Want to reduce the cost of healthcare? Start with our billing practices.
Robert F. Kennedy Jr., as the new secretary of Health and Human Services, is the nation’s de facto healthcare czar. He will have influence over numerous highly visible agencies, including the Centers for Disease Control and Prevention, the National Institutes of Health and the Food and Drug Administration, among others. Given that healthcare is something that touches everyone’s life, his footprint of influence will be expansive.
Our nation’s healthcare system is fragile, in a constant state of teetering on the edge between precarious functionality, financial insolvency and, for some clinics, operational collapse. As with many large systems in our country, finances rule the roost. “No margin, no mission” is the mantra of many healthcare organizations.
This means that every patient interaction with a healthcare provider ultimately includes the omnipresent hand of health insurance policy rules, inconspicuously but persistently imposing its influence in how they authorize any recommended or prescribed treatments by healthcare providers.
In some healthcare organizations, providers are required by their clinic to generate as much revenue as possible. Revenue is earned based on the classification of healthcare services and products, which are mapped into Current Procedural Terminology or CPT codes. These codes are in turn measured by relative value units — the more units billed, the more revenue accrued by clinicians and their employers.
There were more than 11,000 CPT codes available in 2024. The way clinicians code each service during patient interactions ultimately determines how much they can bill and how much patients' health insurance will pay. Such a system implicitly provides a structure to value medical skills and services.
It is impossible to evaluate a screening for prostate cancer (code 84153), an X-ray exam of an infant’s arm (code 73092) or a cardiac shunt imaging (code 78428) on the same scale. Yet the Relative Value Unit system effectively creates such standardization, taking a basket of bananas, oranges and apples and assigning each a value as if they were all grapes.
How is this achieved? An American Medical Association committee creates a single financial measure across the diverse swath of medical treatments, determined by factors including time, intensity and cost. The benefit of such standardization is that health insurance companies and the Centers for Medicare and Medicaid Services can pay for services based on it.
Such a payment model unfortunately encourages some clinicians to find ways to bill certain procedures, even if they have limited healthcare value. Good medicine for patients should drive billing, not the other way around.
Moreover, every type of physician has its own set of codes and values. For example, surgeons perform surgery, cardiologists perform cardiac catheterizations, and primary care physicians perform wellness visits. The value assigned to activities associated with each specialty may contribute to physician satisfaction, or dissatisfaction. It may also influence how medical students choose their specialties. The assigned values may even be a factor driving the looming shortage of all physicians and specialists.
Healthcare is big business in our nation. Given that the per capita cost of healthcare in the United States is higher than any other country, yet our health outcomes are middling or poor, by several measures, one must ask whether all those healthcare dollars are delivering better population health. The data suggest that they are not.
Unraveling financial motives from medical decision-making is a challenge. Indeed, CPT codes should be used to classify health services, their intended purpose. A focus on creating wellness rather than treating sickness would incentivize healthcare providers to grow their prevention practices and reduce the necessity for treatment. This can be captured in the value assigned for such efforts.
The current state of healthcare in our nation is unsustainable. Simply injecting more money into the system is bad for medicine and bad for the economy.
Secretary Kennedy has an opportunity to make a difference. One place to look is the CPT codes and how the relative values are set, to determine if they are placing “carrots” for healthy living in the appropriate places within our healthcare system or paying for services and products that treat disease without encouraging wellness.
Changing the compensation model for healthcare providers will not be easy. The Centers for Medicare and Medicaid Services rely on CPT codes. Many countries around the world also use them, with claims that they reduce costs. Yet per capita healthcare costs in the United States are at least 40 percent higher than in other wealthy countries. The U.S. also spends at least 2.5 times more on the cost of administration than such countries. Clearly, something is not working. The CPT codes may be innocent bystanders, given how they are being used and valued.
Without new models for compensation, every person who receives healthcare services will be affected at some point in their life. If Secretary Kennedy can revamp procedures' valuations in this way — perhaps even by taking ownership of committee that assigns them — the healthcare system may even heal.
The best path forward may not always be the easiest. However, a new path forward is imperative.
Sheldon H. Jacobson, Ph.D., is a computer science professor in the Grainger College of Engineering and the Carle Illinois College of Medicine at the University of Illinois Urbana-Champaign. He applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy and public health.
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