

The implementation of the Medicare payment system is overseen by the Centers for Medicare and Medicaid Services (CMS). Every November, CMS releases a final physician payment fee schedule that defines the payment rates for Medicare physician services for the upcoming calendar year. Learn more about the 2015 Medicare physician fee schedule.

Private sector payments often mirror the payment rates determined by CMS in its annual Medicare physician fee schedule.

Relation between Medicare and private payers

Private sector payments often mirror the payment rates determined by CMS in its annual Medicare physician fee schedule.