During tens of thousands of patient consultations every day, physicians make bad decisions about ordering diagnostic imaging. They may prescribe brain MRI because it is faster to write an order than to conduct a routine neurological exam. They may call for an abdominal CT without realizing that diagnostic ultrasound is cheaper and equally effective. They may give in to a patient's pestering for a shoulder MR prescription because of advice drawn from the Internet. They may ask for imaging to protect themselves against malpractice, or maybe they churn out orders because they own the equipment.
"You've got a multitude of factors," said Don Ryan, CEO of CareCore National, a radiology management company. "Some of it is consumer demand. Some of it is marketing. Some of it involves physician financial incentives. Some of it is just a lack of careful consideration about the potential value of a study."
All these factors have contributed to dramatic growth for high-tech imaging. In a July 2008 study, the Government Accountability Office found that Medicare Part B spending on diagnostic imaging had more than doubled, to $14.1 billion, from 2000 to 2006 (Figure 1). High-tech MR, CT, PET, and nuclear medicine were the biggest contributors to that growth. (A follow-up report from the GAO found that Medicare costs then fell $3.1 billion in 2007 because of rate cuts ordered by the Deficit Reduction Act of 2005.)
Commercial insurers see the same pattern. Their imaging-related costs have increased from 15% to 25% per year since the beginning of the decade. Though some growth is explained by new imaging applications and an aging population, most stems from nonmedical causes. In response, private payers are turning to prior authorization to get imaging costs back in line.
As of mid-September, about 109 million privately insured Americans were subject to prior authorization for imaging, mainly for CT, MR, PET, and nuclear cardiology. Insurers serving 55% to 65% of the commercial health-care market now require referring physicians to check with them first before ordering high-tech imaging.
Though imaging-related prior authorization has been in use for at least 15 years, most insurers have only recently adopted the strategy. CareCore added more than 14 million lives to its rolls from 2006 to 2007. Prior author-ization provider American Imaging Management (AIM) expanded from five million covered lives in 2004 to 29 million lives in 2007, when it was acquired by WellPoint and that company's 12-state network of Blue Cross and Blue Shield health plans. Based in Indianapolis, WellPoint bought into imaging utilization management because of unrelenting double-digit percentage increases in its imaging costs.
"That was the deciding factor," said Robert McIntire, senior vice president of healthcare management.
A high ratio of benefits to costs has also sold insurers on the concept. Though program features vary among the five largest radiology management companies, they generally charge $0.15 to $0.32 per member per month for imaging prior authorization services. In interviews, they disclosed that prior authorization reduces the monthly reimbursement costs for MR, CT, PET, and nuclear cardiology between $1 and $4 per member per month.
UNPOPULAR WITH PHYSICIANS
Prior authorization may seem like an easy choice, but insurers had to overcome public and physician opposition to the approach. Few chapters in the history of the health-care insurance industry have aroused more public concern than the rise of managed care and its adoption of prior authorization as instruments of cost containment in the mid-1990s. Physicians were infuriated. Patient health was sometimes jeopardized, and consumers were appalled at the wide use of prior authorization to regulate access to sometimes life-saving procedures.
